With the valuation of agricultural farm land, the value attributes on the farm is identified and then categorised and apportioned as to determine the monetary contribution towards the entire entity in order to derive at the market value. Such as the land, the commercial necessities or improvements and the residential component. As a rule of thumb the financial world generally measures improvements other than land as lesser security and therefore attach a lower value percentage as the fair value of such. The residential component generally achieves between 10% – 15% contribution of the replacement value and other commercial improvements fetch gently higher percentages, all this is to manage the lending risk etc. This risk partitioned phenomena by the financial world can be misleading to the professional valuator, when the actual value contribution entity to the agri-business is deemed essential and a value closer to replacement value is mooted by the investor. As they say horse for course, it all boils down to the bottom-line, net profit. Yes, I am aware that we as professional valuators are NOT to value the business, but should we disregard and or underestimate value, instead of looking at the bigger picture. Â Logic reasoning and deductive analysis comes with experience and unfortunately cannot be taught in the class room. Once again the much favoured FORCED SALE VALUE, is nothing more than a risk factor implemented by the financial world and has no correlation to the MARKET VALUE, as defined by a….willingly buyer.willing seller open market criteria. A farm is a business very similar to a commercial building of which the value is determined by the rental income achieved, it all boils down to return on invest. The land, agri-business activity and the assets whether Corporeal or Incorporeal in nature all add to the value. The past (historic), present and future demand for the produce is essential, this again hedges onto the of the (land) property. On conclusion this writing is the personal opinion of the writer and is not intended to harm or discredit any party, without prejudice!!
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