Valuing Trees: Net Perspective

Valuing trees: Net perspective

Insurance adjusters and attorneys, not to mention arborists, are often confronted with a tree or plant that is not yet ready for the open marketplace and resultant comparable pricing. It has value, but how to value it becomes the question.

I was involved in such a case. Several thousand trees that were not yet mature were going to be taken in a condemnation matter. The arborist across from me assigned the trees no value. He reasoned that there was no place for them in the open marketplace, and he was correct. They were too small to sell in the marketplace. There was no comparable pricing, the ultimate test of value.

I had the good fortune of having been awakened at midnight on the eve of what was to be an amazing conference on appraising product. The rude caller insisted that I meet him at the bar for a nightcap. Begrudgingly, I acquiesced due to his amazing reputation in the appraisal community.

Here’s what he taught me: Watermelons. That’s right, watermelons that were not yet ripe for harvest. He introduced me to a concept unheard of in either case law or the marketplace: The Net Perspective Revenue Approach to Value. His idea. His invention. He later took it to trial and prevailed. Absolutely unbelievable. It makes all the sense in the world now but before he thought of it nobody knew what to do with trees or plants not yet ready to sell.

Here’s how to do it:

1. Estimate by comparable pricing the value of the tree when it reaches minimum marketable height.
2. Note the height of the current tree.
3. Deduct the value and amount of labor and expense which after, and but for the destruction or taking, would have been required to take care of and market the crop (or tree).
4. Subtract #3 from #1, and you have the in-place value of the subject in mature tree.

And now you know how to value a tree that is so immature that it has no place in the open market.

The moral to the story is to never turn down a midnight request for a nightcap…

The articles presented here do not make any legal recommendations or representations, as the author is not qualified to do so. These articles are for educational and entertainment purposes only. Seek the advice of a qualified attorney regarding questions of law.