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APPRAISAL REPORT

IN A SUMMARY FORMAT
OF
HENRY GEORGE HERZEL PROPERTY
W1/2NE1/4, SECTION 29, T23N, R19W (80.22 ACRES)
NHN SOUTH FINLEY POINT RD.
POLSON, MT 59860

RETROSPECTIVE DATE OF VALUATION

APRIL 3, 2008

FOR
HENRY GEORGE HERZEL ESTATE
JOHN MERCER, TURNAGE & MERCER PLLP
312 1ST STREET EAST
POLSON, MT 59860

BY
JENNIFER MCGINNIS
STEVENS CO.
P.O. BOX 996
POLSON, MONTANA 59860
STEVENS & CO.
A REAL ESTATE APPRAISING & CONSULTING GROUP

June 30, 2008

John A. Mercer
Turnage & Mercer PLLP
312 1st Street East
Polson, MT 59860

RE: Henry George Herzel Estate


W1/2NE1/4, Section 29, T23N, R19W (80.22 ACRES)
NHN South Finley Point Rd., Polson, MT 59860

Dear Mr. Mercer,

At your request I have inspected the Henry George Herzel property located on

South Finley Point Rd., Polson, MT which consists of 80.22 acres. The purpose of this

inspection is to formulate an appraisal report in Summary format which estimates

market value of the property as of April 3, 2008.

This report is a Summary format which complies with the reporting requirements

set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional

Appraisal Practice for such a report. As such, it may not present in-depth discussions of

the data, reasoning and analyses that were used in the appraisal process to develop the

appraiser’s opinion of value. Supporting documentation concerning that data, reasoning

and analyses is retained in the appraiser’s files. The depth of discussion contained in

this report is specific to the needs of the Henry George Herzel Estate for Federal estate

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tax purposes and possible real estate sale. The appraiser is not responsible for the

unauthorized use of this report.

The property involved is located on Finley Point, a unique and well-defined

peninsula on the SE portion of Flathead Lake. This 80.22+/- acre parcel is accessed by

paved, public South Finley Point Rd., approximately seven miles northeast of the city of

Polson. The southern boundary of the subject acreage is a parcel below the high water

mark of Flathead Lake in Government Lot 3, the northern boundary is South Finley

Point Rd., western and eastern boundaries consist of undeveloped acreage. The site is

relatively level, but slopes from north to south at the southern edge of the property,

creating a bench to the wet land area that borders Flathead Lake. The shape is

approximately rectangular and power is available from existing overhead power lines.

The vegetation consists of 61.21+/- acres of grass land with minimal weed infestation, a

few scattered pine trees along the bench and 16.73+/- acres of wet lands along the

southern boundary and approximately 2.28+/- acres below the high water mark of

Flathead Lake. The site has perimeter pole and wire fencing and is improved with an

older barn that is not considered to have contributory value. Finley Point State park is

located approximately two miles NW of the subject, with boat launch, docks, swimming

and camping.

A Phase I Environmental Site Assessment was not provided to me; however, a

visual inspection of the property revealed no on-site contamination nor did it reveal any

materials stored on site which would constitute hazardous wastes. However, your

appraiser is not an expert in this field and if some questions exist a qualified

professional should be contacted.

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I have complied with the Competency Provision as required in the Uniform

Standards of Professional Appraisal Practice, based on my education and experience in

appraising similar properties throughout western Montana.

SUBJECT LOCATION MAP

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SUBJECT PROPERTY PHOTOGRAPHS

Subject property looking SE


Outbuildings do not contribute to the overall value

Subject property looking SW-wet lands, Flathead Lake

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SUBJECT PROPERTY PHOTOGRAPHS

Subject property looking west

Subject property looking NE

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SUBJECT PROPERTY PHOTOGRAPHS

Wet lands bordering the lake and the south end of the subject property

Subject Street; South Finley Point Rd. looking west

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Assumptions and Limiting Conditions:

This is to certify that the appraiser, in submitting this statement and opinion of the

value of subject property, acted in accordance with and was bound by the following

principles, limiting conditions and assumptions.

1. No responsibility is assumed for matters that are legal in nature nor is any
opinion rendered on title of property appraised.

2. Unless otherwise noted, the property has been appraised as though free and
clear of all encumbrances.

3. Where the values of the land and the improvements are shown separately, the
value of each is segregated only as an aid to better estimate the value which it
lends to the whole parcel, rather than value of that particular item if it were by
itself.

4. All maps, areas, plans, specifications, and other data furnished your appraiser
were assumed to be correct. No survey of the property was made by this firm.
Furthermore, all numerical references to linear measurements, area, volume or
angular measurements should be assumed to be “more or less” (+), and are
accurate to a degree consistent with their use for valuation purposes.

5. Neither the employment to make the appraisal nor the compensation for it is
contingent upon the amount of valuation reported.

6. To the best of my knowledge and belief, the statements of fact contained in this
appraisal report upon which the analysis, opinions, and conclusions expressed
herein are based are true and correct. Furthermore, no important facts have
been withheld or overlooked.

7. There shall be no obligation to give testimony or attendance in court by reason of


this appraisal with reference to the property in question unless arrangements
have been previously made.

8. Disclosure of the contents of this appraisal report is governed by the by-laws and
regulations of the Appraisal Institute.

Neither all nor a part of the contents of this report (especially the conclusions as

to value, the identity of the appraiser, of the firm with which she is connected, or to the

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MAI designation) shall be disseminated to the public through advertising media, news

media, public relations media, sales media, or any other public means of

communication without the prior written consent and approval of the appraiser.

The appraiser is not qualified to detect hazardous wastes and/or toxic materials.

Any comment by the appraiser that might suggest the possibility of presence of such

substances should not be taken as confirmation of the presence of hazardous wastes

and/or toxic materials. Such determination would require investigation by a qualified

expert in the field of environmental assessment. The presence of substances such as

asbestos, petroleum products or other potentially hazardous materials may affect the

value of the property. The appraiser’s value estimate is predicated on the assumption

that there is no such material on or in the property that would cause a loss in value

unless otherwise stated in this report. No responsibility is assumed for any

environmental conditions, or for any expertise or engineering knowledge required to

discover such conditions. The appraiser’s descriptions and resulting comments are the

result of the routine observations made during the appraisal process.

Jennifer McGinnis specifically does not authorize the out-of-text quoting from or

partial reprinting of this report.

The liability of Stevens Co. and its employees, and specifically Jennifer McGinnis

is limited to the client and to the fee collected. Further, there is no accountability,

obligations, or liability to any third party. If this report is placed in the hands of anyone

other than the client, the client shall make such party aware of all limiting conditions and

assumptions of the assignment and related discussions. The appraiser assumes no

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responsibility for any costs incurred to discover or correct any deficiencies of any type

present in the property; physically, financially, economically or legally.

Purpose of the Appraisal:

The purpose of this appraisal is to provide the appraiser’s best estimate of the

market value of the subject real property as of the effective date. Market value, as used

in this report, is defined in The Appraisal of Real Estate, 12th Edition, (Chicago:

Appraisal Institute, 1992), as:

The most probable price which a property should bring in a competitive and open
market under all conditions requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the price is not affected by
undue stimulus.

Implicit in this definition is the consummation of a sale as of a specified date and

the passing of title from seller to buyer under conditions whereby:

1) buyer and seller are typically motivated;

2) both parties are well informed or well advised, and acting in what they consider
their own best interests;

3) A reasonable time is allowed for exposure in the open market

4) payment is made in terms of cash in U.S. dollars or in terms of financial


arrangements comparable thereto; and

5) the price represents the normal consideration for the property sold unaffected by
special or creative financing or sales concessions granted by anyone associated
with the sale.

The above definition of market value is also utilized by many federal financial

institutions including the Resolution Trust Corporation (RTC), which was established

under the Financial Institutions Reform, Recovery and Enforcement Act of 1989

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(FIRREA), and is compatible with the definition of market value in The Dictionary of

Real Estate Appraisal, fourth edition.

Legal Description:

The W1/2NE1/4 of Section 29, Township 23 North, Range 19 West, P.M.M., Lake

County, Montana. See attached plat map.

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RETRACEMENT SURVEY

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Purported Owner:

An investigation was made at the Lake County Clerk and Recorder’s Office which

indicated that Henry George Herzel Trust is the current owner of record of the subject

parcel.

Intended Use of the Report:

The intended use of this report is for the sole purpose in assisting the client, the

Henry George Herzel Estate, in Federal estate tax purposes and possible real estate

sale.

Interest Valued:

Fee simple title, subject to all known easements or restrictions of record.

Effective Date of Value:

April 3, 2008

Delivery Date of Report:

June 30, 2008

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Scope of Work, Appraisal Development & Reporting Process:

The data collection and analysis followed the normal procedures as required by

the Uniform Standards of Professional Appraisal Practice, as well as the Code of Ethics

and Standards of Professional Practice of the Appraisal Institute.

Data was obtained from the following sources:

• Lake & Flathead County Appraisal Office

• Lake & Flathead County Treasurer’s Office

• Lake & Flathead County Assessor’s Office

• Lake & Flathead County Surveyor’s Office

• Northwest Montana Multiple Listing Service

• Data files of Stevens Co.

• Real estate brokers and other appraisers in Polson, Missoula and Kalispell,
Montana

Upon receiving the assignment, a file was prepared which included: plat map,

zoning map and copy of zoning information, courthouse research including owner of

record, real estate taxes, legal description and plat, as well as a floodplain map.

A physical inspection was made of the subject property. In the course of

investigating the marketplace, sufficient data was found to develop the Sales

Comparison approach. The Cost and Income Capitalization approaches are not

applicable due to the property being unimproved.

This Summary Appraisal Report sets forth only a portion of the analyses and

appraiser’s conclusions. Supporting documentation is retained in the appraiser’s file.

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Floodplain Designation:

According to the Federal Emergency Management Agency floodplain maps,

specifically Map No. 30047C0200B, with an effective date of December 17, 1987, the

southern portion of the subject property lies in an area of either a 100- or 500-year flood

occurrence.

The recent retracement survey indicates that of the 80.22+/- acre parcel,

61.21+/- acres are dry land, 16.73+/- acres are wet land and 2.28+/- acres are below

the high water mark of Flathead Lake.

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Zoning:

According to the Lake County Planning Department, the subject property lies in

the Finley Point Zoning District, Area D, Finley Point Lakeshore. Conditional Uses

include Bed and Breakfasts, Home occupations, expansion of existing businesses,

guest house, single-wide mobile homes, Retreat centers and church camps, industrial

uses for fruit processing, natural food products, building on slopes which exceed 25%

on interior lots, disturbance of slopes which exceed 25% on lakefront lots, impervious

surface area covering between 15,001 and 20,000 square feet of 30 and 49 percent of

the buildable area of the lot, which ever is less and temporary dwellings and structures.

The average density is 1.5 acres per unit and the development on the lakeshore shall

provide a minimum of 100 feet of actual lake frontage.

Real Estate Taxes:

The current real estate taxes which are assessed against the subject property

total $320.37. This annual tax also includes an additional parcel.

History/Last Sale of the Subject Property:

The last sale of the subject property occurred more than three years ago.

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Highest and Best Use

Highest and best use, as employed in this report, is defined in The Dictionary of Real

Estate Appraisal, 4th Edition, as:

The reasonable probable and legal use of vacant land or an improved property,

which is physically possible, appropriately supportable, financially feasible, and that

results in the highest value. The four criteria that highest and best use must meet are

legal permissibility, physically possible, financial feasible and maximum profitability.

As taken from the same source, the definitions of highest and best use relate to

land as though vacant and highest ad best use as improved. These two distinctions are

as follows:

As Vacant:

Among all reasonable alternative uses, the use that yields the highest present
land value after payments are made fore labor, capital and coordination. The use of a
property based on the assumption that the parcel of land is vacant or can be made
vacant by demolishing any improvements.

As Improved:

The use that should be made of a property as it exists. An existing property


should be renovated or retained as is so long as it continues to contribute to the total
market value of the property or until the return from a new improvement would more
than offset the cost of demolishing the existing building and constructing a new one.

The certain implication within these definitions is the determination of highest and

best use which takes into account the contribution of a specific use to the community

and community development goals as well as the benefit to the individual property

owner. Appraisers must also interpret market evidence to determine the highest and

best use of a particular parcel. That determination from the market analysis represents

the appraiser’s opinion. In appraisal practice the analysis of highest and best use

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requires consideration to any and all uses for which the property is capable of being

adapted. When considering all of these uses, one must first recognize the limitations by

governmental regulations such as zoning ordinances, building codes and health

standards, then the attitudes of typical investors of this type of property in the immediate

area surrounding the subject property.

The most important factor is that land value is based on the premise of highest

and best use of the land as though vacant. For highest and best use to be property

analyzed, four tests must be considered in developing an opinion. These four tests

include an analysis of the uses which are physically possible, legally permissible,

financially feasible, and maximally productive.

Legally Permissible:

This analysis focuses on whether the current or proposed use of the subject

property complies with zoning ordinances or building codes.

The subject is located in the Finley Point Zoning District, Area D where the

average density is 1.5 acres per unit. With this in mind, legality is not a constraining

factor for development of the subject property. Although, a subdivision plan has not

been developed or approved by the governing officials.

Physically Feasible:

The land is mostly level and slopes downward from north to south at the southern

portion of the property towards the wet lands and Lake. Approximately 78% of the area

is dry land and not subject to 100- and 500-year flood occurrences. The development

has good access from South Finley Point Rd., yet there is not a second main road

adjacent to the property, which may cause concern for future development. Therefore,

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subdivision is physically possible, yet a subdivision plan has not been developed or

approved by the governing officials.

Maximally Productive:

There are no major residential developments within the immediate vicinity of the

subject which would compete directly with the development. The zoning allows for the

development and the demand for single-family residential building sites with views of

Flathead Lake in the Polson area continues to be strong. There are other subdivisions

either in the planning stage or under development, but none are located on Finley Point.

There appears to be a reasonable profit motive between the costs for purchasing the

land, as well as installing the necessary improvements, to render the land useable for

the development. There does not appear to be any other higher use for which the

subject property could be developed. Therefore, the subject development meets the

test of maximally productive.

Financially Feasible

It is unknown if subdivision would be financially feasible due to no existing

subdivision plan in place with plat, infrastructure costs or County approvals. It is

unknown what the County would require of a Developer to develop the site, and the

governing officials may require additional access which may affect financial feasibility.

In summation, highest and best use of the subject property is estimated to be

residential subdivision, as zoning allows, yet it is an extraordinary assumption that a

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developer would be able to attain all entitlements and that the project would be

financially feasible.

Exposure Period:

Based on the Highest and Best use of the subject, market evidence indicates an

exposure period range from 6 to 12 months may be required to sell the subject property.

This assumes an aggressive marketing effort, and similar economic conditions to the

current real estate market. An additional 30 to 60 days may be required for sale

consummation. Exposure Period and Marketing time are synonymous in this discussion.

PROPERTY VALUATION

Methods and/or Techniques Employed:

Whenever possible, all three basic approaches to value are employed. The

resulting indications of value are then correlated into a final estimate of market value. In

the course of investigating the marketplace, sufficient data was found to develop the

Sales Comparison approach. The Cost and Income Capitalization approaches are not

applicable due to the property being unimproved.

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SALES COMPARISON APPROACH

In the Sales Comparison Approach, the appraiser arrives at an indication of value

by comparing the relative utility and desirability of the subject property with comparable

properties recently sold. These properties should have approximately the same

physical characteristics as the subject, be in the same general or a similar

neighborhood, and be capable of housing the same or a similar use. Adjustments can

be made for relatively minor differences. Each should be an arm’s length transaction.

Basic to this approach is the principle of substitution which states that “when a

property is replaceable in the market, its value tends to be set by the price required to

acquire an equally desirable substitute property.”

The area around Flathead Lake was researched for large acreage lake frontage

and/or lake view property sales in the past four years. A total of five sales were found

and analyzed, ranging from 20 acres to 220 acres. The most pertinent information on

the sales is contained on the Land Sales Synopsis Grid to follow.

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LAND SALE LOCATION MAP

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LAND SALE SYNOPSIS CHART

Sale
# Location Date Price size/ac $/AC

1 820 MT Highway 82 2/28/2006 $4,000,000 220 $18,182


Somers, MT 59932
Doc.#200605911410
partial wet lands

2 NHN MT Highway 82 3/14/2006 $1,500,000 126.83 $11,827


Somers, MT 59932
Doc#200607311240
mostly flood plain/wet lands

3 1310 MT Highway 82 3/14/2006 $650,000


Somers, MT 59932 improvements ($100,000)
Doc#200607415530 $550,000 20 $27,500
Partial wet lands

4 NHN Highway 93 10/23/2004 $989,000 34.5 $28,667


Big Arm, MT 59860
MLS# 236916
952 feet lake frontage/
wet lands

5 NHN Highway 93 8/29/2007 $1,125,000 98 $11,480


Rollins, MT 59931
Doc#482770 & 482771
Wooded hillside/lake views

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COMPARABLE LAND SALE NO.1

GRANTEE: Kleinhans Farm Estates LLC

GRANTOR: William H. Kleinhans & Yvonne M. Kleinhans

LOCATION: 820 MT Highway 82, Somers, MT 59932

DOCUMENT#: 200605911410, Contract for Deed

MLS#: none, not listed

DATE OF SALE: February 28, 2006

PURCHASE PRICE: $4,000,000

LEGAL DESCRIPTION:

TR1 in NE4NE4 & NW4NE4, Section 24, T27N, R21W


TR4C in E2 L1 & NE4NW4 TR 4 in W2 L1 & TR4B in NE4NW4, Section 19, T27N,
R20W
TR 3B in SW4NE4, Section 19, T27N, R20W
TR6A in SE4NW4, Section 19, T27N, R20W
TR4A in NW4NE4, Section 19, T27N, R20W
All in Flathead County, MT.
PROPERTY DESCRIPTION: 220 acres of mostly level farm land that borders the
Wildlife Refuge to the south, which borders Flathead Lake.

INDICATION OF SALE: $4,000,000/220 acres = $18,182 per acre

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COMPARABLE LAND SALE NO.2

GRANTEE: Kleinhans Farm Estates LLC

GRANTOR: Kat Kove, LLC

LOCATION: MT Highway 82, Somers, MT 59932

DOCUMENT#: 200607311240, Warranty Deed

MLS#: none, not listed

DATE OF SALE: March 14, 2006

PURCHASE PRICE: $1,500,000

LEGAL DESCRIPTION:

TR 5 in NE4NE4, Section 19, T27N, R20W


TR 3 in SE4NE4, Section 19, T27N, R20W
TR 4 in NW4NW4, Section 20, T27N, R20W
TR 3 in SW4NW4, Section 20, T27N, R20W
All in Flathead County, MT.

PROPERTY DESCRIPTION: 126.83 acres of mostly level farm land, in which a large
portion of the acreage is within the flood plain/wetland area that borders the Wildlife
Refuge to the south, which borders Flathead Lake.

INDICATION OF SALE: $1,500,000/126.83 acres = $11,827 per acre

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COMPARABLE LAND SALE NO.3

GRANTEE: Kleinhans Farm Estates LLC

GRANTOR: James T. & Barbara A. Dedman

LOCATION: 1310 MT Highway 82, Somers, MT 59932

DOCUMENT#: 200607415530, Warranty Deed

MLS#: none, not listed

DATE OF SALE: March 14, 2006

PURCHASE PRICE: $650,000

LEGAL DESCRIPTION:

TR2A & TR2BB in NE4NW4, Section20, T20N, R20W


Flathead County, MT.

PROPERTY DESCRIPTION: 20 acres of mostly level farm land, the acreage borders
the Wildlife Refuge to the east and south, which borders Flathead Lake. This parcel is
improved with an older 1,716 SF home and outbuildings.

INDICATION OF SALE: $650,000


($100,000) Improvements
$550,000/20 acres = $27,500 per acre

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COMPARABLE LAND SALE NO.4

GRANTEE: Alan D. & Linda E. Madsen

GRANTOR: Charles B. & Sandra L. Walle

LOCATION: US Highway 93, Big Arm, MT

DOCUMENT#: 452949, Warranty Deed

MLS#: 236916

DATE OF SALE: October 23, 2004

PURCHASE PRICE: $989,000

LEGAL DESCRIPTION:

Lot 2 of Section 32, T24N, R21W, M.P.M. Lake County, MT. (with exceptions)

PROPERTY DESCRIPTION: 34.50 acres of gently sloping grass land, a portion of the
acreage is within the flood plain/wetland area that borders Flathead Lake.

INDICATION OF SALE: $989,000/34.50 acres = $28,667 per acre

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COMPARABLE LAND SALE NO.5

GRANTEE: Robert M. Bonner

GRANTOR: Ann L. Howard & Catherine C. Hultgren Revocable Trust

LOCATION: US Highway 93, Rollins, MT

DOCUMENT#: 482770 &482771, Warranty Deeds

MLS#: none, not listed

DATE OF SALE: August 29, 2007

PURCHASE PRICE: $1,125,000

LEGAL DESCRIPTION:

COS 6575 TR in the S1/2NW1/4 & S1/2NE1/4, Section 16, Township 25 North, Range
20 West, P.M.M. Lake County, MT.

PROPERTY DESCRIPTION: Four contiguous tracts totaling 98+/- acres; topography


varies from medium to steep slope, with a few benches and excellent views of Flathead
Lake and the surrounding mountains.

INDICATION OF SALE: $1,125,000/98 acres = $11,480 per acre

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Adjustments:

All comparables differ somewhat from each other and from the subject in a

number of different ways. The usual differences are time of sale, size, availability of

utilities, access, physical characteristics, amenities, general location, and specific

location. All these factors, in varying degrees, are applicable in the appraisal of the

subject property. When dissimilarities are found in comparable properties, they should

be adjusted for by adding to the comparable price when the dissimilar factor is inferior to

the same factor found in the subject property. Likewise, a minus adjustment should be

made when the comparable sale has a factor which is superior to that found in the

subject property. The sale properties, then, are adjusted to the subject property.

However, in the market it is often difficult, and sometimes impossible to

accurately isolate a given factor. In short, one very seldom finds sales which are

identical in all respects but one, and thus is able to prove conclusively the value, or lack

of it, for any one factor due to a difference in sale price. Often, there are plus and minus

factors which offset each other. Nevertheless, the differences in values are real, and an

attempt, based on as much fact as can be found, will be made to determine the value of

these factors. Then, the appraiser may call upon his experience to make subjective

judgments. The following generalities are cited to acquaint the reader with a

background for the appraiser’s reasoning and judgment to follow:

1. Value increases per unit of comparison as the size of the parcel decreases.

2. Value tends to decrease as distance from an urban center increases. An


exception to this generalization might be certain recreational properties.

3. Value tends to decrease as the topography becomes steeper, more rocky, more
barren, more arid, etc.

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4. Value tends to decrease as access becomes more difficult.

5. Value tends to increase with amenities such as creek or lake frontage, or a good
view.

6. Value tends to increase when zoning allows greater density and/or a more
optimum use of the land.

The opposite may be said of each of the above illustrations.

The adjustments, which are germane in analyzing the comparables as they relate

to the subject property, would first be an adjustment for changing market conditions, or

inflation. Based on sales, re-sales and paired sales of similar type properties in

Western Montana, the overall long-term appreciation rate ranges from 5% to 20% per

year. Based on these sales, an appreciation rate of 10% per year is appropriate.

The second adjustment indicates a size/price relationship. This relationship

reflects that larger tracts of land tend to sell for less while smaller tracts will sell for more

per unit of comparison. In this analysis, the unit of comparison is value, or dollars per

acre.

The final adjustment is one for land quality; whether the land has steep

topography or is mostly within a wet land area or has primarily developable acreage.

This adjustment can range from 10% to 60% depending on the topography and wet land

area.

Discussion of Comparable Sales

Comparable Sale No. 1 is located at 820 MT Highway 82, Somers, MT and

consists of 220 +/- acres of mostly level farm land with views of Flathead Lake, the

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surrounding mountains and borders the Wildlife Refuge which borders Flathead Lake to

the south. This acreage sold for $4,000,000 or $18,182/AC on February 28, 2006. Due

to date of sale, an upward adjustment of 21% is made for changing market conditions.

The size is larger than the subject parcel, resulting in a 20% upward adjustment. The

quality of acreage is similar to the subject, bordering a wet land area, with a portion of

the acreage in the flood plain, therefore no adjustment is necessary. After adjustment,

the value indication for the subject tract is $26,400/AC.

Comparable Sale No. 2 is the private sale of 126.83+/- acres of somewhat level

farm land located on MT Highway 82 in Somers, MT. This parcel has good views of

Flathead Lake, the surrounding mountains and borders the Wildlife Refuge which

borders Flathead Lake to the south, yet according to the Buyer, a large portion of the

acreage is within the flood plain. This acreage sold for $1,500,000 or $11,827/AC on

March 14, 2006. Due to date of sale, an upward adjustment of 21% is made for

changing market conditions. The size is larger than the subject parcel, resulting in a

15% upward adjustment. The quality of acreage is inferior to the subject with a large

portion of the acreage in the flood plain therefore a 40% upward adjustment is

necessary. After adjustment, the value indication for the subject is $23,041/AC.

Comparable Sale No. 3 is located at 1310 MT Highway 82, Somers, MT and

consists of 20 acres of level farm land bordering the Wildlife Refuge on the southern

and eastern boundaries and is improved with a 1,716 SF older home. This private sale

closed March 14, 2006 for $650,000. After adjusting for improvements, the indicated

price per acre is $27,500. Due to date of sale, an upward adjustment of 21% is made

for changing market conditions. The size is much smaller than the subject, indicating a

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20% downward adjustment, the quality of acreage is similar to the subject, bordering

wet land area therefore no adjustment is necessary. After adjustment, the value

indication for the subject is $26,620/AC.

Comparable Sale No. 4 is the sale of 34.50 acres located on the corner of

Highway 93 and Skipping Rock Lane, Big Arm, MT which closed October 23, 2004 for

$989,000 after 303 days of marketing time. This sloping grass land acreage has 952

lineal feet of Flathead Lake frontage that is mostly in a wet land area. Due to date of

sale, an upward adjustment of 34% is made for changing market conditions. The size is

smaller than the subject, indicating a 20% downward adjustment, the quality of acreage

is slightly superior to the subject, with less wet land area therefore a 10% downward

adjustment is made. After adjustment, the value indication for the subject is

$27,658/AC.

Comparable Sale No. 5 is the sale of four contiguous tracts totaling 98 acres

located on Highway 93 in Rollins, MT which closed August 29, 2007 for $1,125,000.

This private sale consists of a wooded hillside with topography that varies from medium

to steep slope, with a few benches and excellent views of Flathead Lake and the

surrounding mountains. Due to date of sale, an upward adjustment of 6% is made for

changing market conditions. This size is larger than the subject resulting in a 15%

upward adjustment. The property quality is inferior to the subject, with much of the

acreage too steep for development, and within a county zoning density of 10 acres per

unit, indicating an upward adjustment of 60%. After adjustment, the value indication for

the subject is $22,390/AC.

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All five sales, after adjustment reflect a reasonable range for the subject property

starting at $22,390 per acre to the highest indication of $27,658 per acre. The

mathematical mean adjusted price per acre is $25,222 and the median, or

measurement of central tendency is $26,400 per acre. Sales No. 1 through No. 4 are

the best value indications for the subject property due to similarities in topography, wet

land, lake and mountain views. Based on these sales an overall value indication of

$25,500 (R) per acre is appropriate for the subject parcel.

In calculating the subject parcel’s acreage, only the dry land of 61.21+/- acres

and wet land of 16.73+/- acres are used. Land that is below the high water mark of

Flathead Lake (2.28 acres) is not included in the price per acre calculation.

80.22 acres Total Gross acreage


-2.28 acres below high water mark
77.94 acres

77.94 acres @ $25,500/AC = $1,987,470

Value Indication by the


Sales Comparison Approach $2,000,000 (R)

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RECONCILIATION AND FINAL CONCLUSION

The Sales Comparison Approach was developed by using five sales within the

Flathead Lake influence area. The sales were adjusted to reflect the subject’s size and

overall quality. The value indication from this approach is reasonably indicative of the

investor attitudes within the greater Flathead Lake influence area.

Based on the data contained in the report, the final estimate of market value for

the subject property is based on the Sales Comparison Approach. Final market value

then as of April 3, 2008, with consideration to a cash sale is:

TWO MILLION DOLLARS

($2,000,000.00)

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VALUE ESTIMATE AND CERTIFICATION

I certify that, to the best of my knowledge and belief:

- The statements of fact contained in this report are true and correct.

- The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, impartial, and
unbiased professional analyses, opinions and conclusions.

- I have no present or prospective interest in the property that is the subject of this
report, and no personal interest with respect to the parties involved.

- I have no bias with respect to the property that is the subject of this report or to
the parties involved with this assignment.

- My engagement in this assignment was not contingent upon developing or


reporting predetermined results.

- My compensation for completing this assignment is not contingent upon the


development or reporting of a predetermined value or direction in value that
favors the cause of the client, the amount of the value opinion, the attainment of
a stipulated result, or the occurrence of a subsequent event directly related to the
intended use of this appraisal.

- My analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standards of Professional
Appraisal Practice.

- I have made a personal inspection of the property that is the subject of this
report.

- No one provided significant professional assistance to the person signing this


report.

I certify that the use of this report is subject to the requirements of the Appraisal

Institute relating to review by its duly authorized representatives.

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Based upon all the elements of which I am aware and which could reasonably

affect value, I have estimated market value of the subject property, with consideration to

a cash sale, as of April 3, 2008, to be:

TWO MILLION DOLLARS

($2,000,000.00)

June 30, 2008 ______________________________


Jennifer McGinnis
MT General Certification #714

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ADDENDA

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QUALIFICATIONS OF JENNIFER MCGINNIS
MT CERTIFIED GENERAL APPRAISER #714
P.O. Box 996
Polson, Montana 59860

EXPERIENCE:

August 2002- March 2003

Working under the supervision of Garold D. Jette, an independent


real estate appraisal firm, appraising residential and multi-family
properties throughout Lake County. Polson, Montana

March 2003- Present .

Working under the supervision of Thomas G. Stevens, MAI of Stevens & Co., a full
service, independent real estate appraisal firm serving clients throughout the State of
Montana.

Stevens & Co. Stevens & Co.


P.O. Box 996 P.O. Box 8287
Polson, MT 59860 Missoula, MT 59807-8287
Telephone: 406-883-1659 406-721-5454

EDUCATION:

University of Montana, 1991

B.A. Communication Studies

Appraisal Institute Courses

Appraisal Principles
Appraisal Procedures
Standards of Professional Practice, Part A
Standards of Professional Practice, Part B
Advanced Residential Form & Narrative Report Writing
Basic Income Capitalization
General Applications
The Professional’s Guide to the Uniform Residential Appraisal Report
Highest & Best Use and Market Analysis
Advanced Sales Comparison and Cost Approaches
15 Hour USPAP Course
Business Practices & Ethics
Additional Courses & Seminars

2004 Montana Economic Outlook Seminar-Bureau of Business & Economic


Research
The Technical Inspection of Real Estate –Beckman Group
2005 Montana Economic Outlook Seminar-Bureau of Business &
Economic Research
Uniform Standards of Professional Practice, Update Course-McKissock
Uniform Appraisal Standards for Federal Land Acquisitions: Practical
Applications for Fee Appraisers - Appraisal Institute
2008 Uniform Standards of Professional Practice, Appraisal Institute
2008 Montana Economic Outlook Seminar-Bureau of Business & Economic
Research

Memberships

Montana Board of Real Estate Appraisers – Board Member


Appraisal Institute – Associate Member

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STEVENS & CO.
A REAL ESTATE APPRAISING & CONSULTING GROUP

June 30, 2008

John A. Mercer
Turnage & Mercer PLLP
312 1st Street East
Polson, MT 59860

RE: Henry George Herzel Estate


W1/2NE1/4, SECTION 29, T23N, R19W (80.22 ACRES)
NHN South Finley Point Rd., Polson, MT 59860

Our File No. 0847-Herzel

Professional Appraisal Services. . . . $1,500.00

Tax ID No. 81-0528230

Interest charged on all accounts over 30 days, figured at 2% per month, from the date of
report completion/delivery.

116 West Spruce Street, P.O. Box 8287, Missoula, Montana 59807
Phone (406) 721-5454 fax (406)721-9848

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