Appraising Buildings ISU – Economics 364X Tim Janssen Appraiser Farm Credit Services of America.

Appraising BuildingsISU – Economics 364X

Tim JanssenAppraiser

Farm Credit Services of America

Introductions

NameWhere you’re from (city, county)

Whether or not you grew up on a farm

What kind of operation (grain, livestock, etc.)

ObjectivesUnderstanding the inspection

processTypes of data to be collected

during the inspection processAbility to describe the physical

characteristics of the improvements

Ability to identify functional and external depreciation issues

Identify factors used to estimate RCNs

Preparing for the InspectionKnow what you’re going to see

before you goHave a list of questions before

going outAssessor’s sheetPlans, specs, costs on newer

constructionAerialSoil Map

Information to be CollectedBuilding DescriptionAssess Condition

(Effective Age/Remaining Economic Life)Size/CapacityFunctional Depreciation IssuesExternal Depreciation Issues

DwellingsDescription

◦Types - ranch, multi-story, log, manufactured vs. modular, contemporary

◦Construction Materials◦Interior Features - bedrooms, bathrooms,

kitchen built ins, basement finish, walk-out, fireplaces, floor coverings, quality, etc.

◦HVAC System - forced hot air, geo-thermal

◦Water Source - rural water or well

◦Septic - tank and laterals or public sewer

DwellingsSize - Square Feet of Living Space

◦Above Grade vs. Below Grade◦Use outside measurements◦Ceiling Height - must be at least 5 feet

◦Porches/Decks - open, 3 season vs. 4 season room

◦Bay Windows◦Basement Finish - not included in

square feet calculation

DwellingsFunctional Depreciation Issues

◦Floor Plan and Design◦Garage – number of cars, attached,

detached, built-in, basement

◦Bathroom on second level◦Superadequate Features - pool, jet

tub?, basketball court, theatre room?, quality or size above neighborhood standards, etc.

DwellingsExternal Depreciation Issues

◦Locational Issues - next to livestock confinement buildings, gravel vs. paved road, distance to off-farm employment, etc.

◦Contemporary Designs◦Superadequate for area or economic

conditions◦Economic Considerations -

unemployment rates, interest rates, etc.

DwellingsRCN Guidelines

◦Varies greatly depending on size and design

◦Basic ranch style: $125-175 per square foot

◦Multi story dwellings typically cost less per square foot

◦Log and contemporary designs can cost significantly more on a per square foot basis

Machine Sheds and ShopsSize - square feet based on outside

dimensionsHeight to EavesFeatures

◦Construction - pole vs. wood frame, siding and roof materials

◦Interior features - concrete floor, insulation, heat, interior wall finish, floor drains, etc.

◦Door size and type - sliding, overhead, bi-fold

◦Brand or Builder

Machine Sheds and Shops

Functional and External Issues◦Eave height may limit size of

machinery◦Dimensions may limit size of

machinery◦Superadequacy◦Small acreage wouldn’t need a high

end shop

Machine Sheds and ShopsRCN Guidelines - Machine Sheds

◦ 4000 SF or less: $8.00-11.00/sf.◦4000 SF or more: $7.00-9.00/sf.◦Height to eave: 14’-18’◦Concrete floor: $4.00-5.00/sf.◦Insulation: $1.50-3.00/sf.◦Basic electrical: $0.50-1.00/sf.◦Overhead doors: $2000-10,000/ea.

Machine Sheds and ShopsRCN Guidelines - Shops

◦ 1600 SF or less: $25.00-35.00/sf.◦1600-10,000 SF or more: $20.00-

30.00/sf.◦Height to eave: 16’+/-◦Heaters: $3.00-6.00/sf.◦Radiant in-floor heat: $4.00-6.00/sf.◦Bathroom plumbing: $4.00-10.00/sf.◦Low cost office: $2.00-5.00/sf.

Grain Storage - BinsSize/Capacity

◦Normally measured in bushels Diameter squared X height X 0.628 Formula does not include ‘peaking’

Features◦Dryer◦Aeration floor/fans◦Stirator◦Unloading auger◦Ladder

Grain Storage - Bins

RCN Guidelines◦10,000 to 20,000 bushels: $2.00-

2.60/bushel◦20,000 to 60,000 bushels: $1.50-

2.25/bushel◦60,000+ bushels: $1.25-1.75/bushel◦Drying bins: +$0.20-0.80/bushel for

burners, controls, stirators, stiffeners, and spreaders

Grain Storage - Handling

Grain Leg◦Bushels per hour◦Height◦Drops

Dryers◦Bushels per hour

Hogs - FinishingSize/Capacity

◦Building Size - measured in square feet or head

◦Capacity - 7.5+/- square feet of usable pen space per head (doesn’t include offices & alleys)

Building Features and Designs◦Modern - double curtains, fully slatted,

climate controlled, natural or tunnel ventilation

◦Old Designs - open front, modified open front, “Cargill” finishers

Hogs - FinishingCondition Issues

◦Economic Life: 25 yearsFinishing vs. Wean/Finishing

Contracts◦Finishing: $28-36/pig space◦Wean/Finishing: $34-42/pig space◦Terms: 5-7 years but had been 10 years

External Depreciation Issues◦Hog prices◦Availability of grower contracts

Hogs - Finishing

RCN Guidelines◦Finishing: $205-220/pig space◦Wean/Finishing: $215-230/pig space◦Brooders/Feed Mats: $5-8/pig space◦Generators and compost facilities

would add to cost ◦Offices and showering facilities can

add to cost

Hogs - Farrowing

Size/Capacity◦Normally measured in # of sows◦6.0 to 6.5 Sows per farrowing crate◦Gestation crates◦Holding pens◦Gilt development/isolation space

Hogs - FarrowingFunctional Issues

◦Adequate gestation space◦Adequate sow movement/holding space◦Adequate gilt isolation and

development space◦Sow flow

External Issues◦Feeder pig and market hog prices◦Environmental regulations, permitting,

interest rates, etc.

Hogs - Farrowing

RCN Guidelines◦$1200 to 2000 per sow◦Factors Affecting RCN

Office facilities Developer facilities Gestation type - pen vs. crate

Hogs - NurserySize/Capacity

◦Measured in pig spaces◦3.0-4.0 square feet per head

Functional Issues◦Separate site for bio-security

External Issues◦Feeder and market hog prices,

demand for feeder pigs, availability of contracts, etc.

Hogs - Nursery

RCN Guidelines◦$150 to $200 per pig space◦$30 to $45 per square foot

Cattle – Feedlots & ConfinementsSize/Capacity

◦Square feet per head Confinement

40 sf/head for solid floor 25 sf/head for slatted floors over pits

Open lot 225 sf/head

◦Bunk space per head Confinement: 10” per head Open lot: 12” per head

Cattle - Feedlots & ConfinementsRCN Guidelines

◦Open Lot: $225-275/head◦Confinements:

Solid Floor: $10-15/sf. or $500-700/head Slatted Floors & Pit: $21+/sf. or $1000+/head

Other Considerations◦Add $125-275 per head for feedmill,

grain storage, commodity shed, processing building, etc.

◦Capacity can be limited by permits and manure storage

Cattle - Feedlots & ConfinementsFunctional Issues

◦Bunk space vs. lot space◦Feed storage, mixing, and handling

system◦Manure storage and handling system

(settling basin)◦Receiving/working/shipping facilities

External Issues◦Cattle prices◦Feed prices◦Environmental regulations

Poultry – Laying HensSize/Capacity

◦Stacked Cages: 53-80 sq. in./bird (67 sq. in. per bird is fairly typical)

◦Cage FreeConstruction and Design

◦Hi-Rise vs. Stacked◦Egg Processing - packer, grader, breaker

◦Manure Storage and Handling

Poultry – Laying Hens

RCNs◦Pullet Barns: $10-12/bird

◦Layer Barns: $15-20/bird for standard cage design

◦Packing, breaking, and grading facilities can add significantly to the cost

Poultry – Laying HensFunctional Depreciation Issues

◦Processing building and equipment ‘right sized’ for the number of layers

External Depreciation Issues◦Feed Costs◦Egg Prices◦Availability of Contracts◦Customer Preferences - cage-free vs.

cages, liquid egg vs. table eggs, etc.

Poultry - TurkeysSize/Capacity

◦Brooder: 0-5 lbs., 0.6-0.7 sf/bird◦Finish Light Birds: 20-25 lbs, 3.0-3.5

sf./bird◦Finish Heavy Birds: 30-40 lbs, 3.5+

sf/birdConstruction and DesignRCNs

◦Brooders: $13.00-18.00/sf.◦Finishers: $9.00-13.00/sf.

Poultry - TurkeysFunctional Depreciation Issues

◦Brooder space vs. finish space◦Brooders turn every 4.5-5.5 weeks vs.

finishers turn every 15-19 weeks◦Brooding and finishing on same site

External Depreciation Issues◦Long-term grower contract available?◦Location to nearest packing plant◦Location relative to neighboring

buildings and livestock facilities (bio-security)

Other Considerations

Some buildings don’t contribute any significant value (corn cribs, old barns, etc.)

PermitsWind TurbinesUnderground Storage TanksBio-security issues relating to

location of livestock facilities

Objectives ReviewedUnderstanding the inspection

processTypes of data to be collected

during the inspection processAbility to describe the physical

characteristics of the improvements

Ability to identify functional and external depreciation issues

Identify factors used to estimate RCNs

Conclusions and Wrap Up

Questions regarding inspectionsQuestions regarding appraisal

professionAppraiser Gift Bag

Contact Information

[email protected] Office Phone: 641-792-9403

THANK YOU!!!