Asking Price for the Assessment of a Fruit Orchard: Some Evidence Using the Remote Segments Approach

Abstract

When missing reliable comparables, estimating inappropriately is a high risk in the use of both market-oriented and income approach methods. Therefore, it is useful to identify effective alternatives in accordance with the estimation method to arrive at the estimated value in the absence of comparables. This paper examines the use of the asking price for estimating the market value of a fruit tree orchard, missing comparable data of similar assets. The analysis was conducted by considering two different scenarios. In the first, asking prices from the same segment of the land to be estimated were used in two market-oriented appraisal methods: the General Appraisal System (GAS) and the Nearest Neighbors Appraisal Technique (NNAT). In both these approaches, market prices were replaced with detected asking prices. The second scenario was based on the use of the Remote Segments Approach (RSA). The comparison was conducted between the market segment of the fruit orchard to be valued and other comparison market segments, consisting of three other species of fruit trees, grown in the same area where the fruit orchard to be estimated is located. The results showed that in the first scenario, the estimated value appeared to be unreliable and excessively high compared to actual market conditions. Using the segment comparison method, which applies asking prices for the purpose of determining the capitalization rate, produced more reliable results. The appraisal also appeared more objective, transparent, and consistent with valuation standards. In the presence of similar limiting conditions, RSA can be an effective support to the activity of the appraiser in the valuation process of agricultural land.

Keywords

• asking price
• market comparison
• land market
• evaluation standards
• income capitalization
• Remote Segments Approach