Tree Appraisals

The following is a summary of a presentation given before The Tennessee Urban Forest Council and Mississippi Urban Forest Council Annual meetings.  It is a summary of the Guide for Plant Appraisals, Ninth Edition.

Trees have many values, both for their beauty and the for the value added to the property. The aesthetic values are very difficult to value and is very subjective. Research shows that the value trees add to a particular property ranges from 7 to 25 percent of the total land value.  The methods used to value urban and residential trees are published in GUIDE FOR PLANT APPRAISAL authored by the Council of Tree and Landscape Appraisers (CLTA).  This guide is also endorsed by the American Association of Nurserymen, The American Society of Consulting Arborists, American Society of Landscape Architects, The Associated Landscape Contractors, Association of Consulting Foresters of America, International Society of Arboriculture, The Society of American Foresters and the National Arborists Association. 

Most appraisals are done after the plants are removed or damaged.  Although, the best time to do an appraisal is when the plants are in its pre-damage condition.  Records, pictures and witness can help determine the tree’s pre-damage condition.  It is the duty of the appraiser to determine the most appropriate method to appraise a landscape.  The appraiser needs to document everything from his first contact with the prospective client, to establishing the background, to inspecting the site, to calculating the values.

Plants and landscapes are a part of real estate.  An appraisal is an unbiased estimate of the nature, quality, value or utility of an interest or an aspect of real estate.  The purpose of the appraisal is defined by the client’s needs or questions.  The valuation process is used to develop a well supported estimate of a defined value.

The Ninth Edition of Guide for Plant Appraisal lists and details three basic approaches for plant appraisals:

Cost Approach – This approach considers the cost to either repair damages to the plants or to replace the plants.  There are various methods of the Cost Approach.

Replacement Cost - This method is used when the plants are of a size that can be replaced.  The value is based upon a) the cost of replacing the same species of the same size and quality, b) the cost of replacing one large plant with several smaller plants or c)  the cost of replacing a large plant with a smaller plant and a cash settlement.

Trunk Formula - This method is used when the plant is too large to be replaced.  This value uses the cost of replacing the largest locally available plant and adjusting it for the size difference, the condition and location of the appraised tree.

Appraised Value = Basic Value x Condition x Location 

Basic Value = Replacement Cost + (Basic Price x [TA(A) - TA(R)] x Species)

Condition = A rating of the tree's structure and health and based on 100 percent

Location = the average for the tree's Site, Contribution and Placement and based on 100 percent

Replacement Cost = the cost to purchase and install the largest locally available and transportable tree in the area.

Basic Price = the cost per square inch of trunk area of a replacement tree measured at the height prescribed by the American Nursery Standards.

TA(A) = Trunk Area at 4.5 feet above the ground of the appraised tree

TA(R) = Trunk Area at 6 inches or 12 inches above the ground of the replacement tree

Species = the rating for a particular species and based on 100 percent

Compounded Replacement Cost - This method is used mostly for large shrubs that are bigger than those available for planting.  This value is determined by taking the replacement cost and maintenance costs and increasing them by an interest rate until the replacement shrub would grow to be as large as the original plant.

Linear Trunk Measurement of Palms - This methods is used to calculate the value of palms based on the amount of vertical "clear" or "brown" trunk measurements.

Cost of Repair - This method calculates the cost to perform any wound treatments, cabling, bracing, pruning, fertilizing, watering, aeration, alleviation of compacted soil, other soil practices, and insect and disease treatments.

Cost of Cure - This method is similar to the Cost of Repair method, but it calculates the expenses that are needed to bring a damaged tree as close to its original condition as possible.

Income Approach – This approach “involves specific situations for which a property or segment of it may provide income benefits” (Page 89).  There are various methods within this approach.

Crop Value -This method is used for those plants that either yield a single harvest, such as Christmas trees and nursery plants, or annual crops, such as fruit and nut trees and plants.  It is based on the value of the crop and uses an interest rate to estimate its present value.

Forest Appraisal (Timber Value) - This method is used for plants, mostly trees, that are grown for a wide variety of forest products and is not suitable for landscape plants. It is based on the value of the final product and uses an interest rate to estimate its present value.

Rental Value – This method is used to determine the difference in commercial and rental properties as the plants contribute to their incomes and profits.

Market Approach – This approach “is based on market information derived from an investigation of property sales.” (Page 93)  This approach determines the market value, selling price, of a property with and without the plants or their damages.  This method does not follow one formula.  This is a developing process and with less structure and standards.  This is only one appraisal method and may be best used as a check against reasonability against another method.

When performing an appraisal, there are four primary factors: species, size, condition and location.  Each chapter of the International Society of Arboriculture determines the species ratings for its region.  The size of the plant is easily measured using the appropriate tools and standards.  The condition of the plant is determine by the appraiser during his inspection and is an assessment of the plant's structure and health.  The location factor involves the site, the plants contribution and placement.

Owners can often receive partial or full remuneration for the value of plants that become casualties as a result of accidents or alternations to the landscape.  The owner may recoup the value through insurance, income tax deductions and civil damage claims.  Homeowners Broad Form (ED 7.77) states landscaping is covered by insurance for damages by fire, lightning, explosion, riot, aircraft, vehicles, vandalism and theft.  The claim is limited to 5% of the dwelling and $500 per plant.  Wind, tornado and hurricanes are not covered unless the plants damage the dwelling and then only removal cost is covered.  The IRS does not accept the Trunk Formula Method or any formula method.
IRS Section 1.165-7(a)(2)(ii) states that  the cost of repairs is accepted as evidence of a loss.  A casualty is the damage, destruction or loss of property resulting from an identifiable event that is sudden, unexpected or unusual.  Civil and Criminal Damage Claims  are legal means by which a person can take action to recover losses resulting from negligence or intentional or unintentional acts.  Double or treble damages may be appropriate, but the appraiser should not suggest this in the appraisal.

Professional appraisers are voluntarily subject to the codes of ethics and disciplinary procedures by their professional societies.  They should have sound knowledge of plants, as well as, IRS regulations, insurance limitations and other government regulations.  Their knowledge should be gain from education and experience.  They should also be members in appropriate professional societies and abide by their Codes of Ethics and Standards of Practice.  The appraiser may take on the role of mediator, arbitrator, consulting expert or expert witness.  In all situations, he may be held accountable for his opinion and are targets for lawsuits.  The appraiser should maintain Errors and Omissions or Professional Liability Insurance.

The form of the written report depends upon the scope and nature of the assignment, but should also be clear and concise.  All reports should have a summary, observations, analysis, discussion, conclusions, certification, recommendations, and supporting information.  They can be in booklet, letter or Standardized Form formats.

All of the above information is presented as general information and is not intended to train any person in the science and art of tree appraisals. The Council of Tree and Landscape Appraisers (CTLA) has developed a list of qualified and experienced appraisers. This list is available by contacting them at CTLA, 15245 Shady Grove Road, Suite 130, Rockville, MD 20850 (301)947-0483.  The CTLA represents the American Association of Nurserymen (AAN), the American Society of Consulting Arborists (ASCA), The Associated Landscape Contractors of America (ALCA), the International Society of Arboriculture (ISA), the Society of American Foresters (SAF) and the National Arborist Association (NAA).

Latest Update 09/08/2003