Federal Land Management

The privately owned Baca Ranch covers nearly 95,000 acres in northern New Mexico. The Forest Service wants to buy the ranch because it contains a diversity of natural features and is almost completely surrounded by the Santa Fe National Forest. The ranch owners had the property appraised in September 1998 by certified appraisers who concluded that the land's fair market value was $101 million--or $1,061 per acre. This report discusses the extent to which the value established by the owner's appraisal was consistent with the comparable property sales data presented in the appraisal and in the Services' market study and other key factors that influenced the appraisal's final outcome. GAO concludes that although the owner's appraisal of the Baca Ranch's value complied with federal appraisal standards, the appraised value is higher than supported solely by sales of comparable properties presented in the appraisal and in the Service's market study and reflects a premium. This testimony summarizes the March 2000 GAO report, GAO/RCED-00-76.

GAO noted that: (1) although the owner's appraisal of the Baca Ranch's value complied with the federal appraisal standards, the appraised value is higher than supported solely by sales of comparable properties presented in the appraisal and in the Forest Service's market study because it reflects a premium; (2) in arriving at a value, the owner's appraisal identified sales of 16 large ranch properties located in New Mexico and Colorado that it considered comparable to the Baca Ranch in one or more ways, such as location, topographical features, and usage; (3) on the basis of professional judgment, the owner's appraisers relied heavily on two higher-valued properties that they considered to be most comparable to estimate the Ranch's value of $101 million; (4) this value reflects a premium over what it would be if it were computed on the basis of all 16 comparable sales; for example, using a weighted average of these sales results in a value $37 million lower than the appraised value; (5) in reviewing the owner's appraisal, the Service's chief appraiser told GAO that he had questions about the value in the owner's appraisal until he made a visual inspection of the property, which led him to agree that a premium value was warranted because of the property's uniqueness; (6) the Service's market study presents data on sales of 11 comparable properties in New Mexico and southern Colorado that also support a range of lower values for the Baca Ranch--the high end of which is still $37 million less than the appraised value; (7) the appraisal reviewer GAO contracted with also found that the appraised value was higher than supported by information in the appraisal, which showed that some of the low-valued properties had similar characteristics and were comparable to the Baca Ranch; (8) on the basis of GAO's analysis of the comparable property sales data presented in the owner's appraisal and in the Service's market study, the government would pay a premium for the Baca Ranch if the value in the owner's appraisal is used to establish its price; (9) the appraised value of the Baca Ranch--as approved by the Forest Service--is higher than would be indicated if it were based solely on the sales prices of all the comparable properties; and (10) to develop this value, the appraisers applied their professional judgment and relied most heavily on two high-valued comparable properties, believing that the ranch would and should bring a premium.