Horse Farms

Looking for comments on problems when appraising horse farms.

Here is an addendum I just wrote for a horse farm I am appraising.  Any comments or suggestions are welcomed.

 Comments regarding location, land values and market factors for horse farms:

The subject is located in an area popular to horse enthusiasts. Signs throughout the area state "horse country" and many good quality horse farms populate the area. The market for horse farms is somewhat similar to that of lake properties in that prices exceed the norm for raw land. Market participants place high value on improvements such as large, good quality horse barns, pastures, arenas and feed stations. These amenities are not considered over improvements; in fact they carry as much weight in the buying decision as the quality of the living quarters for the purchasers.

The appraiser has over fifteen years experience with horse farm appraisals and understands what drives value with these type of properties. To understand why certain amenities require adjustments that are different than when appraising other types of properties you must first understand the typical buyer. The typical buyers are usually relatively affluent and less price sensitive when the property meets their needs. They are buying in horse country because that life style is essential to them and they are very selective. When a property meets their needs they pay prices that seem high compared to properties with similar square footage or lot sizes in other areas. To not recognize and understand the market and market participants would be equivalent to appraising property on a popular all sports lake and using comparable sales with non lake front sites. Lake front sites often constitute 50% or more of the value where non lake front sites range from 20-25% of total value. This is the case with horse farms, and with this particular appraisal, where the site and improvements represent approximately 50% of the value.

Appraising properties of this nature creates a problem at times because of the reluctance of Lenders to place value on the two things that are critical to this type of property; excess land and superadequate improvements. The terms excess land and superadequate are stated because they are often imposed by the underwriters and review committees when reviewing these types of appraisals. To refer to the subject site as containing excess land or the horse facilities as superadequate would be misnomers in this report. The definitions below are from the Dictionary of Real Estate Appraisal, 4'th Edition. Following the definition is an explanation.

Excess Land:

"In regard to an improved site, the land not needed to serve or support the existing improvement. In regard to a vacant site or a site considered as though vacant, the land not needed to accommodate the site's primary highest and best use. Such land may be separated from the larger site and have its own highest and best use, or it may allow for future expansion of the existing or anticipated improvement. See also surplus land."

As the definition states excess land is that land "not needed to serve or support the existing improvements....land not needed to accommodate the sites primary highest and best use..." The highest and best use of the subject property is the present use as a horse farm; therefore there is no excess land. The 22.5 acres +/- is in the appraisers opinion an optimal lot size for the intended use of the property.

Active listing, Real Comp MLS # 28046069 on Hosner Road within one mile of the subject is a 25.19 acre vacant parcel that is listed for $575,000. This is the most similar parcel found of all sales and listings. The MLS remarks state "Just over 25 acres of wooded property in Metamora hunt area. Terrific building site. Small pond to the front of property...".

Superadequacy:

An excess in the capacity or quality of a structure or structural component; determined by market standards.

The extensive good quality fencing, 8 stall horse barn and the improvements to the pastures are not superadequate by market standards for horse enthusiasts. If the value of these improvements is not properly recognized the appraisal will fall short in analyzing the significant charachteristics of the property and not produce a credible result. Underwriters typically are adverse to large adjustments for these type of improvements, and in most appraisal assignments rightly so. This appraisal however is of a horse farm in horse country, therefore appropriate adjustments based on cost and market data were applied.