Why Certified Farmland Appraisals Can Differ by 20%
The technical side of a farmland appraisal, in one page
What an appraisal is
An appraisal is a professional opinion of market value on a specific date: the most likely price between a willing buyer and a willing seller, with neither under pressure. In Canada it's done under CUSPAP (the national appraisal standards), usually by an AACI or CRA designated appraiser. Every step involves judgment.
The three approaches
Approach | How it works | Where judgment comes in |
1. Sales comparison (usually weighted most) | Compares the property with recent sales of similar land, then adjusts for differences | Which sales to use, and how much to adjust for each difference |
2. Income | Converts expected rent or net income into value using a capitalization (cap) rate | Expected rent, expenses and the cap rate |
3. Cost | Land value plus the cost of buildings and improvements, minus depreciation | Replacement costs and how much the buildings have depreciated |
The appraiser then weighs the three results into one final value. That weighting is also a judgment call.
Why two qualified appraisers can be about 20% apart
1. Different comparable sales. In the Iowa study, appraisers used 3–6 comparables, often completely different ones for the same farm. In rural Alberta, where sales are few, this effect is even larger.
2. Different adjustments. Each appraiser decides how much to add or subtract for soil, size, access, location, buildings, irrigation, time of sale and buyer motivation. Small differences add up.
3. Disagreement on basic facts. Cultivated acres, soil rating, irrigated acres and water rights. Tillable acres on the same farm ranged from 92.6 to 111.6 between appraisers.
4. Income assumptions. Rent, expense ratios and cap rates vary; cap rates ranged from 1.79% to 2.65%. A small change in the cap rate makes a large change in value.
5. Time adjustments. Rising or falling markets force a judgment on bringing older sales up to the current date.
6. Highest and best use. Farmland, or acreage or development potential? Different views lead to different comparables.
7. Hard-to-value features. Water rights, pivots, surface leases, buildings and specialty uses often have few direct comparables.
The result
Each factor can shift value by a few percent. Combined, they produced a 15–20% spread between appraisers on the same farm in the 2024 study, with typical variation of about 5%.
What this means in practice
• Treat an appraisal as a range, not a single number.
• Agree on the facts first: acres, irrigation, water rights and soil class.
• For high-value land, get a second appraisal or a review appraisal.
• The market sets the final price: broad exposure, tenders show what buyers will actually pay.
Source: Plastina, Zhang and Sawadgo, "By How Much Can Appraised Farm Values Differ Across Appraisers?", Journal of the ASFMRA, 2024. ·
Article written by Ben Van Dyk I Farm Real Estate powered by Real Estate Centre
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