At American Forest Management, we work with landowners, financial institutions and property managers who request timberland appraisals to asses the value of their timber. There are many reasons why timberland owners may need an appraisal, including to facilitate a transfer of ownership of real estate, to help actuate an acceptable selling or purchase price, or to establish a basis valuation as of a certain date. Our staff appraisers are equipped to provide valuable market insight and opinions of value by obtaining specific knowledge of the subject’s timberland attributes and area resources.
In order to identify the client’s problem, or goal, and determine an appropriate scope of work that will yield a credible appraisal, it’s important that appraisers and clients work cohesively to identify problems upfront. Though not an exhaustive list, the following is a general outline of some of the main items that an appraiser should request from the client before the appraisal begins, and is influenced by Standard Rule 1-2 found in the Uniform Standard of Professional Appraisal Practice (USPAP) 2018-19 edition.
Identification of the Problem
1. First, the appraiser must identify who the client is and any intended users, or the parties the appraisal is written for.
2. The appraiser must also know the intended use, or client’s reasons, for the appraisal.
3. The appraiser must determine the type and definition of value to be used in the appraisal assignment. Most of the time an appraisal is needed to calculate market value.
4. The appraisers need to know the desired effective date of the appraisal. This could either be a retrospective, current, or prospective value.
5. The client can help the appraiser establish the relevant characteristics of the subject property. This includes, but not limited to, the properties’ location, along with its physical, legal and economic attributes.
A legal description of the property can either be obtained from the client or from the courthouse in which the property resides. From our experience, some clients can supply a detailed map delineating the location of the subject timberland and timber stand types. Also, some clients may equip the appraiser with property data containing the subject’s acreage, merchantable timber volumes, stand types, stocking levels, plantation species and establishment ages, improvement history and productive/site index data.
If warranted and unavailable, a client should be prepared to cover the cost of a reliable timber inventory and any supplemental data work needed, because the estimated timber volume has a direct influence on the property’s economic attributes.
The appraiser should be aware of the real property interest to be valued and ask the following questions: Are property rights fee simple, leasehold (reserved timber), leased fee (timber deed), or a combination of these? The client can help by providing the terms and expiration dates of any leasehold or leased fee encumbrances that may affect the property.
It’s important that the client also specifies data of any known timber sale agreements, sales listing, hunting lease income, encroachments, taxes, miscellaneous income and timber supply agreements affecting the property. The client should let the appraiser know if there are any endangered or threatened species located on the subject property and if there are any management restrictions in place. If applicable, the client should provide information on certification programs, governmental programs (i.e. CRP) and carbon programs that the property may be enrolled in, or anything else that may affect the way one could manage and/or use timberland property, such as conservations easements.
6. Finally, all data must be verified by the appraiser. It is important that the appraiser receives the most information possible about the property since that will yield a more accurate outcome.
Once all the above is considered and a scope of work is laid out, the appraiser can start analyzing the data, determining the highest and best use, considering the three approaches to value and reconcile an opinion of value for the subject property. No two pieces of real estate are alike, and all appraisals are unique and different; therefore, the more information the client can supply, the more accurate the appraiser’s opinion of value will be.
Written by Terrell Baker, a Certified General Appraiser at American Forest Management with over 22 years’ experience in the forestry and land sales industries. Based out of the El Dorado, Arkansas office, he provides timberland valuation services for small and large timberland tracts throughout Arkansas and surrounding states. He is also a licensed real estate broker and registered forester in the state of Arkansas, and is a current member of the Arkansas Forestry Association and the Association of Consulting Foresters.
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