Appraisal Services

An appraisal is an opinion of market value on a specific effective date, completed by a state certified appraiser. Appraisals can be completed for many reasons, such as for lending purposes, estate planning, negotiating) a purchase price, etc. Appraisers are non-biased parties who rely on sales and market data to arrive at a value conclusion.

Farmland values are dependent on many factors, such as the general and local farm economy and location-specific characteristics. The highest and best use of the land also affects its value. Putting an exact value on land is complicated, but a farmland appraisal can assist in identifying the most probable value of a property that can assist in arriving at credible value for your intended use. A farmland appraisal provides an estimate of a property’s fair market value. Appraisals are conducted by a state-licensed appraiser who has been trained to properly determine the value of agricultural land.

The Frontier Farm Credit appraisal team completes customized appraisals for active customers. In a customized appraisal, the customer is listed as the client and intended user and is billed directly. Appraisals for lending purposes are requested by the lender, with the lender listed as the client and intended user, and the customer typically pays a fee to the lender, which is typically included as part of loan closing costs.

Customized appraisals are offered to shareholders of Frontier Farm Credit. This includes customers with ag real estate loans, lines of credit, term loans and insurance. We do not issue shares for loans through AgDirect_® or Rural 1^st® therefore, customers with only these loan types are not eligible for the service.

An appraisal is an unbiased opinion of value. Appraisers are specially trained and licensed to understand the methods of valuation, including considering the three approaches to value: sales comparison, cost, and income. Appraisers identify a scope of work, which identifies the property to be appraised, the purpose of the appraisal, any special conditions or requirements, and the work required to develop a credible opinion of value.

An appraiser must determine which combination of the three approaches to value will produce credible results:

• Cost approach – The cost approach is rooted in the principle that the value of the whole is equal to the sum of the parts. The cost approach is typically applied to improved properties for which there is good cost information and total depreciation can be supported.
• Sales comparison approach – The sales comparison approach is rooted in the principle of substitution, meaning a given property is worth what other similar properties have sold for. An appraiser may apply quantitative or qualitative adjustments during this process to account for differences between the subject property and the comparable sales.
• Income approach – The income approach is rooted in the concept that a buyer of real estate is buying the net income stream that the property produces. The most common application is income capitalization, where net income divided by capitalization rate equals value. The income approach is typically applied to properties that have reliable or predictable income and expense information.

The Dictionary of Real Estate Appraisal (Seventh Edition, published by the Appraisal Institute) defines market value as:
“The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

• Buyer and seller are typically motivated.
• Both parties are well informed or well advised and acting in what they consider their best interests.
• A reasonable time is allowed for exposure in the open market.
• Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
• The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.”

Factors that can impact or influence the value of a property include soil types, topography, access, overall location, condition, level of improvement, water rights, etc. The appraiser’s role is to investigate the available details on the property through owner interviews, research of county records, available maps and other sources. The property details are then analyzed and compared to other properties in a similar market area as the subject, and the highest and best use is determined.

While evaluating land, the appraiser will examine many factors and features of the property before determining market value. Here are just a few examples of what an appraiser may look at in a piece of land:

• Access -- How easily is the property accessed by farm equipment?
• Topography and amenities -- Certain land types will be more valuable than others. A tract of land with many hills, rocks or ravines will be appraised differently than a generally flat parcel with excellent soil that lends itself to planting.
• Configuration and size -- A property’s general layout also will influence its value. Irregularly shaped tracts, or those that are cut up into many small fields, take more time and are less efficient to farm.

An appraisal is an opinion of value as of a certain date. It can be a current date but can also be a retrospective date (date in the past). Appraisals can also be completed as of a date in the future. Because markets can change over time, the customers should be careful about relying on an opinion of value with an effective date that is different than what is needed.

The appraisal is typically sent only to the client or client’s representative who requested the appraisal. We will only send copies to others if directed to do so by our client. We understand the importance of confidentiality and will not distribute the appraisal or communicate results to anyone without the permission of our client.

Yes, all Customized appraisals are completed by Certified General appraisers and are completed in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP).

Any information you can provide that helps to identify the property that is to be appraised is helpful. Some examples are:

• A copy of the deed, legal description, or survey.
• Assessor Parcel Numbers, or a copy of the current real estate tax bill.
• Any Covenants, Conditions, and Restrictions the property may be subject to.
• A breakdown of income and expenses for the last one to two years on income-generating land. A copy of the lease is also helpful.
• If the property has land enrolled in the Conservation Reserve Program, a copy of the contract and map.

Finding, verifying, and analyzing sales is one of the most time-consuming parts of preparing an appraisal report. Our appraisal team tracks public auctions, real estate listings, and private sales via county records. This gets sales information into our database quickly, which translates into accurate appraisals and quick turnaround times.