How does NCC calculate the value of the land?
Marking a monitoring plot, Ellerslie Lake, British Columbia (Photo by Tim Ennis/NCC)
The Nature Conservancy of Canada (NCC) only acquires properties from willing landowners. As NCC’s securement actions are highly targeted based on our conservation planning, we generally meet with individual landowners to discuss the conservation values of their land and NCC’s interest in working with them to explore options to secure the land. If a targeted property has been listed for sale, NCC must compete on the open market against other interests, such as farming, forestry or development.
NCC’s appraisal policies ensure that the organization carefully manages its scarce resources and does not inflate local land prices when it purchases properties for conservation purposes.
What is NCC’s appraisal policy?
NCC’s appraisal policy requires independent appraisals of the fair market value of land conducted by qualified land appraisers.
The policy allows NCC to:
- verify the purchase or sale price;
- determine the fair market value of a donation for issuance of a tax receipt in accordance to Canada Revenue Agency requirements; and
- provide donors with transparent information on acquisition costs.
How are properties appraised?
All appraisals must be conducted by an independent qualified appraiser certified by the Appraisal Institute of Canada (in Quebec the Ordre des évaluateurs agréés du Québec).
Properties are appraised using approved and appropriate appraisal methods. Most appraisals conducted for NCC use the direct comparative approach. This approach estimates the market value of a subject property based on the sales of similar properties nearby that have sold close to the date of the appraisal.
The direct comparative approach assumes that in a competitive market, an informed purchaser will not pay more for an asset than the cost of acquiring a satisfactory substitute that provides equal expected benefits.
How are sale prices determined?
The actual sale price of several comparable properties is adjusted by the appraiser to reflect differences between the comparable and the subject property. This allows the appraiser to estimate the price of the comparable property if it was identical to the subject property.
When applying the adjustment, the appraiser divides the comparable properties into two groups: those that are superior overall to the subject property and those that are inferior. The adjusted values of the two groups will provide the probable range of values. If sufficient data are available for comparables most similar to the subject property, a single value can be determined.
Does NCC ever pay above the appraised rate?
Since real estate markets are variable, NCC’s policy permits the purchase of a property at up to five per cent above the appraised value. However, this rarely occurs because NCC needs to manage its limited conservation dollars.
In the extremely rare case where NCC needs to pay more than five per cent above the appraised value of a property, NCC's Board of Directors, and any significant donor of funds for the acquisition of the property, is required to approve the purchase.
In the 622 property acquisitions that have occurred from 1 April 2007 to 30 September 2012, 582 were acquired at or below appraised value. Only 40 (six per cent) were acquired at above appraised value, and of those none was at more than five per cent above appraised value.