While residential homes are typically appraised only on sale or refinancing, there are plenty of reasons for appraising a farm. Perhaps you want to subdivide your land, move lots between family members for estate planning purposes, establish a fair rent or investigate possible future uses. Members of the American Society of Farm Managers and Rural Appraisals carry out more than 175,000 rural appraisals each year. Their methods are complex, but you can get a rough idea of the value of your farm by looking at comparable data and the physical attributes of your land.
Identify the property. Ascertain its size in square acres, which is the standard unit of appraisal for rural property. Your lot sizes should be on your deeds; if they are not, you'll need to carry out a measurement. Use an online calculator to convert square foot and square mile measurements to square acres.
Find out the sale prices of similar land sold in the area. This data is your comparable evidence and is the best indicator of your farm's value, assuming that market conditions remain the same. To gain a true comparable, divide the sale price of similar farms by their land area to gain a per acre value, and multiply that figure by your own acreage, to give a base value for your farm.
Conduct a physical appraisal of your land. Use this to raise or lower your rough per- acre value. Assess your land for features which differentiate it from your comparable data. Look at dwellings, garages, barns, sheds and other buildings and note their condition. Quality buildings will raise value, as will good agricultural soil types, irrigation and water rights and high production yields.
Attribute a percentage value ratio to your land. It is impossible for anyone other than a professional appraiser to assess how much value to attach to benefiting assets, such as water rights or quality storage, but you can think of the differentiation as a percentage. For example, you might consider your land to be 10 percent more valuable than a comparable farm which sold last month, because it has superior soil and productivity.
Consider the "highest and best use" of your land. This is the most profitable use of your land, which is not necessarily the use to which it is currently put. If your land can physically, legally and economically support a use that produces greater returns, this higher usage should be the basis of your appraisal. Be aware of local changes in land usage and zoning laws. If rural lots are being developed for alternate uses, such as vacation homes, your farm is open to a whole new market, which might be prepared to pay more.
The only person who can truly assess the value of your land is a certified rural appraiser with experience in appraising land in your area. If you require an appraisal as a precursor to a land transaction, employ a professional.
Your land is only worth what a buyer will pay for it. No appraisal can account for this, particularly if your land is unique and your market limited.
- The only person who can truly assess the value of your land is a certified rural appraiser with experience in appraising land in your area. If you require an appraisal as a precursor to a land transaction, employ a professional.
- Your land is only worth what a buyer will pay for it. No appraisal can account for this, particularly if your land is unique and your market limited.
Jayne Thompson earned an LLB in Law and Business Administration from the University of Birmingham and an LLM in International Law from the University of East London. She practiced in various “big law” firms before launching a career as a commercial writer specializing in finance and tech. Her work has appeared on numerous financial blogs including Wealth Soup and Synchrony. Find her at www.whiterosecopywriting.com.