The 40-Acre Comparable That Isn't Quite Comparable
You are reviewing a 160-acre irrigated corn/soybean farm appraisal in a strong central Nebraska county. The appraiser used five sales. Sale #3 is a 40-acre parcel that sold 90 days ago for $14,800/acre, the highest adjusted indicator in the grid, and it carries 40% of the reconciliation weight. You pull the public record: the 40 acres was a remainder tract split off a larger farm, has no irrigation well of its own (it was served by a pivot on the seller's retained land under an oral arrangement), has no legal access except a recorded easement over the seller's driveway, and was purchased by the adjoining neighbor whose only practical use was to square off his own field. Sale #2, 155 acres with a certified irrigation well and deeded access, sold for $9,600/acre. The subject's indicated value is $11,400/acre.
1. Identify the highest-and-best-use and market-participant problems with Sale #3 and state whether it is usable as a comparable.
Read the worked answer
Sale #3 fails on two independent grounds.
1. Highest and best use. A 40-acre remainder with no well, no independent access, and irrigation dependency on the seller's pivot is not a self-sufficient economic unit for irrigated row crops. Its likely HBU is as an assemblage tract to the adjoining owner. A sale driven by assemblage demand reflects a different use and a different buyer pool than the subject (a 160-acre operating unit).
2. Market participant / transactional characteristics. The buyer was the adjoining neighbor; the price reflects the value of squaring off an existing field (plottage to that specific buyer), not open-market value to a typical farm operator. This is a classic non-market condition under the transaction characteristics of a sale.
Conclusion: Sale #3 should be excluded, or at minimum relegated to secondary/confirmatory support with a substantial downward adjustment for property rights and conditions of sale that would be difficult to quantify credibly. Basing 40% of the reconciliation weight on it is not supportable. Sale #2 (155 ac, well, deeded access) is the better primary comparable for a 160-acre irrigated unit.
2. Sale #3 also lacks a certified irrigation well. Explain how the appraiser's failure to adjust for that specifically distorts the value conclusion, and what adjustment logic you would require.
Read the worked answer
The appraiser treated Sale #3 as if it were irrigated at the same intensity as the subject. It is not: it has no well and no water right of its own; irrigation was an oral arrangement terminable at the seller's will. Oral arrangements are not appurtenant and do not transfer.
Distortion: The unadjusted $14,800/acre is being carried into the grid at full irrigated-farm weight, which pulls the indicated value up. Because the subject's value rests on a certified well and deeded water, the appraiser is effectively capitalizing a non-transferable benefit into the subject's value.
Adjustment logic to require:
- Establish the market-derived contribution of a certified well/water right in this county (paired sales of irrigated vs. dryland, or the cost-to-develop less depreciation if paired sales are unavailable).
- Apply a negative adjustment to Sale #3 for the absent well and water right, plus a separate adjustment for the access deficiency (easement-only vs. deeded frontage).
- Document the source and derivation of each adjustment in the review; an unsupported lump-sum adjustment is itself a review finding.
If the appraiser cannot support the well adjustment from market evidence, the sale should be dropped rather than adjusted on faith.