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When applying for a farmland loan, lenders typically require a professional appraisal to determine the value of the property. The type of appraisal required can vary depending on the lender and the specifics of the loan.
Download the new Ag Land Loans 301: Land Assessment guide from FBN® Finance to learn more about ag property appraisals or continue reading below to find out which types of appraisals are most common.
Appraisals need to be completed by a certified general appraiser for land loans from FBN Finance. They are requested to use a narrative-style appraisal and the Uniform Agricultural Appraisal Report (UAAR).
A certified general appraiser has met the highest level of state certification for real estate appraisal and adheres to the Uniform Standards of Professional Appraisal Practice (USPAP), which ensures that their appraisals are conducted ethically and competently. They will conduct a thorough analysis, including site visits, market research, and comparisons with similar properties, to provide an accurate valuation.
AVM is a technology-driven method used to estimate the value of real estate properties, including farmland, without the need for a physical inspection by an appraiser. AVMs use mathematical modeling combined with a database of property information to generate property valuations.
This is a standardized form used specifically for agricultural properties. It includes detailed information about the land, improvements, and any agricultural production.
This is a more detailed and comprehensive report that includes a thorough analysis of the property, market conditions, and comparable sales. It is often used for larger or more complex properties.
This type of appraisal is less detailed and is typically used for internal purposes by the lender. It may not be suitable for all loan types.
In some cases, a lender may accept a less detailed appraisal where the appraiser only observes the property from the road. This is less common for farmland loans but may be used in certain situations.
This type of appraisal is conducted without a physical inspection of the property. Instead, the appraiser relies on data and information available online. This is also less common for farmland loans.
It's important to check with your specific lender to understand their requirements. They will provide guidance on the type of appraisal needed and may have a list of approved appraisers you can use.
Overall, the higher cost of an agricultural loan appraisal reflects the additional time, expertise, and resources required to accurately assess the value of a complex and specialized property. Here are some common reasons why it can be costly:
Agricultural properties often include a variety of land types (e.g., cropland, pasture, woodland) and improvements (e.g., barns, irrigation systems, grain bins) that need to be evaluated, which requires more time and expertise to assess accurately.
Farmland parcels are usually much larger than residential lots, which means the appraiser has to cover more ground and gather more data.
Appraising agricultural properties requires specialized knowledge of farming practices, crop values, soil types, water rights, and other factors unique to agriculture, so appraisers with this expertise often command higher fees.
The market for agricultural land is less active and less transparent than the residential real estate market, requiring appraisers to spend more time researching comparable sales and market conditions to determine an accurate valuation.
Agricultural appraisals often need to comply with specific regulatory requirements and standards, and meeting these standards can add to the complexity and cost of the appraisal.
Many agricultural appraisals use the income approach to valuation, which involves analyzing the income-generating potential of the property.
Agricultural properties may have unique environmental and zoning issues that need to be considered, such as conservation easements, water rights, and land use restrictions, and can add to the complexity and cost of the appraisal.
The new Ag Land Loans 301: Land Assessment guide helps you know what to look for when assessing the value of agricultural property, including:
What restrictions and requirements may affect your land purchase?
Will you have full access to the land?
When is a new survey required for a land loan?
What type of appraisal is required for my land loan?
Download your free copy here, and then fill out this short application to get pre-qualified for a loan to expand your property or finance improvements.
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