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-11.31
News
FFC Rural Real Estate Appraisals: A Valuable Service
A short definition of market value is “the most probable price a property should bring in an open and competitive market.”The appraisal staff of Frontier Farm Credit, comprised of seven highly trained state certified professionals, specializes in appraising (providing opinions of) market value of rural real estate in eastern Kansas. FFC appraisers have had the privilege of serving Farm Credit customers and fee appraisal clients for a combined total of more than 110 years.
While the primary focus is on providing accurate, timely appraisals in support of loans to FFC customers, widespread recognition of our appraisers’expertise is evidenced by strong demand for FFC fee appraisal services for such needs as buying and selling property, estate planning, trust matters, property division, and more. Fee appraisal income helps to keep loan administration costs down for FFC borrowers by defraying part of the cost of compiling and maintaining a comprehensive database of comparable sales and other appraisal information, just as some farmers offer customharvesting or conservation work to help pay for purchases of combines and bulldozers.
The process of appraising real estate involves consideration of three approaches to value: (1) the sales comparison approach, in which sale properties are compared directly to the real estate being appraised (the “subject” property). Adjustments are made for differences, such as land use, buildings, acreage size, location, access, land productivity, etc., to arrive at a value indication for the subject property; (2) the cost approach, where real estate with buildings is appraised by first estimating the value of the land using comparable land sales, then adding the depreciated cost estimate for the buildings; (3) the income approach, in which net income for a typical year is calculated for the subject and sale properties. Then the sale net incomes are divided by the respective sale prices to calculate an overall capitalization rate for each sale. The subject property net income is then divided by an appropriate capitalization rate determined from the sale indications to arrive at the value for the subject property. Finally, the appraiser reconciles the value indications of all three approaches into a final market value estimate (appraised value) for the subject property.
Outside appraisal reviewers often note that the overall reliability and quality of the work of Frontier Farm Credit staff appraisers is distinguished through expertise and specialization in rural properties, solidly backed by an extensive, thoroughly analyzed rural sales database.
A disturbing trend now out in the country is that many appraisers of primarily residential expertise claim to be equally qualified to appraise rural properties where much of the value is in the land. This might be true for some; however, our appraisers have reviewed many farm appraisals completed by residential appraisers and have found generally that the level of sales search is limited and the level of sales analysis is minimal. Recently, one such appraisal was brought to one of our lending offices by a customer. The subject property consisted of more than 100 acres with a ranch style home. The appraisal, in which the land value exceeded building value, contained several rural home sales but no actual vacant land sales. Instead, in support of land value, the appraiser made the following statement (paraphrased): “As per MLS, there are (10) 80 to 150-acre tract sales located in the county in the previous 12 months. The 10 sales range from $1,000 per acre to $3,000 per acre, depending on size, location, zoning, etc. In the appraiser’s opinion, the 120-acre tract of land that is described in this report has a site value of $2,000 per acre.”
Why is such a lack of land sales and analysis a problem? First, the client is less able to understand clearly how the appraiser reached the final value opinion. Second, the appraisal and its conclusions become “arbitrary.”It becomes more about what the appraiser thinks or guesses the property is worth, rather than what the market indicates, which also opens the door for potential fraud.
An old hometown café once displayed the message: “Good food is not cheap. Cheap food is not good. We sell good food at reasonable prices.”The same idea applies to this discussion with regard to rural real estate appraisals.
For professional appraisal services with regard to current individual situations and specific rural properties, please feel free to contact your local Frontier Farm Credit office. Our appraisers, experts in rural real estate, greatly appreciate the opportunity to discuss and serve your appraisal needs.
Featured News
FFC Rural Real Estate Appraisals: A Valuable Service
A short definition of market value is “the most probable price a property should bring in an open and competitive market.”The appraisal staff of Frontier Farm Credit, comprised of seven highly trained state certified professionals, specializes in appraising (providing opinions of) market value of rural real estate in eastern Kansas. FFC appraisers have had the privilege of serving Farm Credit customers and fee appraisal clients for a combined total of more than 110 years. Continue Reading>>
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President's Corner
President's Corner
The first half of 2008 has drawn to a close and your Association continues to grow at a rapid pace. As of midJuly your Association has grown to nearly $1.2 billion in accrual loan volume at over 97% acceptable credit quality, based upon adding over $271 million in new loan volume. Our newly formed crop insurance team – in addition to providing crop revenue insurance coverage for our customers – has added over 80,000 acres of crop hail coverage……and continue to add coverage for more customers daily. Our newly formed business services team has completed
tax returns, records, and/or business consulting for over 230 customers. In April we completed the distribution of $4 million in patronage from 2007 earnings. Continue Reading>>
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Of Intere$t
Of Intere$t
It’s all about the dollar. As we round out the summer months
of 2008, the Federal Reserve is being scrutinized not only for the
level of interest rates and the state of the economy, but also for the level of the U.S. dollar versus other major currencies. The first half of the year saw the U.S. dollar deteriorate in value versus other currencies, at least partially because of the level of real interest rates in the United States. Real interest rates take into account stated rates plus the implied rate of inflation. While a weak dollar is good for exports because foreign currencies are able to buy more of our goods and services, it is bad for the price of oil. Oil is traded in U.S. dollars all over the world. Thus if China wishes to buy Venezuelan oil, that transaction is conducted in U.S. dollars. With that, a weaker U.S. dollar means it takes more dollars to buy a barrel of oil. Continue Reading>>
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Crop Talk
Crop Talk
For most —if not all —of us agriculture has always been part of our lives. I can’t remember a year with more variables in the weather along with many other adverse challenges.
Our 41 county territory experienced problems in the wheat crop from various winter conditions. An extremely wet spring led to some flooding and delayed spring planting. To top it off, more moisture and storms packed with hail caused more stress to the wheat crop —including infestations of scab and vomitoxin. It never fails to amaze me that Kansas farmers find ways to get the job done. Outside of a few extremely wet situations, the spring crops were planted and replanted and wheat harvest was completed in our territory. Continue Reading>>
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Leasing Residual
Leasing Residual
The best of both worlds is available through FCL’s Bonus Buster Lease. You can take advantage of the new tax incentives included in the 2008 Economic Stimulus Package and still have the financial benefits of leasing. FCL will monetize the depreciation benefits and provide you with lower payments. Continue Reading>>
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Business ¢ents
Business ¢ents
We all have an estate plan. In a sense, everyone has a plan even if they haven’t formalized a written plan. A person may have a will or a trust they have developed or another plan they have put in writing. For those that have not, the state you reside in provides a plan for you. Often the most important step is to determine the objectives of your estate or transition plan. There are many ways to transfer property before or after death; the key is understanding what you desire to accomplish. Advance planning benefits both you and your loved ones. The following items should be taken into consideration when formulating your plan. Continue Reading>>
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Press Releases
Latest Press Release
- Riffel Promoted to Frontier Farm Credit Vice President of Credit Services
- Fike Promoted to Frontier Farm Credit Senior Vice President of Credit
- Frontier Farm Credit Plans to Build New Marysville Location