Agricultural Appraisal
 

I'm needing to find out the real value of the farm so I can settle a family question. How do I go about determining the market value. Is double the tax appraisal an accurate estimate of value? Can a person do this themselves or is it wiser to hire an appraisal person. This would be for a future sale within the family. Thanks for any info.

My tax value and market value are both higher than what similar properties are listed for - by a lot. I say listed because few places are selling. You could ask a real estate agent in your area.

DOUBLE the tax appraisal???? I always heard that the Tax assessment was about 80-85% of the market value.... In this market? I'd be willing to guess that most current year tax assessments are HIGHER than the market value; I know mine is on both my properties.

My Delaware house is assessed at $266,000.00, but my realtor feels I can only ask about $195,000. My Florida house I just bought for $89,000. But it is assessed at $123,500.

I would definately pay for an appraiser....

Some states have laws limiting tax increases to a percentage of the assessed value regardless of what the market does.

If it's to settle a family question, pay for an appraiser who does ag properties. Wouldn't cost that much. Families have been known to im/explode over property questions.

The tax value has nothing to do with the market value. Not now , not ever.

The most reliable way to estimate market value is to compare recent Sales of comparable property. That is to say property of the same sort and in use the same way. This property should have been sold recently, preferable within the last 90 days.

This information is available at your local (county) court house. The county Auditor, and the county Recorder can help you with this. They should be happy to help since both positions are filled by the election process, and you most likely are a voter. It might be good to let them know why you need to gather this information.:)

Contact a local real esate agent or a loan officer at a local bank to get a recommendation for a real estate appraiser in your area. Short of an acution that is the only way to determine fair market value.

Do you know someone in the real estate field that you trust? If so, call them and tell them that you need an appraisal of your property. They will know a good appraiser that can elp you out. The appraiser can give you the market value for the day he or she is out at the property. If the farm is an actually working farm, you may need a pretty extensive appraisal, so talk to the appraiser extensively about the property before the come out. That way they can make sure they have enough experience and the correct license.

As far as tax value goes. In our area, per the Dept of Revenue, the tax value should be market value give or take 10 percent. Keeping in mind that they are using sales from almost a year and a half ago, so if the market is decline, tax values will take about a year or so to decline and if the market is increasing the tax value will be about a year or so behind that.
Tax value uses a mass appraisal method, where a fee appraisal by a licensed real estate appraiser is specific to your property and is more accurate. Many times an assessor doesn't enter your home and relies on an exterior inspection to do their work.

Lazy J has the best advice. A local appraiser who does farms is the only reliable way. Relying on farm sales in the area can give you an idea, but those can vary greatly because of potential use and proximity to land already owned by a potential buyer.

As was pointed out the only way to determine proper value is with an auction.

I had some land apprised around 1980 by two certified appraisers and when it was sold by auction a short while later the opening bid was higher than either appraisal. The price only went up from there.

Appraisals are educated guesses basically from studying sales records for other property.

My land sold higher than any had in the county up to that point. It really played heck with the state of Kansas Department of Transportation trying to buy rights of way and pay a fair price.

Yup, auction is the only way to determine true value.

Auctions will set a price for that day for that property from those who knew of the auction - about as good as can be done.

Without an open auction, an appraiser - often from real estate office - is the next best.

If you are dealing with family, can turn into bad feelings from unknown branches of the tree...... I'd go for the appraisal to keep things tidy and give you something to fall back on.

Property taxes are rarely a good reflection of today's actual value. Wouldn't rely on them for anything.

--->paul

Betsy,

You've really asked a tough one for the State of Michigan. In theory, double the tax appraisal would work pretty closely, except for two, maybe three factors: Proposal A "froze" the appraised values and limited any increases to the inflation rate. At that time, double your appraised value would have given you an approximation of the retail value of your property, but as time has gone by, your true value and your taxable appraisal value may have a wide variance. Today, of course, in Michigan, property values have been so skewed by our lackluster economy and loan problems, that even that variance would be questionable as a guide. Also, since you have a combination of a home and agricultural land, a lot of different factors may enter in to the true value, asopposed tostraight residential property, or bare farmland.

Only a certified real estate appraiser will give you any correct and legal price at this point. Expect to pay a few hundred bucks. This person will come out, measure the house, outside and inside, take note of the outbuildings. The appraiser will do this according to legal guidlines and questionaires, then will make comparisons to other properties that have sold recently(could be a problem in Michigan, huh?) and add and subtract values according to formulas.

Yes, it is a little bit hit and miss, and two different certified appraisers may give you different values, but once certified, it should stand up in court or inheritance/family split cases. Interview your appraiser to verify this, though. I'm not an appraiser........

Hope this helps,
geo

Ditto.

I have a tract of 35 acres valued on the tax rolls at 4500. Adjoining tract sold last year for 5000 an acre. Just a wee bit of difference. My main tract of land has a tiny tax value of around 8K. My property surrounds a tract where the land's been selling for 100K an acre... again, wee bit of difference. Of course, if I changed from Ag to Commercial, the difference between value and evaluation would differ less.

You've got to get a real estate agent, or find an equivalent place nearby that recently sold.

Without a doubt, hire an appraiser.

Look at it this way, you could either lose money on the sale if your price is too low. Or could cause an family rift if the sale is too high. Isn't is worth a few hundred dollars to keep things on the level? An appraisal is an unbiased opinion... just make sure you ask around for a reputable, certified appraiser to do the job.

Call your local Farm Credit Services - they would be the ones to go to for a true appraisal and a fair assessment of your property. Some banks have loan officers that specialize in farms, but at FCS; the most of their business is farms.

And that poster above that implied about families getting a little hairy about property values and estate kind of issues wasn't joking.... it brings out the worst in some people...

Farm land has so many variables that the only way to find out the real price is to sell it. If that is not the reason then get somebody to apprise it for you then get another to apprise it and go half way in between. If you are going to sell it then start high and come down every 3 or four month so that you start to get offers.

:clap:This is the only way to go.It can be expensive in some areas.

Auctions tend to limit the spectrum of buyers, since most pay with cash. And most buyers at the auctions are looking for a bargain. Around here, it's not uncommon to achieve 20%-50% less for property at auction. Values set at auction are not typically recognized as market value by appraisers due to this fact. Market value assumes a reasonable exposure time to the market, which will attract the widest base of potential buyers. Occassionally a bidding war will open up between 2 or 3 buyers, and a higher value will result. But not that often.

Hire an appraiser familiar with farms in your area.

The difficulty with farm appraisal is a farm is a business.
The 3 approaches to value:
cost approach=present value of assets(house,land,etc.)
sales approach=current sales of comparable properties.
income approach= value of income the property should produce.(financial appraisal).

These all must be included in the appraisal(opinion of value).

In many states Agriculture properties are taxed based on production rather than market.

Around here an appraisal for a farm runs from a $1000 up.
Choose your appraiser carefully.

Betsy,

in michigan we have something called taxable value, SEV and True Cash value (TCV). Taxable Value is always equal or less than SEV, and SEV is half of the TCV. All these are set by the assessor of the township where the property is.

You can call the township where the farm is and ask them to provide you with those numbers ( it is their job ).

IN a normal real estate market, TCV would be the same as market value (what somebody would pay for the property). However, we are not in a normal market, and these days TCV very often is higher than what the property will bring on the open market.

So it would help to call a couple of realtors that deal with farms and rural properties and ask them to put a price on it.

I hope this helps and I did not confuse you too much.

Betsy, I sure hope this is not to settle an estate within a family, I can see all kinds of trouble written all over this one if it is. Always remember blood is thicker than water, and money isn`t everything, and what ever happens family is family. The most fair way is both parties get an agent for the fair market value. > Thanks Marc

LOL why complicate things then just sell it at a family auction.
As everyone here adds up to there just isnt a fair way. Appraisers apraise what they think is important but people BUY what THEY think is important.

I bought a nasty chunk of alaskan swamp ruined by the railroad, huge piles of spoil and the ditch that had been dug for them.
I SOLD a wonderfull property on a high gravel ridge with plentifull views across the open wetlands that also protect the place from wildfire . It came with Public transportation access , plentifull gravel stores and a salmon and trout stream:nanner:

I guess I should explain the situation. My two sisters and I own the "family farm", been in the family since 1886, and my oldest sister is thinking she would like to "enjoy her inheritance". I have lived here and managed the farm and cared for (now deceased) aging parent for thirty years. My other sister and I have talked about buying the third sister out so I'm looking for a way to come up with an amount that is fair market value. We have recently had several dairies start ups within 25 miles by dutch families. They have paid pretty high dollars for farmland. I'm talking 200 acres of good farm land plus the buildings and house. Wanted to be prepared with a fair price when we make the offer to the oldest sister. I had thought an appraisal was the way to go, just checking to see if anyone had a better idea.

The last agricultural land appraisal we had cost $500. This indluced both the land and buildings. Contact you local Ag Banker for references for good Ag Appraisers.

Jim

OP says, "I have lived here and managed the farm and cared for (now deceased) aging parent for thirty years..."

Methinks you ahould deduct this value from your settlement offer... you worked hard!

Better explanation now, thanks.

Get an appraisal done, make offer to one sister who wants to sell place based on that appraisal, however, to make it all legit, offer to sell her your portion for the same amount. With that proposal, nobody has to worry about if they are getting skinned or not.

I used to let my son split a donut with his baby sister when they were young. First time I saw what he was doing (breaking it so it was at least 2/3 his and 1/3 hers), I implemented new rule, one who split got the last choice. Same thing goes for selling property between siblings, make an offer, but be prepared to sell her your third for what you are offering for hers. Sometimes, people are not rational about actual worth and a public auction may be the best thing for all involved.

What he said!

An appraisal backed up by figures for recent sales in same general area, with date of sale, size of land, location, brief description, special info. Your appraiser should have this or be able to tell you where to get it.
(e.g. sold 30 June 2010, $5555 per acre, 200acres, 15 miles west of Nametown, 150 acres cleared level or gently rolling for crop or pasture, 30 acres steep hilly pasture, 20 acres steep rough rocky forest, permanent creek with 1/2 acre dug pond, 4-bedroom 1950's farmhouse, pole barn, garage, workshop. Fierce competition at auction between two adjoining farmers who hate each other and both wanted it for expansion drove price up).

You can not always trust a appraisal person as well. My sister is selling her place and had a appraisal done and they came back with $31,000 that was 2 weeks ago. They have had 2 offers of $55,000 after that and are selling it to one of them.
$24,000 is a big difference between what the appraisal was and what people are offering. I have seen it go the other way as well with the appraisal being higher then what people are willing to pay.

That is so true, an appraisal is only an estimate of the value of a property. The "true value" of a property can only be determined by the sale of it, what someone is actually willing to pay for it. That is the reason any appraiser who is legit will point out this fact.