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Be a More Informed Buyer, Renter With Farmland Value Platforms
In 2014, Chris Seifert left Climate Corporation and started his own tech company. In true Silicon Valley fashion, the former Google analyst began working from his garage.
Seifert, a Colorado native, was helping his family make decisions about their farmland in Iowa. He had searched for a Zillow equivalent for the farmland market and was shocked to learn one didn’t exist. For a data scientist like Seifert, this wasn’t an inconvenience; it was an opportunity.
One year later, AcreValue was born. The farmland value platform allows farmers to evaluate land they are considering purchasing or renting. Reports on fields show valuable data including soil type, topography, land boundaries, and crop history.
In Iowa, Illinois, Indiana, and Minnesota, AcreValue goes one step further. A valuation model uses more than 20 field-level and macroeconomic data variables, including crop prices, to estimate the value of an individual plot of farmland.
The tool was so innovative that it attracted the attention of Granular, an ag software and analytics company. In 2015, Granular purchased AcreValue and placed Seifert in charge of the agronomic data science team.
Seifert and his team have continued to add additional layers of data to AcreValue, increasing its value and functionality.
“This is about giving everyone equal and better access to public information about farmland values,” says Tamar Tashjian with AcreValue.
The newest feature is called Comp Sales. It allows you to see what land sold and for what price during the past two-and-a-half years. The data is from county public records and will be the first map-based digital tool with this info.
This year, AcreValue also added digital plat maps to the platform. The maps, like all existing AcreValue features, are free. Some data points and reports do require users to log in.
By the end of this year, AcreValue also hopes to add the price-estimate feature to more states in the Corn Belt.
On the Farm
From the garage of a California home to the cornfields of western Indiana, does AcreValue perform the way Seifert hoped it would? Yes, according to Chris Hudson.
Hudson farms with his father, Curt, in Crawfordsville, Indiana. On the fifth-generation farm, Hudson incorporates technology throughout the operation to maximize production and profit. He started using AcreValue in 2015.
“When we were evaluating purchasing a couple of different farms, I looked up the land in AcreValue,” he says. “It’s helpful to have an idea about what a piece of ground costs, as there aren’t other reference points.”
Before cash-rent negotiations, Hudson looks at AcreValue reports again to have a better understanding about what the land is worth.
Hudson also uses AcreValue to improve relationships with landlords. When a land partner is interested in buying a farm, he shares the AcreValue report. “This allows the owner to have a pulse of farm ground instead of being in the dark,” explains Hudson.
As Seifert envisioned, AcreValue helps Hudson and his landlords evaluate farmland by making the key data points readily available and providing a price estimate. However, the tool does have its limitations. “You need to take into consideration the different land improvements that can exist that aren’t fully captured, like drainage,” explains Hudson. This can make the AcreValue estimate too low.
In the value estimate, AcreValue doesn’t factor in an auction where two neighbors start a bidding war over a piece of land. This could also make the price estimate much lower than the price paid by the landowner. “While it is not a perfect number, it is a good starting point to help folks involved in a difficult conversation come to a fair result,” says Seifert.
Innovation in Iowa
In Steve Bruere’s home state of Iowa, there is going to be a lot of land changing hands soon. How can landowners – many of whom are from out of state – learn how much their assets are worth?
Enter What’s My Farm Worth, a web-based tool that tells landowners across the nation the value of their land. Bruere owns Peoples Company, a Des Moines-based real estate, land management, and appraisal firm that aims to help folks learn more about farmland.
In Iowa alone, a majority of farmland is owned by people age 55 or older. There are 30 million acres of tillable farmland, representing a $230 billion asset class. Since 60% of those acres are rented, that means “a massive amount of land transfer is coming down the road,” Bruere says. “How do you market to these clients?”
Peoples Company partnered with Ag Solver, an Ames, Iowa, firm that developed the algorithms driving What’s My Farm Worth. Factors influencing values include county yield by soil type, five-year crop yields and crop prices, plus land-grant university crop budgets.
“When you click Download, all these numbers are calculating, then it spits out a number on the report,” Bruere says.
The downloaded report contains a lot of information, including soils map, topography map, Corn Suitability Rating or Productivity Index map, and crop history. It’s all public information, but when aggregated, it provides a wealth of useful information for current landowners and prospective buyers.
“The numbers aren’t always perfect,” he says. “But when you get done, you have a lot of info about your farm and a range of values you can use.”
Bruere admits – as a free service, available nationwide – What’s My Farm Worth will hopefully provide leads for brokerage management or appraisal services. He also knows that many people will use the site as a guide, which is all it should be, he adds.
“This is a cash-flow methodology, so the results aren’t perfect. Sometimes the land is worth more; sometimes it is worth less. When you take the technology and combine it with boots on the ground, it is an effective tool,” he says.
Tweaks to Come
Computer algorithms can’t account for aggressive neighbors or other local dynamics.
“There are some bugs,” he admits. The computer algorithms cannot yet identify if there is a center pivot system on irrigated land, which would add value to a property. Peoples Company is working on incorporating the features that boost land values. Bruere also is working on a way to add local auction data to the site so landowners can compare What’s My Farm Worth findings to actual sales data.
“There is no way any algorithm can predict prices accurately without these local dynamics,” he says.
Bruere says Peoples Company will continue to invest in What’s My Farm Worth in hopes it will be a big part of the business.
“Those who figure out how to layer in local dynamics are really going to have something,” he says. “We’re working on that for Iowa so you can toggle back and forth between cash-flow methodology and actual sales. We think that will be pretty neat.”
By Jessie Scott and Bill Spiegel