Fall 2003

THE FADING PROFESSIONAL

Jerry called a few months ago. He was retiring and closing his rural appraisal business.

The first time I met Jerry was nearly 35 years ago. We both had graduated from college with degrees in agriculture. Doane Agricultural Service Inc, the premier farm management and farm appraisal company in the United States had just hired him and me. We were the typical Doane employee…. raised on a farm with an agriculture degree from a major land grant university. We were to be trained and supervised by the most educated and experienced professional farm managers and rural appraisers in the country.

A "Doane Man" was never to cut corners or reduce the quality of work under any circumstances. The "Doane experience" prepared many of us, such as Jerry and me, to run our own businesses. Jerry formed his rural appraisal business and for 25 years his days at Doane and his every day growing experiences made him one of the best rural appraisers in Missouri.

Then in the 1980's Doane disappeared. After 65 years of providing landowners with excellent appraisal services and 65 years of educating a long list of professional rural land appraisers Doane was gone. And now a generation afterwards, those former Doane employees, such as Jerry are retiring. No longer will the farm boy with an agriculture degree find a company such as Doane to sharpen his appraisal skills.

A few years ago the State of Missouri created new regulations that all appraisers must be licensed and meet minimum education and experience requirements. There were three types of licensees created:

1. The State-licensed Real Estate Appraiser, who was approved to appraise residential property not to exceed $250,000 but not commercial property

2. The Certified Residential Real Estate Appraiser, who was approved to appraise all types of residential property, but not commercial property

3. The Certified General Real Estate Appraiser, who was approved to appraise all types of property

While the regulations mandate minimum standards for appraisers to appraise houses and commercial buildings, no State standards need to be met to appraise rural land. So, anyone who is a licensee's appraiser with or without knowledge of land can offer an opinion of value.

Here are examples of licensed appraisers, whose opinions exceeded their skills.

An owner hires a Certified General Appraiser to appraisal his 270-acre Franklin County property. The land had a major access problem, but this problem was not mentioned in the appraisal. When the owner asked the appraiser how the access problem affected the value, his response was, "access wasn't important in establishing value." This appraiser demonstrated the worst kind of ignorance: He didn't know that he didn't know!

A person, who promotes himself as a rural appraiser, stopped by my office the other day. After a few minutes of conversation, he demonstrated that he had no knowledge of topography maps, an essential skill necessary for a land appraiser.

Sadly, he didn't understand soils either, but he justified his ignorance by announcing, "soils aren't important to the value of a property." That's the same as saying that a house's foundation isn't important to the value of the house. Again, here is an appraiser who didn't know that he didn't know.

A Franklin County landowner had his 97-acre property appraised by a licensed appraiser. Imagine the shock when the appraisal was $400,000 when all had expected a value of $185,000 - $210,000. The 97 acres is located 15 miles from the nearest town, on a private gravel road. The appraiser ignored nearby land sales comparable to the property. Instead, he used three sales that were 20 acres in size with homes, and located on concrete streets near a town. There was nothing comparable about these sales. But to this appraiser who had never been trained to appraise rural property, all land was the same.

These errors were detected early, but what happens when the less obvious mistakes are overlooked. For example, suppose the appraiser determines an incorrect value because he lacks the basic knowledge of soils, topography, potential land use, etc. These mistakes may go unnoticed because most landowners do not read the appraisal report beyond the first page that states the opinion of value. If the owner makes a business decision based upon an unqualified appraiser making a bad appraisal, the result could be very damaging.

So how does a landowner determine the market value of his rural property? Here are two suggestions.

1. Employ an appraiser who is experienced, knowledgeable, and has a rural background. Also ask for and talk to his references. The licensed appraiser who is also a licensed real estate broker is a plus. He is in touch with the market and has everyday "one on one" experiences with buyers and sellers.

2. Contact two real estate brokers who sell land. Don't promise them a listing to get a "free" appraisal. Instead, pay them for their opinion of value. Their opinion will not be influenced by their thought that "if I give the owner a high price, he'll list with me." The broker's opinion of value should include detailed information of your property and the comparison of your property to other similar land that has sold.

An appraisal is one person's opinion… in other words, it's a "guess." The State appraisal regulations allow all licensees to appraise rural property, but those regulations do not qualify licensees to appraise rural property. An appraiser or real estate broker who has the education, experience, and skills to evaluate your land will raise the "guess" to an "educated guess."