ARA Case Analysis & Practical Application 3

Question 1

An appraiser is valuing an irrigated farm in a region where water rights are separately deeded and traded. The subject owns senior water rights. What is the correct valuation treatment?

Accepted Answer

Value the water rights separately as real property and include in the overall property value

Answer

In jurisdictions where water rights are separately deeded and tradeable, they are real property interests that must be identified and valued as part of or separate from the real estate.

Question 2

A 640-acre ranch has 400 acres of native grassland and 240 acres of row crop land. Comparables are predominantly all-grassland ranches. Which adjustment technique is most appropriate?

Accepted Answer

Allocate value by land use type using a contributory value analysis for each component

Answer

When a property contains multiple land use types with different value levels, contributory value analysis allocates separate per-acre rates to each component.

Question 3

The appraiser discovers that the subject farm's operating income has been artificially inflated by a government subsidy program scheduled to expire next year. How should this affect the income approach?

Accepted Answer

Normalize income by excluding or phasing out the expiring subsidy to reflect sustainable income

Answer

Expiring subsidies represent non-recurring income; normalization requires adjusting to sustainable, market-based income to avoid overstating value.

Question 4

A rural property straddles a county line, placing improvements in one county and cropland in another with different property tax rates. How does this affect the appraisal?

Accepted Answer

It may affect net income in the income approach and should be disclosed in the appraisal report

Answer

Differing tax rates affect net operating income and should be disclosed; buyers may factor varying tax burdens into their purchase decisions.

Question 5

An ARA is appraising a property where the highest and best use as vacant differs from the highest and best use as improved. What is the required action?

Accepted Answer

Analyze both, then select the use that produces the highest value as the basis for the appraisal

Answer

When as-vacant and as-improved highest and best uses differ, the appraiser must analyze both and base the final value conclusion on the use producing the highest value indication.

(ARA) Accredited Rural Appraiser Practice Test

(ARA) Accredited Rural Appraiser Practice Test

ARA Case Analysis & Practical Application 3