DELICANO, JUNVE L.

BSREM 1YR SEM2

Assignment #1
Midterm
Title: Procedure for Developing the SMV for Agricultural Lands
Instruction:
Discuss the Procedure for developing the SMV for Agricultural Lands

(SMV) for agricultural lands is a measure used to assess the suitability and
productivity potential of soil for agricultural purposes. It provides valuable
information for landowners, farmers, and agricultural professionals to make informed
decisions about soil management practices and land use planning. The concept of
SMV is particularly important in sustainable land management practices, as it helps
identify areas with different levels of productivity potential and guides the
implementation of targeted soil management strategies to optimize agricultural
productivity while minimizing environmental impact.

Determining the Scheduled Market Value (SMV) for agricultural lands involves a
structured approach to assess the fair market worth of the land, considering various
factors influencing its value. Here's a detailed procedure for developing SMV:

◼ Establish Appraisal Purpose: Define the purpose of the appraisal, whether it's
for taxation, sale, purchase, mortgage, or any other financial transaction. Each
purpose may have different evaluation criteria.

◼ Gather Property Information: Collect comprehensive data about the

agricultural land under evaluation. This includes land size, location, soil type,
topography, accessibility, water availability, infrastructure (such as roads and
utilities), land use history, and any legal restrictions or encumbrances.

◼ Understand Market Trends: Analyze local and regional market trends for
agricultural lands. Consider factors such as supply and demand dynamics, land
prices, rental rates, agricultural productivity, government policies, and economic
conditions affecting the agricultural sector.

◼ Select Appropriate Valuation Method: Choose the most suitable valuation

method based on the characteristics of the agricultural land and the appraisal
purpose. Common valuation methods for agricultural lands include:

✓ Sales Comparison Approach: Compare the subject property with similar

agricultural lands that have been recently sold in the same or similar area.
Adjustments are made for differences in land size, location, soil quality,
improvements, and other relevant factors.

✓ Income Capitalization Approach: Estimate the present value of the expected

income generated by the agricultural land, such as crop yields, livestock
production, or leasing income. This approach typically involves capitalizing
the net operating income using a capitalization rate.
 ✓ Cost Approach: Determine the value of the land by estimating the cost to
replace or reproduce it, considering factors like land acquisition costs, site
preparation, infrastructure development, and other improvements. Deduct
depreciation for any physical deterioration, functional obsolescence, or
external factors affecting value.

◼ Conduct Property Inspection: Visit the agricultural land to assess its condition
firsthand. Evaluate factors such as soil quality, drainage, topography, vegetation,
land use practices, and any improvements or structures on the land.

◼ Analyze Comparable Sales: Identify and analyze recent sales of comparable

agricultural lands in the vicinity. Consider similarities and differences in terms of
land size, location, soil productivity, accessibility, zoning, and other relevant
factors to derive an indication of the subject property's market value.

◼ Apply Valuation Adjustments: Make appropriate adjustments to the

comparable sales data to account for differences between the subject property and
the comparables. Adjustments may be made for factors such as land size, location,
soil quality, improvements, market conditions, and transaction terms.

◼ Calculate SMV: Once all necessary data has been gathered and analyzed,
calculate the Scheduled Market Value of the agricultural land using the selected
valuation method. This may involve applying mathematical formulas, regression
analysis, or other quantitative techniques to arrive at a final estimate of value.

◼ Document the Appraisal Report: Prepare a comprehensive appraisal report

documenting the appraisal process, data sources, assumptions made, valuation
methods used, comparable sales analysis, adjustments applied, and the final SMV
determination. Ensure that the report complies with applicable appraisal standards
and regulations.

◼ Review and Quality Assurance: Review the appraisal report for accuracy,
completeness, and consistency. Verify that all relevant data has been properly
considered and that the valuation approach used is appropriate for the appraisal
purpose. Conduct quality assurance checks to minimize errors and ensure the
reliability of the SMV determination.

◼ Finalize SMV Conclusion: Present the finalized Scheduled Market Value

conclusion for the agricultural land, along with any supporting documentation
and analysis. Communicate the findings to relevant stakeholders, such as property
owners, buyers, lenders, tax authorities, or other interested parties.

◼ Update Regularly: Periodically review and update the SMV of agricultural lands
to reflect changes in market conditions, land use patterns, economic factors, or
regulatory requirements. Keeping the valuation up-to-date ensures its relevance
and accuracy over time.

By following this procedure, stakeholders can obtain a reliable estimate of the

Scheduled Market Value for agricultural lands, facilitating informed decision-making
and transactions in the real estate market.