Recent auctions

1. Recent auctions • 2/26; Hardin co. 80Ac.; 84.9 CSR; fairly uniform, 3 soils • $7,50 per acre; $83.04/CSR point • 2/26; Story Co., 64 Ac; 86.3 CSR; fairly uniform, 4 soils • $6,950 per acre; $80.53/CSR point • 2/20; Cedar Co.; 77 Ac. 76 CSR; rough farm; • $5,518/acre; $72.60/CSR point • 2/11; Franklin Co.; 253 acres; 90 CSR; • $7,025/acres; $78.06/CSR/point; • 2/12; Hardin Co.; 80 ac.; 80.8 CSR; fairly uniform, 4 soils • $6,450/acre; $79.83/CSR point • 1/14; Hardin Co.; 71.5 Ac.; 80.2 CSR; fairly uniform; • $6,900/acre; $86.03/CSR point • Why?

2. Highest and Best Use • Be sure to appraise as vacant land first • Many buildings simply do not add value to the property, even if they are new. Tobacco barns in areas that quit growing tobacco, grain bins in a cow-calf area, things that were build w/o considering the demand or very specialized for one operation • If there are improvements that add value then evaluate as improved property; • The key is ‘do the improvements that add value to the property’

3. Highest and Best Use • Remember that it is the market and market conditions that are going to drive what will be HBU • HBU is based on potential use, not actual use; remember that buyers pay based on the potential • There are transitional areas, eg., development is moving in the direction but not there yet. This means there can be an interim value and then a terminal value • There can be speculative uses

4. Highest and Best Use • An appraiser working in a transition area has to be very careful • Another aspect is if improvements are needed for HBU, eg. Tiling • There are 4 basic question that need to be asked to determine HBU • What uses are legal? • What uses are physically possible • For uses meeting 1 and 2, which ones are financially feasible, ie, give positive net income or non-monetary benefits • Of these uses, which one produces the greatest return or benefit

5. Highest and Best Use • Legally possible; • Be sure to do a title search looking for restrictions; • Transfer of development rights; very popular in some states and areas • Life estates • Conservation easements • Restrictive covenants • Downzoning

6. Highest and Best Use • Physically possible; • What are the characteristics of the property; soils, slope, frontage, water, • Characteristics will control what should be considered for potential uses • If there is a defect can it be corrected and will it be? If the defect is going to be corrected then the appraiser has to be sure and include the cost for the correction

7. Highest and Best Use • Financially feasible options; • What will be the net income from a use, if positive then it should be considered • It is very important to remember recreational and home properties; these will yield nonmonetary benefits that have to be considered

9. Highest and Best Use • Don’t be ridiculous in how far you go with this analysis • The appraiser has to know the neighborhood and the potential but it is not their job to examine everything (vegetable production, U-Pick-Ums, stables, etc.) All possible uses that might result in higher income but that isn’t the point of what the appraisal is trying to determine • Appraiser has to use judgment