What you should know about farmland appraisals
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