Farmland appraisals are an important part of the process of
buying or selling farm property. These appraisals provide an estimate of the
value of the land and its potential for farming, which can be used to determine
the price for a sale or to secure financing for a purchase. However, there is a
difference between an appraisal and a BPO, and it’s important to understand the
distinctions before you embark on the process of buying or selling farm
property.
An appraisal
is a professional assessment of the value of a property, typically conducted by
a licensed appraiser. The appraiser will visit the property and gather
information about the land, including its size, location, soil quality, and any
improvements or structures on the property. They will also consider market
conditions, including the prices of similar properties in the area, and use
this information to determine the fair market value of the land.
A BPO, or
broker price opinion, is a more informal assessment of the value of a property,
typically conducted by a real estate broker. The broker will visit the property
and gather information about the land and its potential for farming, but unlike
an appraisal, a BPO is not required to be conducted by a licensed appraiser.
The broker will then use this information to provide an opinion of the value of
the land, which can be used as a guide for pricing a sale or negotiating a
purchase.
When it
comes to purchasing farm property, an appraisal is generally considered to be the
more accurate and reliable assessment of value. Appraisals are conducted by
licensed professionals who have the training and expertise to gather and
analyze data and make accurate estimates of value. Additionally, appraisals are
usually required by lenders as part of the loan process, which means that an
appraisal will be conducted regardless of whether or not the buyer chooses to
have one done.
On the other
hand, a BPO is a more informal assessment that can be useful for sellers or
buyers who want a rough estimate of value before embarking on the more formal
appraisal process. A BPO can also be useful for buyers who are not planning to
take out a loan and do not need an appraisal to secure financing.
In
conclusion, whether you are buying or selling farm property, it’s important to
understand the difference between an appraisal and a BPO. An appraisal is a
more formal and accurate assessment of the value of the land and is typically
required by lenders, while a BPO is a more informal assessment that can be
useful for getting a rough estimate of value. Ultimately, it’s important to
consider your specific needs and the requirements of your lender when deciding
whether to have an appraisal or a BPO conducted on your farm property.
David Whitaker | Iowa Land Guy
