Big Sale: Farm and Ranch Appraisals
July 18, 2019
There is an ongoing demand for appraisal of property falling under the agricultural umbrella. Whether it is a working farm or ranch or recreational property, here is what you need to know about the trends and perks of farm and ranch land and their associated appraisals.
Appraisals of farm and/or ranch land fall under the category of agriculture valuation. Farm and ranch appraisals include not only the land associated with the property but also any structural improvements (residential, agricultural, or otherwise) situated on the property. Minerals (oil, natural gas, and hard minerals) can either be appraised separately or included with the surface estate.
Farm and ranch properties can have specialized characteristics that require the additional knowledge of an experienced and expert appraiser that specializes in these property types. More often than not, farm and ranch properties are located in remote areas where the confirmation of comparable sales can be more difficult and rely on relationships with rural land brokers, buyers and sellers, etc. So how do you figure in the important factors of a working farm, timberland, wetlands, or a forest preserve?
The Basics of Farm/Rach Appraisals
It’s important for us to note from the get-go that not all farm and ranch properties are appraised based on the same value driving characteristics. Rural properties can have significant differences regarding location, special features, recreational appeal, scenic appeal, crop production, livestock carrying capacities, timber reserves, and more.
Careful consideration must be given to a property's terrain, cultivated land, improved pasture, water features, elevation changes, trees, views, natural habitat, mineral interests, fencing, livestock and animal production facilities, and other infrastructure. Luckily, at Valbridge, our team is comprised of appraisers that specialize in and are specially designated for farm and ranch property appraisals. We pride ourselves on being industry experts and welcome the opportunity to service your farm and ranch or other agriculturally-related appraisal needs.
Now, diving in deeper: You should also now that agricultural property demand is really hot right now. Such properties offer opportunities for the buyer, seller and interested investor, alike.
The Farm and Ranch Appraisal Advantage
Favorable Market Stance
The demand for farm and ranch real estate has continued to grow over the past several years. New demand from the millennial market has been noted as they show an interest for remote landscapes. Further, rural real estate is often purchased for recreational pursuits including family retreats, hunting and/or fishing opportunities, etc. which typically strengthens demand and pricing.
Expansion and Development Opportunity
Many individuals place a high interest on rural property as a long-term investment. The growth in populations every year means cities and urban areas are regularly expanding. If an investor can be strategic in their rural property purchase location and buy an investment at a reasonable price, they can potentially develop the property, divide the property into smaller units for resale or sell the property for much higher pricing in the future.
Laws & Regulations
There are certain regulation and law advantages for rural properties that may not be present in urban areas in terms of property development. Restrictions are typically less in rural areas as compared to big cities where property development is restricted by municipalities, or other government agencies.
The minimal regulation and lack of rural zoning makes it easier for owners to utilize their properties without having to deal with strict regulations set up in cities like Los Angeles or Miami.
Buyer and Investor Benefits
There are several farm and ranch property tax benefits that most people take advantage of in the ownership of rural property.
One is an agricultural use exemption. In an agricultural use exemption, you or someone else manages livestock, crops, or other agricultural pursuits on your property which typically lowers the tax liability of the farm or ranch to fractions of the property taxes that others without an agricultural use exemption might pay. Other benefits include properties that are “run” as a business. Properties run as a business can write off expenses associated with the operation as a tax deduction. Of course, laws and regulations differ depending on location and the associated regulatory agencies. Luckily, a seasoned appraiser like the ones at VPA can outline all of the pros and cons associated with a specific agricultural property in question.
Nodding to the incentive of investing in a rural property, there are also certain government programs that can assist you in managing and owning rural property. Government funded programs such as the Crop Reduction Program (CRP) allows farmers and ranchers the opportunity to defer planting crops or grazing livestock and receive payment from certain government entities on the deferred acreage. The Environmental Quality Incentives Program (EQIP) assists land owners with brush control, infrastructure construction, etc.
Trends on the Rise
Recent trends associated with farm and ranch properties ownership include recreational buyers and developers purchasing larger tracts and dividing the properties into smaller units for resale. Recreational buyers are purchasing land for use and enjoyment as a safer long-term investment as opposed to putting money into the volatile stock market. Developers are purchasing land as a result of strong demand for “country living” as cities expand into rural areas.
What to do Next
At Valbridge, we have and continue to develop comprehensive appraisal services for all types of property. We produce custom, consistent appraisal reports across the U.S. market for (but not limited to) office, industrial, retail, hospitality, multi-family, and so much more. But we don’t stop there…
Valbridge is eager and ready to work with you to get the job done on your farm and ranch appraisal needs. Get in touch with us today and get the ball rolling on the appraisal of your rural property.