Land Resource Valuation

1
Land Resource Valuation

• Chapters 2, 3, 4 in the text
• AGEC 432
• Dr. Curtis F. Lard

2
Appraisal

• Appraisal an opinion of the present market
  value of a real property.
• Conditions
• An adequate description
• A specific date
• Supported by market date and data analysis
• Made by a qualified real estate professional

3
Economic Value

• Economic Value has three components
• Utility must be able to satisfy a want
• Scarce in Supply otherwise it would be free
• Appropriable It can be possessed and traded

4
History of Value

• Adam Smith 1776
• Thomas Malthus 1798
• Karl Marx 1867
• Alfred Marshall 1890

5
Value Depends Upon

• Internal Characteristics
• Soil Quality
• Topography
• Minerals
• Drainage

• External Characteristics
• Time
• Location
• Size
• Relative
• Absolute

6
Forces that Influence Real Property Values

• Social Attitudes of Buyers and Sellers
• Economic Prices, costs, interest rates,
  inflation
• Government Taxation and zoning
• Environment Climate, yield, etc.

7
Market Value

• Connotes what a property is actually worth
• The most probable price in terms of money which a
  property should bring in a competitive and open
  market under all conditions requisite to a fair
  sale, the buyer and seller, each acting
  prudently, knowledgeably and assuming the price
  is not affected by undue stimulus

8
Approaches to Real Estate Valuation

• Cost Approach An estimate of the land value
  plus the depreciated reproduction cost or
  replacement cost estimate of the improvements
• Income Approach Appraisal analysis that
  converts anticipated benefits to be derived from
  ownership of property into a value estimate
• Sales Comparison Approach An analysis of
  similar, recently sold properties in order to
  derive an estimate of the most probable sales
  price of the subject property

9
Some Uses of Appraisals

• Transfer ownership of property rights
• Financing and Credit Use
• Legal Matters, such as
• Eminent Domain
• Division of properties
• Environmental Issues

10
Some More Uses of Appraisals

• Taxation of Real Property
• Assessed values
• Separation of property rights (interests)
• Estate Plans
• Inheritance taxes

11
Some More Uses of Appraisals

• Investment opportunities
• Counseling
• Decision Making
• Accounting of Asset Values
• Real Estate Markets for Agricultural Lands
• Production Market
• Investment (Inflation) Market
• Consumption Market (Held for Non-market Reasons)

12
Economic Principles Involved in Appraisal

• Highest and Best Use
• Anticipation
• Supply
• Demand
• Competition
• Substitution
• Balance
• Contribution
• Surplus Productivity
• Conformity

• Externalities
• Professional Designations
• AFM (Accredited Farm Managers by ASFMRA)
• ARA (Accredited Rural Appraiser by ASFMRA)
• MAI (Member of the Appraisal Institute by the
  Appraisal Institute)
• SRA, SREA, and SRPA (by the Society of Real
  Estate Appraisers)

13
The Appraisal ProcessScientific Method or
Research Problem

• Define the Problem
• Preliminary Survey and Plan
• Data Collection and Analysis
• Discuss Land Valuation
• Apply all three approaches
• Sales Comparison Established Value
• Cost Established Value
• Income Established Value
• Reconciliation
• Final Establishment of Value

14
Helpful Hints for Class Presentations or Real
Estate Research Projects

• Introduction
• The team members
• The project problem identification
• Statement of objectives
• Define your study

• Description of the Surrounding Environment
  (Visual)

World
Nation
State
City
Region
Neighborhood
Subject Property
15
continued Helpful Hints for Class Presentations
or Real Estate Research Projects

• Relevant Demographic and Economic Characteristics
• Descriptive Analyses
• Regional Analysis 7 County Area
• Neighborhood Analysis Brazos County
• Site Analysis Defined by your product
• Legal Description
• Plat Plan
• Zoning
• Tenants
• Improvements
• Economic and Financial Conditions of the Subject
  Property
• Tenants
• Vacancy Analysis
• Income projections through the next five years

16
continued Helpful Hints for Class Presentations
or Real Estate Research Projects

• Methodology (procedures and techniques)
• Supply and Demand Analysis
• Analysis of your problem and recommendations and
  conclusions
• Assumptions and limiting conditions
• Appendix (may include data, maps, etc.)

17
Code of Ethics for Appraisers

• Procedures
• Conflicting Interests
• Disclosure
• Before Accepting a job
• In the Report
• Unity of Report
• Adverse Conditions
• Clients Property
• Hypothetical Reports
• Must Use Appraisal Methods

• New Business
• Advertising
• Solicitation
• Type of Work
• Funds Fees