Appraising Grain Facilities
for Farm Owners
By Mason Spurgeon, Certified General Real Estate Appraiser
Having recently appraised two different types of grain facilities, I was reminded of how appraisers may need to follow different methods even when appraising the same kind of property. To the uninitiated, a grain facility is just a grain facility: they store grain and usually sell on a per bushel basis. But my two recent projects showed me that grain facilities fall into different classes of their own based on various factors—especially highest and best use, and overall condition.
Appraising a New Private Farm Grain Facility
The first facility I appraised was set up for a private farmer on his personal farm and was recently constructed. It was a very high capacity private farm facility with a loop system and over 230,000 bushels of storage. Sales for loop systems are very difficult to locate on private farm tracts, but at Spurgeon Appraisals our sales research and appraiser network is second to none. After several hours of research, comparable farm sales for loop systems were finally located. Sales of newer facilities indicated a very low percentage of external obsolescence, which showed that these properties are in high demand, because a buyer is willing to pay what the seller has in the property’s construction costs, minus physical depreciation.
Appraising an Older Grain Facility or Feed Mill
The same cannot be said for older facilities. The second facility I appraised was an old feed mill that was still in operation. However, after inspecting the facility and equipment I determined that the highest and best use was as a private grain facility rather than a feed mill. Small feed mills are not as prevalent as they once were. Many have gone out of business or converted to other types of operations, private farm properties. Because of the condition of the facility, the external obsolescence on this property was much higher than that of the first property appraised. Buyers of these older properties recognize that there is less demand and higher maintenance costs involved and will expect a discount.
Grain Facility Appraisals
Two Facilities, Two Outcomes
Different classes of grain facility, based on highest and best use and condition.
Facility 1
New Private Farm Facility
230,000+
bushels of storage
- Recently constructed
- High‑capacity loop system
- Very low external obsolescence
- Properties in high demand
Facility 2
Older Feed Mill
HBU
private grain facility, not a feed mill
- Still in operation
- Small feed mills are not as prevalent as they once were
- Much higher external obsolescence
- Buyers expect a discount
Farm · Commercial · Home appraisals | Missouri · Illinois · Iowa
Cost Approach
Where the Value Goes
Construction cost, less depreciation and external obsolescence.
Newer facility
Physical depreciationVery low external obsolescence
Older facility
Construction cost
Illustrative only
Farm · Commercial · Home appraisals | Missouri · Illinois · Iowa
What Buyers of Older Grain Facilities Should Watch For
Buyers of older facilities have to be vigilant. Maintenance costs and repair costs could be very high, which is the reason for the external obsolescence. Also, it may not be the exact setup or modern equipment the farm buyer wants, and the cost to add is very high. The overall setup of an older facility is typically not as well thought-out as a new facility on a large farm. New facilities are often built with expansion in mind, whereas older facilities sometimes appear to be thrown together with little room for expansion.
For Farm Buyers
Buying an Older Facility?
Buyers of older facilities have to be vigilant. Five things to weigh.
Maintenance and Repair
Costs could be very high, which is the reason for the external obsolescence.
Setup and Equipment
It may not be the exact setup or modern equipment the farm buyer wants.
Cost to Add
Adding what you need can be very costly.
Overall Layout
Typically not as well thought‑out as a new facility on a large farm.
Room for Expansion
New facilities are often built with expansion in mind; older ones may have little room to grow.
Farm · Commercial · Home appraisals | Missouri · Illinois · Iowa
A Thorough Farm Appraisal Report
At Spurgeon Appraisals, we strive to complete a thorough farm appraisal report with every aspect of the property taken into consideration. Call or email us today to see how we can help you with your farm appraisal needs.
Spurgeon Appraisals regularly appraises a variety of property types. We have experience appraising farms, residences, and commercial properties. We pride ourselves on providing excellent customer service and quality appraisals. Contact our team to see how we can meet your appraisal needs and exceed your service expectations.
