CSR’s in Appraisal. Corn suitability ratings are specific to the state of Iowa and are helpful in developing all three approaches to value in an appraisal of farm real estate. THREE APPROACHES TO VALUE IN THE APPRAISAL PROCESS: - Cost Allocation Approach - Sales Comparison Approach
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Corn suitability ratings are specific to the state of Iowa and are helpful in developing all three approaches to value in an appraisal of farm real estate.
IN THE APPRAISAL PROCESS:
- Cost Allocation Approach
- Sales Comparison Approach
- Income Capitalization Approach
1. Good cropland, Poor cropland
2. Land Capability Classes from county soil
3. Classifications developed from CSR classifications. Examples are:
Class I = 78+ CSR
Class II = 68-77 CSR
Class III = 54-67 CSR
Class IV = 40-53 CSR
Class V = < 40 CSR
This is the soils data entry portion of my appraisal spreadsheet. Soil inventory is exported from digital mapping software (cut and paste). Classes and CSR’s are automatically calculated.
The above-inventory is automatically linked to another page on the spreadsheet that allocates value per land class. Entries at this point are: total acres, non-crop acres, sale price, value percentages, and building value (if any).
In Northwest Iowa, we can find $/CSR ranging from $30 to well over $50 per CSR point.
Example: sales in part of Sioux County, which is strong in livestock, can show 10-20% higher values than other areas with similar soils. Sioux County, being farthest west and one county from the top of Iowa, has lower CSR ratings than other counties with similar soils. Galva silty clay loam with B-slope in Sioux County is a 67 CSR but is 75 CSR in Sac County.
Sioux County $3,350/67 CSR = $50 per CSR
Sac County $3,000/75 CSR = $40 per CSR
The Sales Comparison Approach requires
comparisons and adjustments to account
for differences between the subject
property and each comparable sale.
soil quality. This can be measured by difference in CSR’s or
differences in values and percentages of each land class.
more than soil quality. These include:
factors is determined by head to head
comparisons between sales. Usually
expressed in $ per acre. Keep these factors
in mind if you’re talking $/CSR.
The anticipated net income is capitalized by
a rate determined from comparable sales
to arrive at a value.
Value = Income / Rate (IRV)
Example: $125 net income / 4.0% rate = $3,125 / acre
stream from a piece of property. CSR’s are useful in
determining crop yields or rental rates.
If you are using a crop production income stream, you will need
to determine expected average yields for the comparable sales
and subject property. For example, if a property has 75 CSR
and you know that a factor of 2 is appropriate for the area,
the expected average yield would be 150 bushels per acre.
Lower CSR farms tend to produce better, percentage-wise,
than higher CSR farms, so know what factor would apply to a
the corn yield. In Northwest Iowa on Galva-Primghar-Sac
soils, corn may yield 2.9 times the bean yield while on
Clarion-Nicollet-Webster, corn may yield 3.25 times the
Knowing the proper ratios for the area is key. Yield monitor
data laid over soil maps is golden information in determining
these ratios; however, one year’s data can be misleading. In
2002 in Northwest Iowa, late summer rains gave poorer soils an
advantage over good soils regarding Yield per CSR. Multi-year
data should even this out and provide more reliable
rates. A factor of 2 would mean that a 75 CSR farm might
rent for $150 per acre while a 60 CSR farm might rent for
$120 per acre.
Again, lower CSR farms tend to produce better or draw better
cash rent, percentage-wise, than higher CSR farms, so know
what factor would apply to a give situation.
Example - we have handled cash rent bid situations where
lower-CSR farms had several bids at 3 times the CSR, while
higher-CSR farms in another area barely achieved 2 times
CSR’s are a great tool - a benefit to farm
management in Iowa, and a valuable aid in
land valuation. However, they only begin
to tell a farm’s story.
$ per CSR