When it comes to understanding the true value of farmland and associated improvements, the only accurate method is to perform an appraisal. Appraisals are the standard for establishing value across a wide array of asset classes, including office buildings, multifamily complexes, hotels and shopping centers.
While any certified commercial real estate appraiser can perform a farm appraisal, selecting a firm that specializes in the unique and highly local realm of farmland is a smart choice.
We had the opportunity to discuss farm appraisals with Halderman's Emily Elfers, who provided insight into the methodology for performing appraisals, along with insight into how Halderman approaches the market.
How would you define a farm appraisal?
A farm appraisal is an opinion of market value of farmland and improvements on the land, including dwellings and agricultural structures like grain bins and barns.
Are there different types of appraisals?
Yes. There are appraisals that are presented an in outline form, but Halderman uses a full appraisal that adheres to the UAAR format. This is an excellent format to organize the thoughts for a report.
What standards are required for an appraiser?
In order to perform a farm appraisal, the designation of Certified General Appraiser is required. Halderman uses independent contractors who are experienced and certified.
To become an appraiser, a bachelor's degree is a prerequisite, followed by 300 hours of specialized education and 3,000 hours of supervised experience.
Why are appraisals important for estate settlement and divorce?
When an estate is settled or in the case of divorce, assets are divided among the parties. If one side is buying out the other or if an asset is sold off, an appraisal sets the value independently, and all parties are treated equitably.
How do lenders choose appraisers?
The first screen is that an individual must be a Certified General Appraiser. After that, they have to get on a lender's roster of prospective appraisers. This can be done by submitting a resume or a deal sheet and building relationships. A knowledge of UAAR reporting is beneficial as well.
What sets Halderman apart from competitors in the appraisal space?
The first thing is that we focus on farm appraisals. Although the appraisers who perform the work are licensed to do any type of commercial appraisal, Halderman is a specialist firm in this regard.
Secondly, due to all the farm management and advisory work we have done through the years, our internal database is a wonderful resource to obtain local knowledge and compare and contrast values for farms within the same region and with similar characteristics.
What are some best practices that you can share with us about appraisals?
The first thing that comes to mind is to understand your area. There is no substitute for local knowledge and understanding trends and factors that can affect prices and demand.
From a technical standpoint, the lifeblood of an appraiser is the sales comp. Sales comps are crucial to determine what buyers are willing to pay in a particular market. One limiting factor, of course, is that sales comps are comprised of historical data, and formulating an opinion of value is a current estimate. This requires that the appraiser has a knowledge of economic trends and forecasts.
How does an owner find an appraiser?
Simple. Contact Halderman directly.
Halderman Real Estate and Farm Management provides farm owners and farmers with expert valuation and farm management services. We look forward to speaking with you about farm appraisals and any of your farming needs.