Principles of Livestock Valuation Veterinary Services’ Class on Livestock Appraisal February 24-26, 2009

Key Point When doing appraisals don’t worry about getting the correct value, but instead worry about doing the valuation correctly, i.e. following standard appraisal principles

Introduction Objectives Basic: Advanced: Ability to review & judge appraisal reports An understanding of the compensation process and who to contact for help An appreciation for non-traditional poultry An understanding of dairy cow appraisal Advanced: Ability to appraise animals & write appraisal reports Encouraged to seek additional appraisal training American Society of Agricultural Appraisers

Introduction Outline Introduction to Appraisal Compensation’s Role in Veterinary Services Thus the need for appraisal Appraisal Principles Appraisal Reports What makes for a good appraisal report Group Exercise in critiquing appraisal reports Poultry in America What’s going on in the Western Region Valuation of Dairy & Poultry Appraisal Exercises

Why This Course APHIS needs to have appraisals that will pass audits APHIS:MRPBS, USDA:OIG, GAO Poorly done appraisals put APHIS’ ability to manage the compensation process at risk If auditors don’t have confidence in valuations, then dollar amounts being spent on indemnity more likely will be questioned If it appears that public funds are not being spent wisely the whole program could be at risk

Why This Course What do auditors desire in appraisals? Not some much concerned about the actual value per se, but the process of how the value was determined Consequently, auditors want enough information so that if they did the appraisal they would have arrived at a similar valuation Good appraisal reports lead you to value, poor appraisal reports tell you value This course is about good appraisal reports

What is an Appraisal? An Appraisal can be of the following An estimate of cost A determination of value A forecast of earnings A non-monetary opinion as to authenticity or quality of a property Notice the use of the words estimate, determination, forecast, opinion

What is an Appraisal? An appraisal is not a precise measurement, neither is it a guess; it is an estimate or an opinion based on supporting facts. Yin-Yang of appraisal: art vs. science subjective vs. objective To be in agreement appraisals should have similar, but not necessarily the same valuation Ultimate goal of an appraisal is to convince others that your estimate of value is valid, not precisely correct Thus, my critiques of Felicia’s appraisals haven’t focused on her values, but in improving the use of supporting facts and presentation of those facts.

Uniform Standards of Professional Appraisal Practice Saving & Loan financial crisis of the early 1980’s demonstrated the need to improve appraisal practices Valuations were based upon the needs of the client and not necessarily the value of the property Properties were over-valued and eventually led to the demise of several savings & loans

Uniform Standards of Professional Appraisal Practice Appraisal Foundation established in 1987 to develop and promote the Uniform Standards of Professional Appraisal Practice (USPAP) www.appraisalfoundation.org

USPAP Has several rules and standards, we will focus on just a few now (more later) Ethical no-no’s Appraisal is expected to meet/exceed a predetermined value Appraisal fee is a function of valuation provided Failure to disclose conflict-of-interest Doing appraisals where you have conflict-of-interest (more details later) Not maintaining confidentiality If seeking expert opinion, give only enough details for the individual to form an opinion

USPAP Competency Rule APHIS Perspective Should only accept those assignments for which you have training and knowledge However, can Gain additional knowledge Can gather much information from the internet Consult with an expert Hire another appraiser to assist you APHIS Perspective You have received appraisal training My assistance is available Therefore give it your best shot