Ask Henry

Valuing Vineyards

Greetings Henry,

Over the years I have appraised a few rural properties that have possessed small vineyards. In every case, the owner has claimed the vineyard was not for commercial use, it was for hobby use only -- or, that there was only a very small "incidental income" attributable to the vineyard. Is there any hard criteria that can be applied in determining if the highest and best use is commercial wine production, based on the # of vines, etc. In discussions with other appraisers, it has always seemed to be a grey area with lots of appraiser discretion.

Rick Bacich

Dear Rick,

My daughter Kate did her college thesis at Vassar based on a survey of organic farms in the Hudson Valley in upstate New York, which is a wealthy semi-rural area. Her conclusion was that after you assigned some cost to the labor by the owners, the farms were not making any money at all! A well-known real estate author moved south with her husband to run a vineyard they had purchased. When I saw her at an educators' convention, she lamented that she made more money selling the grapes from a farm stand than she could by producing wine. Last I heard, they'd sold the vineyard and given up. There's lots more anecdotal evidence that indicates what the owners are telling you is true.

You might try the Lum Appraisal Library, 550 W. Van Buren Street, Suite 1000, Chicago, IL 60607; (312) 335-4100 to see what has been published on the subject. The librarians there are knowledgeable and helpful.