When Do You Need A Certified Farmland Appraisal?

A farmland appraisal is something that we get asked for often throughout the calendar year here at Iowa Land Company. When an appraisal is needed and why? We can help in getting sellers connected with a certified appraiser. We also provide a free, no obligation market analysis if we feel a certified appraisal is not necessary.

An appraisal is a document that gives an estimate of the fair market value of your agricultural property. The most common reason for ordering an appraisal is to obtain a farm loan on a property. However, there are several other reasons why an appraisal might be needed. Below are just a few:

• to settle an estate
• to obtain a farm loan (common)
• to set a tax basis for capital gains
• to determine a reasonable price when selling farm real estate (Not Required)
• to contest high property taxes
• to settle a divorce

Dates Are Important When Settling an Estate

It can sometimes take one to two years for an estate to settle before ownership is transferred, so the farmland appraisal could be up to two years old before it enters the market. The inheritors of the estate need to keep this in mind when going to sell the land because the original appraisal could be out of date. Meaning the market value may have increased or decreased depending on market analysis. Emotions often play a major part in the selling or purchasing of farmland, which is where a well executed public auction can assist in selling land encompassed in an estate.  

Obtaining a Farm Loan

An appraisal is generally required by all farm lender before a final farm loan approval to ensure that the farm mortgage loan amount is not more than the current value of the property. The appraisals for farm loans are performed by an approved “appraiser” who is typically a state-licensed individual trained to render expert opinions concerning agricultural property values. In an appraisal, consideration is given to the property, its location, farmability, as well as comparable sales. Most lenders will order an appraisal with a certified appraiser of their choice. Consult with your loan officer for further assistance.

Farmland Appraisal for Capital Gains

A farmland appraisal is used to determine the stepped up basis at the time of death of the current landowner/heir. It’s a good idea to have a certified appraiser to appraise the land at the time of death. Having this done will give the new owner an accurate market value of the farmland. The appraised price becomes the basis, if the new owner or beneficiary decides to sell in the future, that price is used when determining capital gains tax. For more information on capital gains tax click here or consult with your CPA.   

Broker’s Opinion of Value

If you’re considering selling your farmland, you should request an opinion of value from a real estate brokerage that is highly educated in farmland sales. The seller does not need to have a certified appraisal to sell their land. Iowa Land Company offers  an extensive, FREE, No Obligation market analysis on your land to help set realistic expectations and let the seller know the value of their farmland. We take into consideration comparable sales, CSR2 average, soil type, location, and farmability when putting together our farmland appraisal. In most cases, a public auction is considered a true appraisal because it determines the worth of what buyers are willing to pay in the current market. We offer a professional farmland auction platform that produces results throughout the state of Iowa. To learn more on this service we provide, watch the video below, visit our website at https://iowalandcompany.com , or email us info@iowalandcompany.com.