Before anyone said a dollar amount, the appraiser had split the orchard's value in two
A family friend at a small ag lender let me listen in on a call as long as I stayed muted, which is about as close as I've gotten to any of this. Citrus orchard, family had it three generations, they wanted to borrow against it to buy the neighbor's block.
The appraiser talked for about forty minutes and I understood maybe half. The part I did get: he kept separating two numbers. The land itself, what the bare dirt is worth with water access. And then the trees on it, valued separately based on age and variety and how many years of production are left in them.
Then the loan officer said something I wrote down word for word. He said we lend against the dirt and we underwrite the trees.
Afterward I asked him what he meant. He said if everything goes badly, what the bank ends up holding is ground. The trees can die, a freeze can take a season, prices can go somewhere nobody expected. So the loan size keys off the land value, and the tree value and the production history are how they decide whether the borrower can actually make the payments in the meantime. Two different jobs for two different numbers.
I'd assumed a lender looks at one appraised value and multiplies. Sitting there for an hour and a half took that assumption apart. Terms and how any particular lender does it will vary and I'd confirm in writing with them, obviously, but the logic of splitting it stuck with me.