Trees offer lots of benefits to city residents, property owners, and the population at large. These benefits include environmental, health, social, aesthetic, functional, and market or monetary values. However, this guide focuses mainly on calculating the economic value of trees.
Despite their diverse and huge values and benefits, it is not unusual for tree owners to lose trees as a result of road widening, pipeline or utility construction, home remodeling or construction, oil and gas drilling activity, and so on.
To get financial compensation for the loss of a tree, tree owners need to establish the value of their tree.
However, estimating the value of individual trees can be quite challenging because it follows a more complicated procedure. More so, many factors must be considered when calculating the worth of a tree.
In this guide, we will explain in detail the different methods for appraising the value of individual trees. Read on.
A professional arborist measuring tree diameter at breast height (DBH).
How Do I Calculate the Value Of A Tree?
There are four main methods for appraising the value of a tree, as published by the International Society of Arboriculture (ISA).
These methods are:
- The Cost Approach
- The Income Approach
- The Sales Comparison Approach (Market Approach)
- The Tree Value calculator
The cost approach:
This method places a dollar value on trees and other plants grown for their landscape value either to repair the damage done to a tree or to replace the tree.
The income approach:
This method considers the value or income the tree generates. It is used in estimating the economic worth of a tree.
The sales comparison approach:
This method is used to determine how the presence of trees on a property increases or decreases the overall value of the property.
The method applied for your use will be dependent on the type of trees affected, the effects of the damage, and the reason for its appraisal. These can only be determined by qualified tree and landscape appraisers.
For this guide, we will focus mainly on the Cost Approach and the Tree Value calculator.
A certified arborist is evaluating tree condition for appraisal purposes.
Tree Value Calculator:
There are several online calculators for estimating the value of individual trees. Some of these calculators include:
To make use of the tree value calculator, all you need to do is input the species of the tree, its height, circumference (or DBH), and other details about the tree’s location and condition.
Once you enter these details, the calculator will give you an estimated value of the tree based on the factors and formula it uses.
We hope this article has helped you to understand how to calculate the value of a tree. Using any of the methods above to calculate your tree value will help you greatly in financial planning, decision making, or settling a claim.
The Cost Approach
This approach is further subdivided into four other methods:
- The trunk formula method (TFM)
- The cost of the cure method
- The cost of the repair method
- The replacement cost method
The Trunk Formula Method (TFM)
This method is the most commonly used technique to establish the value of mature and large timber. It is used to define the value used in comparing other trees of the same species. However, it does not provide adequate market value for the tree.
Note that the values based on the TF method are calculations generated by using unit cost. The unit cost to be used for this formula must be obtained from local resources determined by the consulting arborist.
To establish the value of trees using the TF method, begin by multiplying the cross-sectional area of the tree with the unit cost. Determine the cross-sectional area of the tree by first ascertaining the diameter at breast height (DBH).
DBH is measured by using a special measuring tape to wrap around the trunk of the tree at 4.5 feet above the ground. The number arrived at is then divided by 3.14. After getting the diameter, divide it by 2 to get the cross-sectional area. Then, multiply its area by the unit cost to get its value.
According to the Council of Tree and Landscape Appraisers (CTLA), the TF Method is defined as:
Value = Basic Tree Cost x Species Rating% % x Condition Rating% x Location Rating%
This definition considers rating factors such as species, condition, and location of trees to assess their value.
Basic Tree Cost is the Replacement Tree Cost + (Base Price x Adjusted Trunk Area, or ATA). The base price is determined to be $65 for Indiana. ATA is the area of the tree trunk in square inches measured at a standard height of 4.5 feet, less the area of the largest available transplantable tree, which is determined to be $800 in Indiana.
Species rating is used to assign particular values to different plant species to help in estimating their worth.
Condition rating establishes the overall health and structural integrity of the tree. An assessment of the condition includes the whole body of the tree.
Location rating is the value determined by the tree’s location in the landscape and the overall area where the property is located.
Example Calculation:
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 estimated to determine the value of the tree on their property using the trunk formula method as defined by the CTLA.
Value = Basic Tree Cost x Species Rating% x Condition Rating% x Location Rating%
Appraised Value = ($800 + ($65 x (835 in² – 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.
Black Walnut (Juglans nigra) similar to the one in the example calculation.
Cost of Cure Method
This method determines the cost of treatment required to return a property to the closest approximation of its original state by addressing damages.
Both methods account for tree and debris removal, the replacement process, and post-treatment maintenance.
Cost of Repair Method
This method is similar to the cost of cure method. It calculates the cost to carry out maintenance on an affected tree in order to repair the damage.
It includes:
- Wound treatment
- Bracing
- Pruning
- Pest management
- Other practices to improve health (supplemental irrigation, mulching, and fertilization)
In investigating the cost of repair, the difference in appraisal between the condition of the tree before damage and after repair is added to the cost of the prescribed treatment for the tree.
Replacement Cost Method
The replacement method is used by professional appraisers to estimate the cost of the largest available tree with that of an appraised tree of the same species, in the same location and, if possible, of similar size.
However, in cases where a tree is too large to be replaced by a single tree of equal value, appraisers may assign several smaller trees considered to be collectively equivalent to the original tree. This eventually becomes a matter of adding the value of the replacement trees and their related costs.
The cost of removing the old tree and restoring the area with an identical tree is also added up as the expenses involved with the method. Most of the time, they are up to the size of individual trees that were lost.
Important Factors That Affect Tree Value
Please note that the basic value of your tree can be adjusted based on the following factors:
- Species: Different tree species have different values based on their adaptability, maintenance needs, and longevity.
- Location: The location of the tree, which includes the placement, functional and aesthetic benefits, and site value, will affect its value.
- Condition: Finally, the structure, health, and structural integrity of the tree play an important role. A healthy tree is worth more than a tree with defects. If your tree is shedding its bark, it will definitely be valued less.
Frequently Asked Questions (FAQs)
How Do I Calculate the Value of a Tree?
To calculate the value of a tree, you can use the cost approach method, which includes the trunk formula method (TFM), cost of cure method, cost of repair method, and the replacement cost method.
This method considers factors like the size of the tree, its species, condition, and location. Other ways to calculate the value of a tree are the Income Approach, the Sales Comparison Approach (Market Approach), and the Tree Value calculator.
What Factors Influence Tree Value?
Likely factors that can influence tree value include species, size, health and condition, environmental benefits, location, and aesthetic value.
