Requirements for Various Appraisals
Requirements of a Poultry Farm Appraisal
Appraisal of income producing farms, such as poultry farms, requires the appraiser
to apply three approaches to value. The Cost approach attempts to add the
land value as if vacant to the depreciated contribution of the improvements.
The Sales Approach compares and adjusts properties similar to the subject
for differences to estimate a value. The Income Approach capitalizes an income
flow by use of a multiplier to arrive at a value based upon the ratio of income
to value.
To properly appraise a farm, the appraiser needs to be informed of the following.
INCOME INFO
The term length and income from the grower contract
The performance of the farm for the past three to five years
The expenses of the farm including
Insurance & Taxes
Labor
Utilities (gas, electric, water)
Repairs
Reserves (an amount set aside for unexpected expenses)
PROPERTY DATA
The date of construction of each building (and construction costs if possible)
The equipment included in the building
All repairs and replaced equipment, upgrades, etc. made in the past 5 years
Well depth and pump size
PROPERTY HISTORY
Any offers made in the past one year
Any listing or sale of the property made in the previous three years
A copy of a current contract for sale (if applicable)
Any easements, zoning, or restrictions on the property
Requirements to properly appraise a Residential or Vacant land Property
A legal description
A tax parcel number
A legal street address
A history of lease and ownership for three previous years
A list of repairs made in the previous three years
The year the house was built (if known)
A list of any recurrent problem, if any
A termite inspection or other pest report, if any
A copy of any home inspection, septic or waterwell test or inspection, radon
tests, and any appraisal made in the three previous years.
For vacant land
A lease history if leased for hunting or grazing
Any soil report, easement or restriction on use
Any USDA payment or income from the property
Any debris pile, exposed or buried, or any other environmental restriction
Requirements of a Mineral Appraisal
The appraiser relies upon an estimate, usually prepared by an Estimator. The
Estimator is usually a qualified petroleum geologist or reservoir engineer.
The estimator determines the gross quantity of oil and gas present and divides
them into reserve categories.
PROVEN reserves are resources being produced, or have a 90% probability of being developed. This is often referred to as “behind the pipe.” PROBABLE reserves are areas geologically favorable for the accumulation of petroleum and generally refer to areas that are within one mile of actual economic production. POSSIBLE reserves are wildcat acreages that have geological conditions favorable to accumulate oil or gas, but have not been tested. These reserves are generally more than one mile from production.
By one suggested method, proven reserves are 90% likely to meet the estimate. Probable reserves are 50% likely, and possible reserves are 10-14% likely to result in a producing well.
The appraiser’s function should be separate from the estimator where possible. Where simple cash flows dominate, such as mineral owner royalty interests, it is practical for the appraiser to analyze the income history for credible results. At a minimum the appraiser must be furnished with a copy of the following:
A map or legal description of the property appraised
A tax history
A record of ownership
Any applicable deeds or leases
A reserve and resources estimate
Current and total production
Well history and income for the previous 5 years
A well decline history
An expense history
All previous lease bonuses, terms of the lease or royalty interest
Any geological report or company brochure
A signed certification by the estimator that insures they are acting as a
disinterested third party
Terrel Shields
13257 Fairmount Road
Siloam Springs, AR 72761