Accurate rural appraisals for your agricultural mortgage
The foundation for any appraisal is subject property identification. All appraisals have a scope of work that defines 1.) What is going to be in the appraisal, 2.) Who gets to use the appraisal, and 3.) What the subject property is.
For residential appraisals, property identification is typically a street address, which can be easily looked up and verified. For rural and agricultural appraisals, however, legal descriptions offer the best source for property identification. Legal descriptions are anything but simple.
When seeking a rural or agricultural property appraisal, look for an appraisal team with a proven track record in legal description verification. Work with appraisers with the expertise and tools – such as Deed Plotter software – to accurately draw legal descriptions to ensure plated acres and find closure errors from a flawed description.
One example comes to my mind when thinking about legal description verification. A local lender had made a loan (mortgage already recorded) on a small acreage with a hog finisher being built on it. The finisher had easement access through another family owned finisher site.
For the legal description of the site, the lender used the metes and bound description provided by a survey completed by a local engineering & surveying company. In the diligence of the appraisal process, Compeer’s appraisal team used Deed Plotter to sketch the property boundary, including the easement access. At some point during the surveying process a call supposed to be described as “east” was actually identified as “west.”
What’s the ramification of a simple mistake on the legal description? In this case, the lender didn’t have access to the property they had already put a mortgage on. Without the use of Deed Plotter to sketch the perimeter boundary of the subject property and access, the error would have likely gone undetected.
Legal description verification feeds into another important attribute the best rural appraiser teams possess: sales data analysis/collection. It’s important for appraisal professionals to follow the local markets, including the monitoring of public listings and auctions before a sale is agreed upon.
Confirmation of the sale terms through a multitude of sources is another best practice. Next, sales is confirming the sale was completed through the local courthouse. The last step includes reviewing the Real Estate Transfer Declaration and/or deed to verify the sale terms we expect match what is recorded and finalized. Data review includes:
- Legal description
- Purchase price
- Grantor/grantee, etc.
It’s vital the appraisers make routine checks of sales at the local courthouses to ensure their sales data is up to date with the most accurate information available. A solid database provides the team the tools to analyze the sales in a multitude of ways, including varying land classes, land uses, income potential, and other physical attributes that are important to the local market area.
If you’re passionate about farming and rural America, why trust your property appraisals to just any appraiser? Be persistent and find one who’s strong in legal description verification and sales data analysis/collection. These two skills are essential for thorough rural appraisal and determine the foundation of every appraisal.
Durkin Young is a senior appraiser for Compeer Financial