Land is a farm owner’s most valuable resource. Without land, there is no farm.
Aside perhaps from those who work the land, it’s also the owner’s most important asset. That’s why every person in agriculture keeps such a close watch on farmland values and trends.
However, there’s more to a farm and its value than just the land alone. Buildings, irrigation, certain types of rights, production yield history and, of course, sentimental value are all key aspects that will give you a sense of what the farm is worth.
Just that sense won’t cut it, though. For a true and accurate value, you will need to have your farm appraised by a certified appraiser.
What an Appraisal Provides to Landowners
Anyone who owns farmland will at some point need an official appraisal of their land. They don’t necessarily need to be looking to sell, either. There are quite a few other reasons someone would need to seek a farm appraisal.
Those reasons include any of the following:
- Establishing the cost of replacement for insurance
- Property tax appeals
- Divorce settlements
- Lawsuits
- Estate settlements
- Real estate negotiations
- Eminent domain
- Government requirements and regulations
Appraisal Services Offered by Stalcup Ag Service
Our team of certified rural appraisers at Stalcup Ag Service offer our clients three different appraisal services: market value, estate and partition. Estate appraisals are used for federal and state of Iowa inheritance tax purposes and before filing estate tax returns, while partition appraisals are used when the land needs to be divided among multiple owners.
Then there are market value appraisals, which is the service we’re focused on for this blog post. A market value appraisal gives the landowner the value of their land and farm property.
These types of appraisals are used when the owner is looking to buy, sell or transfer ownerships, but again, there can be multiple other reasons, including establishing the basis for depreciating buildings or improvements to the land, estate planning, financing and other reasons.
How Market Value Appraisals are Conducted
No matter the owner’s reason for having an appraisal conducted, our goal here at Stalcup Ag Service is always to work to give the clients we work with a highly objective value that they can be certain is accurate. This comes down to three distinct approaches.
The first of these approaches is called an income capitalization approach. This provides land owners with a value that is based on expected reasonable income and expenses with the net income divided by a capitalization rate derived from market data.
The second approach is a sales comparison approach. We collect the data and compare the land directly with sales that have occurred in the area.
The third and last approach used is a cost allocation approach, which includes an allocation of value for each type of land based on the prices of similar land types found in nearby sales.
Combined, these approaches deliver an honest and objective appraisal that the owner can be confident is accurate.
The Appraisal Process
The incredible amount of detail that goes into farm appraisals can make the appraisal process seem daunting to some. But that’s why we are here. Our team conducts the research and crunches numbers so that our clients can have peace of mind in knowing they’re getting an accurate value at the end of the process.
As far as the research portion of the appraisal process goes, there is a lot of data to compile. We take a look at financial documents that prove income and can shed light on expected future income. But there are many other documents to collect, including legal descriptions, documents that show water rights, soil maps, assessments on buildings, permits, leases and much more.
But in addition to compiling all that data, our appraisers will also visit each property for a close, physical inspection. This is done so that we can lay eyes on the land and determine its condition. We will look at physical terrain, water access sites, irrigation setup, fencing, outbuildings – everything.
We will also want to take a look at any areas subject to easements and any part of the property that falls under certain government rules and regulations. These are all factors that will affect the final value that we determine.
Once all this is done, we can determine market value.
What your Farm’s Market Value Means for You
When your appraisal is done, you are ready to take the next steps in whatever process you are working through, whether that is selling the property, financing a loan or some other process. Sometimes just having knowledge of what your farm is worth can be valuable.
In fact, as anyone in the industry can tell you, land values are always worth watching because they play such a vital role in this industry. Not only do they give some insight into the state of agriculture from an economic perspective, but they also play even more roles in each landowners’ personal life and day-to-day decisions.
In Iowa, Iowa State University’s Farmland Value Surveys are an excellent resource for finding accurate and updated information on farmland values. The information is updated twice a year and you can find surveys that date back to 2006 online.
Contact Stalcup Ag Service for your Farm Real Estate Needs
When you need an appraisal on your farm land, you need professionals who you can trust to put in the work and return an objective, accurate value. At Stalcup, our ag managers and appraisers are accredited or are actively working to become accredited. Some members of our staff have both Accredited Farm Manager and Accredited Rural Appraiser certifications. No matter who you work with at Stalcup, though, trust that qualified individuals who live and breathe agriculture are in your corner.
Stalcup provides more than appraisals, so contact us for any of your rural real estate or farm management needs. We are located in Storm Lake, Iowa, and are happy to provide you with consultations on topics ranging from leasing to succession and much more.
If you’d like a consultation, then please reach out to us.
