Farm Loan Appraisals
A farm loan appraisal is a document that estimates the fair market value of agricultural land and is required by all farm loan providers, including Farm Plus Financial, before giving a final farm loan approval to ensure that the farm loan amount is not more than the current value of the property.
The appraisals for farm loans are performed by an approved, state-licensed farm loan appraiser, who is qualified to render an expert opinion concerning agricultural property values. During this process, value is weighted based on the land, its location, amenities, as well as its physical conditions. Click here for Vineyard Loan Appraisal information.
Farm Plus Financial receives bids from our nationwide network of independent appraisers, the best of which we present to you. From that selection, you choose an appraiser and timeline that best fits your needs.
The 3 Most Used Techniques For Evaluating Agricultural Property Are:
Sales Comparison Approach: The appraiser uses at least 3 comparable properties in the area, that have sold in the last six months and are within a 10-50 mile radius of the subject property. Similarities are then analyzed between the sold properties to the subject property. Details factored in the analysis include agricultural products grown, acreage, land improvements, square footage, number of bed/baths, property age, view, and condition. The Sales Comparison Approach is the most common technique used.
Cost Approach: This method uses this valuation formula: Land value, plus the cost of reconstruction of buildings, minus accrued depreciation of buildings from new to current state.
Income Approach: Estimated potential net income of the property. This technique is used for income-producing properties in conjunction with other approaches.
Frequently Asked Questions About Appraisals
While the lender orders the appraisal on the borrower’s behalf and is listed on the report, the borrower will receive a copy.
Usually, switching your farm loan provider does not automatically mean you must start the process again. Your first lender can transfer the appraisal to a different loan provider. Some firms may charge a small fee, to compensate for clerical work involved in editing the appraisal for the loan provider, called a “Retype Fee.” The original farm loan provider can refuse to transfer the appraisal to another farm loan lender. In this case, you would need to start over with a new appraisal.
The seller of the property sets the price of the property, not an appraiser. Sellers looking to sell for the highest price possible do not want to be held to an appraiser’s assessment of their property, therefore sellers typically do not order an appraisal. The real estate agent, who is compensated based on final sale price, normally assists the seller in setting the price.
In order to arrive at price, the agent performs a comparative market analysis (CMA). State to state regulations vary, but agents are usually allowed to perform CMAs without an appraiser’s license. A CMA is made by surveying recent sales of properties in the area, similar to the Sales Comparison Approach used by appraisers. The accuracy of the CMA relies on the agent’s experience and the property. Typically, the agent will recommend a list price using this CMA, and the seller uses this recommendation when setting a list price.
In order to do their job properly, your appraiser might have additional requirements, including but not limited to:
- A copy of the deed, survey, purchase agreement, or other pertinent papers.
- A copy of the current real estate tax bill, statement of special assessments, balance owing, and on what [sewer, water, etc.].
- If it is an income-producing property, a breakdown of income and expenses for the last year or two and a copy of the lease might be required.
They might also need to know:
- The list price of the property and who listed it
- If there is a farm loan on the property, with whom, when placed, for how much, interest rate, etc.
- What’s included in the sale, such as appliances
What People Are Saying
Farm Plus Financial is full of friendly, knowledgeable, diligent individuals who work hard to exceed their clients’ needs. I’ve done a number of appraisals for Farm Plus and their commitment to quality and efficiency is evident in all they do!
The staff at Farm Plus Financial are wonderful to work with. They are very responsive, friendly, and answer all questions we had. We have worked with them twice now and can not say enough how great the company is to work with.