appraising rural properties

Appraising Rural Properties


Appraising residential properties in rural areas can be both challenging and rewarding. Unlike the standardized expectations of urban and suburban properties, rural properties often present unique characteristics that require a nuanced approach to valuation. Whether you’re a seasoned appraiser or new to the field, having a better understanding of rural properties is essential for providing credible appraisals. In this guide, we’ll explore what defines a rural property, the challenges appraisers face, reasons for conducting rural appraisals, strategies for finding comparables, and tips for writing a compliant appraisal report.

Defining rural properties

Before we dive into the appraisal process, let’s establish exactly what a rural property is in this context. The USDA defines a rural area as one of the following:

  1. Open country or towns with a population of less than 10,000, excluding areas associated with urban development
  2. Towns, villages, and other places which are not a part of an urban area and are not contained within an MSA and have a serious lack of mortgage credit for lower and moderate family
  3. Two or more towns, villages, or areas that are contiguous may be considered separately for a rural designation if they are not otherwise associated with each other

Fannie Mae and Freddie Mac do not have a definition of what a rural property is, though they do provide insight into some of the characteristics of rural property. However, Freddie Mac and Fannie Mae state that factors like mixed zoning, large land parcels, numerous non-residential outbuildings, and unique property features are common elements of rural properties.

Challenges of appraising rural properties

Appraising rural properties presents unique challenges due to their diverse characteristics and market dynamics.

Limited comparable sales data

Rural areas typically have fewer real estate transactions compared to urban or suburban markets. This scarcity of comparable sales data makes it challenging to find properties similar to the subject for valuation purposes. Appraisers may need to cast a wider net and analyze sales from neighboring towns or even different regions to find suitable comparables.

Diverse property types and uses

Rural areas often exhibit a wide range of property types and uses, including agricultural land, recreational properties, and mixed-use parcels. Appraising rural properties means you must accurately assess the primary use of the property and consider any secondary uses, such as farming operations or recreational amenities, that may affect its value. The diverse nature of rural properties requires appraisers to have a comprehensive understanding of local zoning regulations and land use patterns.

Unique property characteristics

Rural properties frequently feature unique characteristics such as large acreage, unconventional home designs, and outbuildings with various functions. Appraisers must accurately describe these features and assess their contributory value to the overall property. Additionally, factors like topography, natural resources, and access to utilities can significantly impact property value and require careful consideration during the appraisal process.

Remote location and accessibility

Many rural properties are located in remote or secluded areas, which can pose challenges for appraisers in terms of accessibility and data collection. Traveling to rural properties may require additional time and resources, especially if the property is located in rugged terrain or lacks access to roads. Appraisers must be prepared to navigate these logistical challenges to conduct thorough on-site inspections and gather relevant data.

Limited market activity

Rural real estate markets tend to have slower turnover rates and less frequent sales activity compared to urban areas. This limited market activity can result in longer marketing times for properties and increased difficulty in determining market trends and property values. Appraisers must closely monitor local market conditions and consider longer time frames when analyzing sales data to ensure credible value conclusions.

Seasonal variations

Seasonal factors can have a significant impact on rural property values, particularly in agricultural or recreational areas. For example, farmland may be more valuable during planting or harvest seasons, while recreational properties may experience fluctuations in demand based on weather conditions or outdoor activities. Appraisers must account for seasonal variations in property values and consider their impact on market trends and comparable selection.

Economic dependence

Rural communities often rely on specific industries or economic sectors for livelihood, such as agriculture, forestry, or tourism. Changes in commodity prices, government policies, or environmental regulations can significantly impact local economies and property values. Appraisers must be aware of these economic dependencies and consider their implications when valuing rural properties.

Reasons for rural appraisal

Rural property appraisals serve various purposes, including mortgage financing, estate planning, divorces, ad valorem assessment appeal, and eminent domain claims. Understanding the intended use of the appraisal is essential in making sure the scope of work for the appraisal is appropriate. When providing appraisals for any of the above intended uses, or a different one, appraisers play a crucial role by providing valuable insights into rural property values.

Writing your rural property appraisal report

Crafting a comprehensive appraisal report is essential for conveying findings accurately and transparently. In addition to providing detailed descriptions of the subject property and thorough market analysis, there are several key considerations to keep in mind when writing an appraisal report for rural properties.

Contextualize market data

Given the unique nature of rural markets, it’s essential to provide context for the comparable sales data used in the appraisal. Explain any significant differences between the subject property and comparables, such as distance, property characteristics, and market conditions. This contextualization helps justify valuation conclusions and enhances the credibility of the report.

Address unique features

Rural properties often boast distinctive features such as barns, outbuildings, or expansive acreage. Take care to accurately describe these features and assess their contributory value to the overall property. Including photographs of these features can provide visual support and aid in understanding their significance to the appraisal.

Consider highest and best use

Conduct a thorough analysis of the subject property’s highest and best use, considering factors such as zoning regulations, market demand, and economic feasibility. Clearly articulate the rationale behind your determination and how it influences the property’s value. This analysis helps demonstrate a comprehensive understanding of the property’s potential and enhances the accuracy of the appraisal.

Evaluate site value

In rural markets, site value can vary significantly based on factors such as topography, access, and scenic views. Provide a detailed assessment of the site’s value, taking into account its unique characteristics and market demand. Consider how these factors impact overall property value and provide clear rationale for your valuation conclusions.

Address unconventional improvements

Rural properties may feature unconventional dwelling types such as log homes, earth berm homes, or converted barns. When appraising these properties, provide comprehensive descriptions of the improvements and assess their market acceptance and value. Utilize market data and comparable sales to support your valuation conclusions and address any challenges posed by these unique features.

Document comparable selection

When selecting comparable sales, be transparent about your methodology and reasoning. Explain why certain comps were chosen and how they relate to the subject property. If using distant or dated sales, provide detailed commentary and justification for their inclusion, ensuring transparency and accuracy in the appraisal process.

Provide detailed adjustment analysis

When making adjustments to comparable sales, provide thorough documentation and rationale for each adjustment made. Consider factors such as property characteristics, location, and market conditions, and ensure adjustments accurately reflect the market’s reaction. Transparent and well-supported adjustments enhance the credibility of the appraisal and support valuation conclusions.

Address market conditions

Rural markets may experience unique economic trends and fluctuations that impact property values. Provide a comprehensive analysis of local market conditions, including trends in supply and demand, economic indicators, and relevant external factors. This analysis helps contextualize valuation conclusions and provides insight into the property’s performance within the broader market context.

Specialize in appraising rural properties with the right CE

If you live near rural communities may be a good idea to hone your skills to specialize in rural properties. There are few appraisers with genuine expertise in this field, and the available talent pool isn’t growing quickly. Specializing will help you not only avoid potential mistakes that often accompany rural land appraisal, but it can help you expand your business and diversify your income by providing a sought-after service.

If you want to specialize in appraising rural properties, you can learn more with these appraisal continuing education courses:

Get full access to our continuing education catalog with an Unlimited CE Membership

Whether you want to specialize in a type of appraisals, expand your overall knowledge, or simply meet your state CE requirements, our Unlimited CE membership offers complete access to our entire CE catalog, including the 7-hour USPAP Update Course, plus over 400 resources and materials to support your knowledge and career.