Farm and Ranch Appraisals in California: Valuing Several Parcels, Orchards and Vineyards

This article is general information, not legal or tax advice. Talk to your attorney or CPA about your situation.

Vineyards, wineries and agricultural property have always been a big part of our work. A farm file is rarely one tidy parcel. It might be an avocado ranch above Santa Paula, lemon groves on the Oxnard Plain, a vineyard in the Santa Ynez Valley and a cold storage building in town, all held by the same family, trust or LLC. This guide covers what makes those assignments different and what to send so the report gets done right.

When does a California farm or ranch need an appraisal?

The same reasons any real estate does, with a few that are specific to agriculture:

• Estates and trusts. A date-of-death value for basis, estate tax filings and dividing the property among heirs. In a formal probate, the court-appointed probate referee values the real property for the inventory, and Probate Code Section 7051 puts the proceeding in the county where the decedent lived, even if the ranches are in other counties. Trusts usually need a private appraisal. See trust administration appraisals.
• Prop 19 family farm claims. When a family farm passes from parents to children, the exclusion turns on fair market value, parcel by parcel (more below).
• Family buyouts and partitions. One sibling keeps the ranch and buys out the others, or co-owners cannot agree and a court is asked to divide or sell. See partner and LLC buyouts, fractional interests and partition appraisals.
• Divorce. Date of separation and current values for a divorce appraisal of farm and ranch property, and the home on it.
• Lending. Private lenders secure loans on ranch land, orchards and vineyards, sometimes several parcels under one note. See blanket loan appraisals and hard money appraisals.
• Disasters, takings and tax appeals. Before-and-after values after a fire or flood (casualty loss appraisals), eminent domain when a road or utility project takes part of a ranch, and property tax appeals.

Why does each legal parcel matter in a farm appraisal?

A farm is often run as one operation but owned as a collection of separate legal parcels, sometimes with different assessor’s parcel numbers, different deeds and even different owners within the family. The value of each piece can matter on its own:

• Prop 19. Revenue and Taxation Code Section 63.2 says the family farm exclusion “shall apply separately to the transfer of each legal parcel that makes up a family farm,” and each legal parcel is treated as a family farm itself, except a parcel containing a family home, which may qualify separately under the family home rules. The new taxable value depends on how each parcel’s fair market value compares with its existing taxable value plus an allowance.
• Williamson Act contracts. Under Government Code Section 51243, when land under contract is divided, the owner of each resulting parcel can give notice of nonrenewal or petition for cancellation independently of the others.
• Splitting the ranch. Heirs or partners who divide a ranch usually divide it by parcel, so they need to know what each piece is worth, not just the total.
• Selling in pieces or as a whole. Some parcels are worth more sold together, for example when one parcel holds the well or the only road access. Others, like a homesite with a view, may sell better on their own. Part of the appraiser’s job is to consider which is the more likely way the property would sell.

Your attorney or CPA decides which values the assignment calls for. One report can show each parcel and the property as a whole, as of the same effective date.

Are trees, vines and wells part of the real estate?

Generally yes. Civil Code Section 658 says real property includes land and “that which is affixed to land,” and Section 660 says a thing is affixed when it is “attached to it by roots, as in the case of trees, vines, or shrubs.” Both sections make an exception for growing crops that are agreed to be severed before sale or under the contract of sale, which are treated as goods.

In practice, that means the appraisal looks hard at the plantings and the improvements that serve them:

• Crop, variety and rootstock, planting density and the age of the orchard or vineyard
• Health and remaining productive life, and any blocks that need replanting
• Wells, pumps, pipelines, reservoirs, frost protection and irrigation systems
• Barns, shops, packing or cold storage buildings, worker housing and the main house
• Access, topography, soils and how much of the property is actually plantable

What the appraisal does not value is the farming business itself: equipment, inventory, brands, contracts and goodwill. We appraise the real estate. If the estate or the buyout also needs a business valuation, your CPA can bring in a business appraiser.

How does a Williamson Act contract affect the value?

Many California farms are under a Williamson Act contract (the California Land Conservation Act of 1965). Under Government Code Section 51243, every contract excludes uses other than agricultural and compatible uses and is binding on all successors in interest. A standard contract runs at least 10 years and adds a year automatically each anniversary (Section 51244) unless a notice of nonrenewal is served (Section 51245). Farmland Security Zone contracts start at no less than 20 years (Section 51296.1).

In exchange, the assessor values the land differently. Revenue and Taxation Code Section 423 tells the assessor not to use sales data for enforceably restricted land and to value it by capitalizing the income it can be expected to produce. That restricted assessed value is not the same thing as market value. A market value appraisal asks what a buyer would pay for the land with the contract in place, or in nonrenewal, and the restriction on uses is part of that answer. Counties administer the contracts under their own rules, such as Ventura County’s LCA program and Santa Barbara County’s Uniform Rules for Agricultural Preserves and Farmland Security Zones. (General information. Ask the county or your attorney how a specific contract applies.)

How do water and groundwater affect a farm appraisal?

Water is often the difference between a productive ranch and dry land. The appraisal looks at where the water comes from (wells, a water district, surface rights or a mix), how reliable it is and what it costs. Under the Sustainable Groundwater Management Act, a groundwater sustainability agency can regulate, limit or suspend extractions and set extraction allocations (Water Code Section 10726.4). In a basin with limits, two parcels that look the same from the road can have very different values. Copies of well logs, district bills and any allocation notices help the appraiser get this right. (General information. Water rights questions belong with your attorney.)

How do Prop 19 and estate tax special use valuation fit in?

Two rules come up often with family farms, and both depend on a supported value:

• Prop 19 family farm exclusion. As described above, the exclusion under Section 63.2 works parcel by parcel and compares fair market value with the existing taxable value plus an allowance. For a parent-to-child transfer at death, the date-of-death value of each parcel is the number that matters. A claim has to be filed with the assessor.
• Special use valuation for estate tax. Internal Revenue Code Section 2032A lets an executor elect, on the estate tax return, to value qualifying farm real property at its value for its farm use rather than its fair market value, with a cap on the total reduction that is adjusted for inflation. The election has detailed qualification rules and a written agreement signed by everyone with an interest in the property. Whether to use it is the CPA’s and estate attorney’s call. The reduction is measured from fair market value, so the estate still needs a supported market value appraisal.

(General information. Talk to your CPA or estate attorney about how these rules apply to your family.)

How do you appraise a farm portfolio spread across several counties?

Family farm holdings often cross county lines: an avocado ranch in Ventura County, a vineyard in Santa Barbara County, row crop ground in the Central Valley and a commercial building or two in town. We do everything everywhere in California, so one firm can handle every property, agricultural and commercial, as of the same effective date. That keeps the method consistent and gives the attorney or CPA one set of numbers to work from. See multi-property portfolio appraisals and our local pages for Santa Barbara and Ventura, the Inland Empire, San Diego, North County San Diego, Sacramento and every county we cover.

The appraiser on your assignment inspects the property in person. On a ranch, that means walking the blocks, looking at the wells and pumps and seeing the access roads, not just driving by the gate. We are your ears and eyes on the property.

What should you send the appraiser for a farm or ranch?

• The purpose and every effective date your attorney or CPA needs
• A list of every parcel, with APNs, acreage and how each is held (individually, in a trust, LLC or partnership, or as a partial interest)
• A map showing parcel lines, planted blocks, wells, buildings and access
• Planting records: crop, variety, rootstock, planting year and any replanting
• Water information: well logs, pump tests, water district bills and any groundwater allocation notices
• Any Williamson Act or Farmland Security Zone contract, and any notice of nonrenewal
• Leases or farming agreements, and recent operating history if the land is leased
• Recent property tax bills and any assessor notices
• Prior appraisals, surveys, permits and anything on fire, flood or other damage
• An inspection contact who knows the property

Your appraiser will confirm the exact list on the first call. A single vineyard parcel needs less. A multi-parcel ranch across counties needs more.

How do farm families, attorneys, CPAs and lenders work with PM Appraisal?

Call or text (805) 990-9700. You talk directly to the appraiser on your assignment, not a coordinator or an appraisal management company. We pick up the phone. We confirm the parcels, the effective dates, the purpose and who will rely on the report before anyone engages. When the CPA, a lender or a sibling’s attorney has a question later, it goes straight to the person who wrote the report.

Rush commercial appraisals take 5 to 7 business days. Standard timing depends on the property and scope, and with a multi-parcel ranch we can plan the order of the properties around your attorney’s calendar. Our opinions are independent: we never take an assignment that requires a predetermined value, and our fees are never tied to the result.

Farm and ranch work is one example of what we do. Our team appraises every commercial property type, from office, retail, industrial and multifamily to gas stations, hotels, land, vineyards, medical, care facilities and special-use property, and every kind of commercial appraisal, from date-of-death and retrospective work to lending, divorce, litigation, partition, tax appeal and more, anywhere in California.

Keep reading

• Multi-property portfolio appraisals
• Commercial appraisal in Santa Barbara and Ventura counties
• Trust administration appraisals in California
• Date of death appraisals
• Partition action appraisals
• Partner and LLC buyout appraisals

This article is general information, not legal or tax advice. Talk to your attorney or CPA about your situation.