Tree Valuation Purdue University

Page 1 FNR-473-W PURDUE EXTENSION Tree Appraisal Trees provide many benefits and value to property owners in functional, aesthetic, social, environmental — and even economic — ways. Value may be defined as the present worth of future benefits. Many of these benefits can be quantified by a dollar figure, and it is the responsibility of an appraiser to assign monetary value. Appraising trees and living landscape components can be challenging, and requires training, expertise and experience. The methods used to value trees are published in The Guide for Plant Appraisal, 9 th Edition, authored by the Council of Tree and Landscape Appraisers (CTLA). The guide is endorsed by all the major arboriculture, horticulture and real estate industry organizations. When conducting an appraisal, be sure to use the current edition. The guide describes the various appraisal processes and gives examples of each. Although it is a good tool for the valuation of plants, it is only a guide and the procedures involved require care and experience. The purpose of an appraisal is defined by the clients’ needs. These needs may include tort claims, insurance claims, tax deductions, real estate assessment and proactive planning. An appraisal estimates the defined value of personal property, including plants. The www.fnr.purdue.edu tree appraisal process is used to develop a supported estimate of current value. Unfortunately, most appraisals are done after trees have been removed or damaged. This situation requires additional investigation and might include determining pre-casualty value or sampling on a local basis. The best time to conduct an appraisal is prior to any incident or damage. This is rarely done, however. If available, previous site records, tree assessments, site reviews, images and even a witness can help determine the tree’s pre-damage condition. With all the facts gathered, it is the duty of the appraiser to determine the appropriate method and provide an unbiased valuation. The appraiser should document all activities related to the process, from initial contact with the client — including establishing the background information on the tree — to inspecting the site and formulating values. Regardless of the appraisal method used, there are some primary factors to consider. The four major elements involved in properly assessing the value of a tree are size, species, condition and location. A thorough understanding of each is imperative; otherwise, the appraisal will lack credibility and significance for the case. Author Lindsey Purcell, Urban Forestry Specialist, Purdue University Department of Forestry & Natural Resources Page 2 2 Tree condition or health is an important rating determination. The species rating is a comparative value given to the tree or plant based upon its individual characteristics. Consideration is given to the plant’s assets and its inherent qualities. This rating is provided by a council of experts in the area and will vary within regions around the country. Additionally, there can be variations in ratings within the state, relative to hardiness zones. Adjustments will be necessary based on subjective observation. Check the local chapter of the International Society of Arboriculture for more information on the ratings for your state. The condition of the tree is a subjective determination made by the appraiser during the inspection. It is an assessment of the tree’s structural integrity and health at the time of appraisal. Thought should be given to rooting, branching, health and vigor, any damage or wounds, and evidence of pest infestation. It is important to note the current condition as the most reasonable gauge for the rating determination. The size of the plant is measured using common tools and industry standards. A diameter tape or tape measure can be used to measure trunk size, and is typically recorded as the diameter at 4.5 feet above grade, or shoulder height. Consult with the appraisal guide on proper sizing procedures. The location factor involves the landscape value of the site and the placement of the tree on the property. Consider the location of the property, overall quality of the landscape, hardscape and related elements. Understand the tree’s contribution to the site, its function and the aesthetics to determine how effectively the placement of the tree provides these benefits. Location is one factor in determining a tree’s value. A diameter tape aids in calculating tree size. After the primary plant and site assessments have been completed, determination of the proper approach is necessary. The Guide for Plant Appraisal details three basic methods for plant valuation: cost, income and market approaches. The approach chosen depends on the kind of property, purpose of the appraisal and quality of information for analysis. It may be necessary to use other methods, or a combination of approaches, in the appraisal process to verify the results. Tree Appraisal • FNR-473-W Page 3 Tree Appraisal • FNR-473-W The Cost Approach considers the amount in dollars to either repair damage to the tree or replace the tree. There are various methods to use within this approach: Replacement Cost estimates the cost of replacing a tree in the same location with the same species and, if possible, of similar size. However, in most cases a tree is too large to be replaced by a single tree and still be of equal value. In those cases, appraisers may designate several smaller trees deemed collectively to be equivalent to the original tree. This becomes a matter of calculating the value of the replacement trees and their associated costs. Often, some type of settlement is involved in the negotiations, as well. This usually is found to be the most accurate determination of market value of the tree. Trunk Formula (TFM) defines value in comparison to other trees of the same species. However, it does not necessarily provide adequate market value of the tree. The TFM often is used when the tree is too large to be replaced with typical nursery stock, and can be a good representation of overall value to the property. The basic value of a tree is the sum of two factors: the cost of transplanting the largest normally available tree of the same or comparable species, and the increase in value because of the larger size of the tree being appraised compared to the size of the replacement tree. An example can be found at the end of this publication. The formula used in the process is stated as: Value = Basic Tree Cost x Species Rating % x Condition Rating % x Location Rating % • Basic Tree Cost is the Replacement Tree Cost + (Base Price x Adjusted Trunk Area, or ATA). Base price is determined to be $65 for Indiana. ATA is the area of the tree trunk in square inches measured at standard height of 4.5 feet, less the area of the largest available transplantable tree, which is determined to be $800 in Indiana. A table of conversions from Diameter at Breast Height, or DBH, to ATA is available in the CTLA guide. • Species rating is the factor assigned to a given tree species, based on the list provided in this publication. This subjective rating is based on individual qualities and traits, which may vary geographically within the state because of local climate and environmental influences. • Location rating is a value determined by the tree’s placement in the landscape and the overall area in which the property is located. It is derived by the following equation: (Site % + Contribution % + Placement %) ÷ 3 • Condition rating is determined by establishing the overall health and structural integrity of the tree. An assessment of condition includes roots, trunk and canopy. The appraiser and the appraisal situation determine the amount of detail in this assessment. 3 • Replacement Tree Costs are the cost of the tree, cost of transporting the tree to the site, planting it in the same location as the appraised tree and monitoring it during the maintenance period. This cost is subjective to location. Example: A residential site located on Main Street has a Black Walnut, Juglans nigra, located in the rear of the site, near the garage. The tree measures 33 inches DBH, and is in good condition. The tree owners wish to have it appraised to determine the value of the tree on their property. Using the Trunk Formula Method as defined by the Council of Tree and Landscape Appraisers as Value = Basic Tree Cost x Species Rating % x Condition Rating % x Location Rating % the formula can be expanded to determine the values for each component as: V = (RC + ((BP x (ATA – ATr)) x SR x CR x LR V = Value of appraised plant. RC = Replacement Cost for the average largest transplantable sized tree that a nursery can provide in this area. This has been determined to be $800 for Indiana. BP = Base Price per square inch dollar value of a tree. For Indiana, this has been determined to be $65. ATA = Adjusted Trunk Area value at DBH in square inches of the tree. This number is available from the chart provided in the CTLA guide. ATr = Adjusted Trunk replacement value at DBH in square inches of the average largest transplantable sized tree that a nursery can provide in Indiana. This has been found to be 4 inches, which has a trunk area of 13 square inches. SR = Species Rating value between .00 and 1.00, which can be determined by using the table provided. This is a subjective value, which can be adjusted to a higher or lower value, depending on the location in the state. LR = Location Rating value between .00 and 1.00, and determined by rating the placement of the tree in the landscape. This value is an average of site, contribution and placement ratings. CR = Condition Rating value between .00 and 1.00 for the tree, and determined by assessment of overall tree health and structure. Using the information provided and subjectively rating the tree for appraisal, the formula values would be: Appraised Value = $800 + (($65 x (835 in 2 – 13 in2)) x .50 x .88 x .70 Appraised Value = $16,703 based on the assessment of the tree and property. This is the worth of the tree in relation to the property, site and location. Page 4 Tree Appraisal • FNR-473-W 4 Cost of Repair calculates the cost to perform maintenance on the affected tree in order to repair damage. It includes wound treatment, cabling, bracing, pruning, pest management and associated cultural practices to improve health, such as supplemental irrigation, mulching and fertilization. Cost of Cure is similar to Cost of Repair. This method is used to determine the cost of treatment that will return the property to the closest approximation of its original condition. This often is called “years to parity” and is a very detailed, intricate approach requiring diligence in the assessment and calculation of repairs. Both Cost of Repair and Cost of Cure approaches account for tree and debris removal, the replacement process and post-restoration maintenance. The Income Approach is preferred when a property or segment of a property might provide income benefits. There are various methods within this approach, which includes crop values, forest appraisal and rental value. Market Approach is based on market information derived from an investigation of property sales. The market approach will determine the market value of a property with and without the trees or their damage. This method may employ more than one approach to reach valuation. This is only one value indicator, and perhaps is best utilized as a reasonability check. The appraisal method chosen will have a profound effect on the final value attributed to a tree or landscape. Results should be reasonable in relationship to the value of the property where it resides. Similar trees in different areas could have much different values. Studies have estimated that trees may account for up to 20 percent of the value of a residential property. In other circumstances, much lower values could result, depending on location and other factors. There are several considerations that influence inspection and appraisal processes, and how characteristics translate into value. Laws governing appraisals dictate which method may be allowed in particular applications. Important, detailed discussions of tree appraisals can be found in the Guide for Tree Appraisal. The appraiser may assume the role of mediator, arbitrator, consulting expert or expert witness. In all situations, an appraisal might be a target for lawsuits. The appraiser should maintain proper insurance for protection. When an expert opinion is necessary, as for an insurance or legal claim, it is wise for the tree owner to consult with a professional arborist. Experience is critical to proper valuation of a tree. Table 1. Species Rating for Landscape Trees — This list contains a sample of plants in the landscape that grow in Indiana, including native and non-native selections. This is not meant to be inclusive but, rather, representative of the majority of species found commonly in the urban forest. The ratings represent comparative values for species found in Indiana with consideration given to the following: • Hardiness • Durability (structural integrity) • Longevity • Biotic tolerance These ratings do not take into consideration factors such as maintenance requirements, nonstructural tree characteristics (e.g., aesthetics) and site adaptability. Such factors are more appropriately considered in the rating of the tree’s CONDITION AND LOCATION CLASSES. NOTE: The values contained in the Species Rating Guide should not be used without following the procedures identified and explained in the Guide for Plant Appraisal, 9th Edition, authored by the Council of Tree and Landscape Appraisers, and published by the International Society of Arboriculture. Scientific Name, Common Name Notes Rating Abies concolor, White or Concolor Fir 80 Acer campestre, Hedge Maple 60 Acer xfreemanii, Freeman Maple 70 Acer ginnala, Amur Maple 60 Acer griseum, Paperbark Maple 70 Acer miyabei, Miyabe Maple 80 Acer negundo, Boxelder 20 Acer nigrum, Black Maple 80 Acer palmatum, Japanese Maple 70 Acer platanoides, Norway Maple Invasive species 20 Acer pseudoplatanus, Sycamore Maple 70 Acer rubrum, Red or Swamp Maple 60 Acer saccharinum, Silver Maple 40 Acer saccharum, Sugar Maple Improved cultivars 80 Acer saccharum, Sugar Maple Improved cultivars 80 Acer tataricum, Tartarian Maple 70 Acer triflorum, Three-Flowered Maple 80 Acer truncatum, Purpleblow Maple 70 Aesculus xcarnea, Red Horsechestnut 70 Aesculus glabra, Ohio Buckeye 60 Aesculus hippocastanum, Common Horsechestnut 60 Aesculus pavia, Red Buckeye 70 Ailanthus altissima, Tree of Heaven Prohibited-noxious species 20 Albizia julibrissin, Mimosa or Silk Tree 20 C ontinued on next page... Page 5 Tree Appraisal • FNR-473-W 5 Alnus glutinosa, European Black Alder Invasive species 20 Alnus incana, White Alder 70 Alnus rugosa, Speckled Alder 70 Amelanchier, Serviceberry 70 Asimina triloba, Common Pawpaw 50 Betula alleghaniensis (lutea), Yellow Birch 50 Betula lenta, Sweet Birch 50 Betula nigra, River or Red Birch 70 Betula papyrifera, Paper Birch 40 Betula pendula, European White Birch 20 Betula populifolia, Gray Birch 40 Carpinus betulus, European Hornbeam 70 Carpinus caroliniana, American Hornbeam (Blue Beech) 70 Carya sp., Hickory Various species 70 Castanea dentata, American Chestnut 20 Castanea mollissima, Chinese Chestnut 60 Catalpa sp., Catalpa 40 Celtis laevigata, Sugar Hackberry Southern locations 70 Celtis occidentalis, Common Hackberry 70 Cercidiphyllum japonicum, Katsura Tree 80 Cercis canadensis, Redbud 60 Chionanthus virginicus, Fringetree 60 Cladrastis lutea (kentukea), Yellowwood 60 Cornus alternifolia, Pagoda Dogwood 70 Cornus florida, Flowering Dogwood 60 Cornus kousa, Kousa Dogwood 70 Cornus mas, Cornelian Cherry Dogwood 70 Cornus officinalis, Japanese Cornel Dogwood 70 Corylus colurna, Turkish Filbert 80 Cotinus coggygria, Common Smoke Tree 60 Cotinus obovatus, American Smoke Tree 70 Crataegus crus-galli, Cockspur Hawthorn 80 Crataegus laevigata, English Hawthorn 40 Crataegus mollis, Downy Hawthorn 50 Crataegus phaenopyrum, Washington Hawthorn 70 Crataegus xlavallei, Lavalle Hawthorn 60 Crataegus ‘Vaughn, ’ Vaughn Hawthorn 60 Crataegus viridis ‘Winter King, ’ Winter King Hawthorn 70 Diospyros virginiana, Common Persimmon Male 70 Diospyros virginiana, Common Persimmon Female 50 Elaeagnus angustifolia, Russian-Olive Invasive species 20 Eucommia ulmoides, Hardy Rubber Tree 50 Fagus grandifolia, American Beech 80 Fagus sylvatica, European Beech 70 Fraxinus americana, White Ash Rating subject to EAB and treatment protocol 70 Fraxinus excelsior, European Ash Rating subject to EAB and treatment protocol 60 Fraxinus pennsylvanica, Green Ash Rating subject to EAB and treatment protocol 60 Fraxinus quadrangulata, Blue Ash Rating subject to EAB and treatment protocol 70 Ginkgo biloba, Ginkgo Male 90 Ginkgo biloba, Ginkgo Female 60 Gleditsia triacanthos, Honeylocust 70 Gleditsia triacanthos f. inermis, Thornless Honeylocust Improved cultivars 50 Gymnocladus dioica, Kentucky Coffeetree Male 80 Gymnocladus dioica, Kentucky Coffeetree Female 60 Halesia carolina, Carolina Silverbell 70 Ilex opaca, American Holly 70 Juglans cinerea, Butternut 30 Juglans nigra, Black Walnut 40 Juniperus chinensis, Chinese Juniper 60 Juniperus virginiana, Eastern Red Cedar 60 Koelreuteria paniculata, Golden Raintree 60 Larix decidua, European Larch 60 Larix kaempferi, Japanese Larch 60 Larix laricina, American Larch 50 Liquidambar styraciflua, Sweetgum Seedless varieties 80 Liriodendron tulipifera, Tuliptree 70 Maclura pomifera, Osage-Orange Invasive species 20 Magnolia acuminata, Cucumbertree Magnolia 70 Magnolia grandiflora, Southern Magnolia 60 Magnolia kobus, Kobus Magnolia 60 Magnolia xloebneri, Loebner Magnolia Improved cultivars 70 Magnolia xsoulangiana, Saucer Magnolia 70 Magnolia virginiana, Sweetbay Magnolia Southern locations 70 Malus, Crabapple Cultivar-dependent 80 Metasequoia glyptostroboides, Dawn Redwood 60 Morus sp., Mulberry 40 Nyssa sylvatica, Sourgum (Black Tupelo) 80 Ostrya virginiana, Ironwood (Hophornbeam) 80 Oxydendrum arboreum, Sourwood 60 Continued on next page... Page 6 Tree Appraisal • FNR-473-W 6 Paulownia tomentosa, Paulownia (Princess Tree) Invasive species 20 Phellodendron amurense, Amur Corktree Invasive species 20 Picea abies, Norway Spruce 70 Picea glauca, White Spruce 70 Picea glauca var. Densata, Black Hills Spruce 70 Picea omorika, Serbian Spruce 70 Picea pungens, Colorado Spruce 70 Pinus banksiana, Jack Pine 40 Pinus bungeana, Lacebark Pine 70 Pinus cembra, Swiss Stone Pine 70 Pinus echinata, Short Leaf Pine 50 Pinus nigra, Austrian or Black Pine 40 Pinus ponderosa, Ponderosa Pine 60 Pinus resinosa, Red Pine 50 Pinus strobus, Eastern White Pine 70 Pinus sylvestris, Scotch Pine 40 Platanus xacerifolia, London Planetree 60 Platanus occidentalis, Sycamore 70 Populus alba, White or Silver Poplar 30 Populus deltoides, Cottonwood Male 50 Populus deltoides, Cottonwood Female 30 Populus euroamericana, Hybrid Poplar 50 Populus grandidentata, Bigtooth Aspen 50 Populus nigra ‘Italica, ’ Lombardy Poplar 20 Populus tremuloides, Quaking Aspen 50 Prunus americana, Wild Plum 50 Prunus armeniaca var. mandshurica, Manchurian Apricot 50 Prunus avium, Sweet Cherry 40 Prunus cerasifera, Purple Leaf Plum 40 Prunus maackii, Amur Choke Cherry 60 Prunus padus, European Bird Cherry 40 Prunus persica, Common Peach 40 Prunus sargentii, Sargent Cherry 70 Prunus serotina, Black Cherry 50 Prunus serrulata, Japanese Flowering Cherry 40 Prunus subhirtella var. pendula, Weeping Cherry 40 Prunus virginiana, Choke Cherry 40 Psuedotsuga menziesii, Douglasfir 80 Pyrus calleryana, Callery Pear Invasive species 20 Quercus alba, White Oak 90 Quercus acutissima, Sawtooth Oak 70 Quercus bicolor, Swamp White Oak 80 Quercus coccinea, Scarlet Oak 70 Quercus ellipsoidalis, Hill’s or Northern Pin Oak 60 Quercus falcata var. pagodaefolia, Cherrybark Oak Southern locations 70 Quercus imbricaria, Shingle Oak 70 Quercus macrocarpa, Bur Oak 90 Quercus michauxii, Swamp Chestnut Oak 70 Quercus muehlenbergii, Chinquapin Oak 80 Quercus palustris, Pin Oak 60 Quercus phellos, Willow Oak Southern locations 70 Quercus prinus, Chestnut Oak 70 Quercus robur, English Oak Southern locations 80 Quercus rubra, Red Oak 70 Quercus shumardii, Shumard Oak 70 Quercus velutina, Black Oak 60 Rhamnus cathartica, Common Buckthorn Invasive species 20 Robinia pseudoacacia, Black Locust Invasive species 20 Salix alba ‘Tristis, ’ Weeping Willow 40 Salix matsudana ‘Tortuosa, ’ Corkscrew Willow 30 Salix nigra, Black Willow 40 Sassafras albidum, Common Sassafras 70 Sophora japonica, Japanese Pagoda Tree Southern locations 70 Sorbus americana, American Mountain Ash 40 Sorbus alnifolia, Korean Mountain Ash 50 Sorbus aucuparia, European Mountain Ash 50 Syringa pekinensis, Peking Lilac 70 Syringa reticulata, Japanese Tree Lilac 70 T axodium distichum, Baldcypress 90 Thuja occidentalis, White Cedar Arborvitae 70 Thuja orientalis, Oriental Arborvitae 60 Tilia americana, American (Basswood) Linden 70 Tilia cordata, Little Leaf Linden 60 Tilia xeuchlora ‘Redmond, ’ Redmond Linden 80 Tilia tomentosa, Silver Linden 70 Tsuga canadensis, Canadian Hemlock 80 Ulmus, Hybrid Elms 70 Ulmus americana, American Elm 30 Ulmus carpinifolia, English Elm 30 Ulmus parvifolia, Chinese or Lacebark Elm 70 Ulmus pumila, Siberian Elm 40 Ulmus rubra, Slippery or Red Elm 20 Ulmus thomasii, Rock Elm 30 Viburnum prunifolium, Blackhaw Viburnum 70 Viburnum sieboldii, Siebold Viburnum 60 Zelkova serrata, Japanese Zelkova 60 Page 7 Tree Appraisal • FNR-473-W 7 Table 2. Condition Rating for Landscape Trees — Each plant can have any combination of the following health or structural issues, and others. The expression of symptoms and signs is subjective. The appraiser should consider the individual species characteristics and use existing circumstances as a reasonable scale for condition determination. This table is a general representation to assist in formula values. Condition Rating Tree Structure Consider root condition/formation, trunk condition and branch assembly and arrangement Tree Health Consider crown indicators including vigor, density, leaf size, quality and stem shoot extensions Formula Values Excellent Root plate undisturbed and clear of any obstructions. Root flare has normal development. No visible trunk defects or cavities. Branch spacing/structure and attachments are free of any defects. Perfect specimen with excellent form and vigor, well-balanced crown. Trunk is sound and solid. No apparent pest problems. Normal to exceeding shoot length on new growth. Leaf size and color normal. Exceptional life expectancy for the species. 1.0-.90 Good Root plate appears normal; only minor damage may be found. Possible signs of root dysfunction around trunk flare. Minor trunk defects from previous injury, with good closure; less than 25% of bark section missing. Good branch habit, minor dieback with so me signs of previous pruning. Codominant stem formation may be present. Minor corrections required. Imperfect canopy density in few parts of the tree, 10% or less, lacking natural symmetry. Less than half normal growth rate and minor deficiency in leaf development. Few pest issues or damage, controllable. Normal branch and stem development with healthy growth. Typical life expectancy for the species. .90-.75 Fair Root plate reveals previous damage or disturbance and dysfunctional roots may be visible around main stem. Evidence of trunk damage or cavities with decay or defects present. Less than 30% of bark sections missing on trunk. Codominant stems are present. Branching habit and attachments indicate poor pruning or damage, which requires moderate corrections. Crown decline and dieback up to 30% of the canopy. Overall poor symmetry. Leaf color somewhat chlorotic with smaller leaves. Shoot extensions indicate some stunting and stressed growing conditions. Obvious signs of pest problems contributing to lesser condition. Some decay areas found in main stem and branches. Below average life expectancy. .75-.50 Poor Root plate disturbance and defects indicate major damage with girdling roots around the trunk flare. Trunk reveals more than 50% of bark section missing. Branch structure has poor attachments, with several structurally important dead or broken. Canopy reveals signs of severe damage or topping, with major corrective actions required. Lacking full crown, more than 50% decline and dieback, especially affecting larger branches. Stunting obvious with little evidence of growth on smaller stems. Leaf size and color reveals overall stress in the plant. Insect or disease infestation may be severe. Extensive decay or hollow. Life expectancy is low. .50-.30 Page 8 Order or download materials from Purdue Extension • The Education Store www.the-education-store.com PURDUE AGRICULTURE 09/12 Tree Appraisal • FNR-473-W 8 Table 3. Location Rating for Landscape Trees — Representative factors that influence location ratings and suggests formula values for various sites and applications. Location Rating Site Position The general appearance and quality of the site in relation to the market value in the area; overall site appearance Site Contribution The functional and aesthetic attributes the plant has on the site overall in terms of appeal and purpose Site Placement The effectiveness of realizing benefits and the influence of the plant on contribution to the site Formula Values Excellent Arboretum Well-maintained residential area Historical district Designated parks and recreation areas Air filtration Water purification Noise abatement Erosion control Windbreaks Shade/cooling effects Specific plant aesthetic factors Structural accents Framing views Space definition Privacy Traffic management Create vistas Screening Specimen trees in a functional landscape design Single, historic or specimen tree Outstanding aesthetic value in the landscape 1.0-.90 Good Suburban residential areas Golf course School/corporate campus Green spaces/memorials Cemetery Scenic parkways Considerable element in the landscape for design quality or function Plants in a windbreak, screen or other integral planting Planting allows maximum functional benefits .90-.75 Fair City streets/boulevards Rural residential areas Urban streets Industrial/commercial areas Well-spaced planting site Tree installation in planting pits or lawn strips Mass, unplanned plantings on a site .75-.50 Poor Streets/roadways in rural areas Woodlots, managed Freeways/interstates Countryside, naturally occurring woodlands Woodlots, unmanaged Trees with utility interaction Improper spacing with infrastructure conflicts Species with fruit or leaf litter issues Invasive species .50-.30 It is the policy of the Purdue University Cooperative Extension Service that all persons have equal opportunity and access to its educational programs, services, activities, and facilities without regard to race, religion, color, sex, age, national origin or ancestry, marital status, parental status, sexual orientation, disability or status as a veteran. Purdue University is an Affirmative Action institution. This material may be available in alternative formats.