When You Need a Farm Appraisal

By Mark Fisher, Appraisal Technician

June 2020

A farm is somewhat unique in that the value of the property is very dependent on the land, structures, and the usefulness of those structures. Unlike a warehouse in St. Louis, whose value may derive from the location, a rural farm is as useful as what's on it and what can grow on it. For example, the difference in grain facilities - whether they are newer or older - can have an impact on the valuation. A farm appraisal is usually quite involved because it requires so much expertise.

Skilled appraisers, like the ones we have here at Spurgeon Appraisals, have expertise in farms. They can assess a farm not just based on the land, but also the structures. They know which silos are more valuable, which areas have more expensive land, and which confinements are less likely to require maintenance in the future. Indeed, an experienced appraiser can get you closer to the truth when it comes to farmland value.

Appraisals are often necessary for various legal and financial situations. A few situations will require you to have an appraisal done on your farm. Here are five scenarios for when you will need a farm appraisal and what impact the valuation could have.

Business Loans and Lines of Credit

To extend a line of credit or loan to your farm, a bank will need to know the value of your farm’s assets. The best way to have an accurate value for those assets is to have an appraisal done. An appraiser can come to your farm, evaluate it, and compare it with similar properties in the area. By seeing how your farm compares, you can have an accurate value and determine if it is enough to secure the loan.

An accurate appraisal is critical in this scenario because it can be the difference between the bank approving or rejecting you for a loan. If the assessed value is too low, they might deem the line of credit to be too risky, which could jeopardize your business plans. Appraisers with more experience are more likely to notice smaller details which will increase (or decrease) the valuation of your property.

Selling or Buying  

If you want to sell or buy, you will need to know what it is worth or you might be ripped off. Knowing what the farm is worth, and having the data to back it up, is crucial to closing this type of business deal. An accurate appraisal is essential here since a poorly calibrated valuation could result in you selling for too little money. On the flip side, if the valuation was too high, you might be accused of acting in bad faith. At Spurgeon Appraisals, we guarantee the accuracy of our reports.

Gift or Estate Planning

Many farms in America are handed down from generation to generation. If you want to leave your farm to your loved ones, you will likely want a plan to ensure that the tax burden to them is minimal. An appraisal can help you know what your farm is worth so you can start drafting those plans now.

There are some special valuation rules within the IRS code (specifically 2032A) which are especially relevant to farms. These rules have some prerequisites, but both your appraiser and tax professional can explain the law and how it might impact you. In short, if you have a farm, do not leave estate or gift planning for the last minute. Contact a qualified appraiser and discuss your situation to see what options might be available to you.

Property Tax Appeal

Property taxes are expensive. They are even worse if your property has not been correctly assessed by the county, which does happen. County assessment often lacks the nuance of a professional appraisal. Going back to the example of grain facilities, the county assessor probably will not take the type you have into account. Spurgeon Appraisals will. If you think that your farm's property taxes are too high due to an elevated assessment, an appraisal can help. Having an independent third party evaluate your property gives you the documentation you need to lower your taxes with the county. One straightforward appraisal has the power to save you thousands of dollars in the future!

Dissolution or Bankruptcy

If you are looking to dissolve your farm, you will need to know the farm's value to complete that process. You will need to settle up any money owed to the federal government and also pay all creditors as much as possible. Having an accurate value is critical to ensure that all owners and creditors get their fair share of the property, and to show the courts that you are, indeed, bankrupt.

Many Scenarios Require a Farm Appraisal

Naturally, these are not the only scenarios when you will need a farm appraisal. Other situations, such as litigation or divorce, can also require an accurate valuation of the farmland. All these scenarios share the need for an accurate, precise valuation. At Spurgeon Appraisals, we have extensive experience in these types of appraisals. We have many positive customer reviews, with many of them citing our level of detail and analysis in the report.

If you need an accurate appraisal of your farmland, please give us a call or email us today. Our phone number is 573-769-7779. Our email is frontdesk@spurgeonappraisals.com. We would love to speak with you about your particular situation and see how we can be of assistance!