Principles of Livestock Principles of Livestock ValuationValuation

Veterinary Services’ Class on Veterinary Services’ Class on Livestock AppraisalLivestock Appraisal

February 24-26, 2009February 24-26, 2009

Key PointKey Point

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

IntroductionIntroduction

ObjectivesObjectives Basic: Basic:

Ability to review & judge appraisal reportsAbility to review & judge appraisal reportsAn understanding of the compensation An understanding of the compensation

process and who to contact for helpprocess and who to contact for helpAn appreciation for non-traditional poultryAn appreciation for non-traditional poultryAn understanding of dairy cow appraisalAn understanding of dairy cow appraisal

Advanced:Advanced:Ability to appraise animals & write appraisal Ability to appraise animals & write appraisal

reportsreportsEncouraged to seek additional appraisal Encouraged to seek additional appraisal

trainingtraining American Society of Agricultural AppraisersAmerican Society of Agricultural Appraisers

IntroductionIntroduction

OutlineOutline Introduction to AppraisalIntroduction to Appraisal Compensation’s Role in Veterinary Compensation’s Role in Veterinary

ServicesServicesThus the need for appraisalThus the need for appraisal

Appraisal PrinciplesAppraisal Principles Appraisal ReportsAppraisal Reports

What makes for a good appraisal reportWhat makes for a good appraisal reportGroup Exercise in critiquing appraisal reportsGroup Exercise in critiquing appraisal reports

Poultry in AmericaPoultry in America What’s going on in the Western RegionWhat’s going on in the Western Region Valuation of Dairy & PoultryValuation of Dairy & Poultry Appraisal ExercisesAppraisal Exercises

Why This CourseWhy This CourseAPHIS needs to have appraisals APHIS needs to have appraisals that will pass auditsthat will pass audits APHIS:MRPBS, USDA:OIG, GAOAPHIS:MRPBS, USDA:OIG, GAO

Poorly done appraisals put Poorly done appraisals put APHIS’ ability to manage the APHIS’ ability to manage the compensation process at riskcompensation process at risk If auditors don’t have confidence in If auditors don’t have confidence in

valuations, then dollar amounts valuations, then dollar amounts being spent on indemnity more likely being spent on indemnity more likely will be questionedwill be questioned

If it appears that public funds are not If it appears that public funds are not being spent wisely the whole being spent wisely the whole program could be at riskprogram could be at risk

Why This CourseWhy This Course

What do auditors desire in appraisals?What do auditors desire in appraisals? Not some much concerned about the Not some much concerned about the

actual value per se, but the process of actual value per se, but the process of how the value was determinedhow the value was determined

Consequently, auditors want enough Consequently, auditors want enough information so that if they did the information so that if they did the appraisal they would have arrived at a appraisal they would have arrived at a similar valuationsimilar valuation

Good appraisal reports lead you to Good appraisal reports lead you to value, poor appraisal reports tell you value, poor appraisal reports tell you valuevalue This course is about good appraisal This course is about good appraisal

reportsreports

What is an Appraisal?What is an Appraisal?

An Appraisal can be of the followingAn Appraisal can be of the followingAn estimate of costAn estimate of costA determination of valueA determination of valueA forecast of earningsA forecast of earningsA non-monetary opinion as to authenticity or A non-monetary opinion as to authenticity or

quality of a propertyquality of a property

Notice the use of the words estimate, Notice the use of the words estimate, determination, forecast, opiniondetermination, forecast, opinion

What is an Appraisal?What is an Appraisal?

An appraisal is not a precise measurement, An appraisal is not a precise measurement, neither is it a guess; it is an estimate or an neither is it a guess; it is an estimate or an opinion based on supporting facts.opinion based on supporting facts. Yin-Yang of appraisal: Yin-Yang of appraisal:

art vs. scienceart vs. sciencesubjective vs. objectivesubjective vs. objective

To be in agreement appraisals should have similar, To be in agreement appraisals should have similar, but not necessarily the same valuationbut not necessarily the same valuation

Ultimate goal of an appraisal is to convince others Ultimate goal of an appraisal is to convince others that your estimate of value is valid, not precisely that your estimate of value is valid, not precisely correctcorrectThus, my critiques of Felicia’s appraisals haven’t focused on Thus, my critiques of Felicia’s appraisals haven’t focused on

her values, but in improving the use of supporting facts and her values, but in improving the use of supporting facts and presentation of those facts. presentation of those facts.

Uniform Standards of Uniform Standards of Professional Appraisal PracticeProfessional Appraisal Practice

Saving & Loan financial crisis of the Saving & Loan financial crisis of the early 1980’s demonstrated the need early 1980’s demonstrated the need to improve appraisal practicesto improve appraisal practicesValuations were based upon the needs Valuations were based upon the needs

of the client and not necessarily the of the client and not necessarily the value of the propertyvalue of the property

Properties were over-valued and Properties were over-valued and eventually led to the demise of several eventually led to the demise of several savings & loanssavings & loans

Uniform Standards of Uniform Standards of Professional Appraisal PracticeProfessional Appraisal Practice

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

USPAPUSPAP

Has several rules and standards, we Has several rules and standards, we will focus on just a few now (more later)will focus on just a few now (more later)Ethical no-no’sEthical no-no’s Appraisal is expected to meet/exceed a Appraisal is expected to meet/exceed a

predetermined valuepredetermined value Appraisal fee is a function of valuation Appraisal fee is a function of valuation

providedprovided Failure to disclose conflict-of-interestFailure to disclose conflict-of-interest

Doing appraisals where you have conflict-of-Doing appraisals where you have conflict-of-interest (more details later)interest (more details later)

Not maintaining confidentialityNot maintaining confidentialityIf seeking expert opinion, give only enough If seeking expert opinion, give only enough

details for the individual to form an opiniondetails for the individual to form an opinion

USPAPUSPAP

Competency RuleCompetency Rule Should only accept those assignments for which you Should only accept those assignments for which you

have training and knowledgehave training and knowledge However, can However, can

Gain additional knowledgeGain additional knowledge Can gather much information from the internetCan gather much information from the internet

Consult with an expertConsult with an expertHire another appraiser to assist youHire another appraiser to assist you

APHIS PerspectiveAPHIS Perspective You have received appraisal trainingYou have received appraisal training My assistance is availableMy assistance is available Therefore give it your best shotTherefore give it your best shot