Selling farmland is a major decision that is never taken lightly. For some, financial reasons could be behind the need to sell acres, but not always. For others, the decision to put portions or all of the farm up for sale is simply due to retirement or seeking to capitalize on a great return on investment.
No matter the reason to put up the for sale signs and notices, there is a lot to consider in the leadup to that decision and throughout the process, too. Here we have put together some basic information that you may find helpful if you ever find yourself in a position of selling farmland.
Who is selling farmland
Many people currently trying to sell farmland typically fall within one of five categories: active farmers, retired farmers, estate sales, investors or a general other category. That’s according to the recently released 2019 Farmland Value Survey from Iowa State University Extension and Outreach. While the survey focuses on Iowa, it gives a good general glimpse at who is out there with land to sell in today’s agriculture economy.
A closer look at the survey data shows why those groups are selling their land. By far the most sales were estate sales (52%), followed by retired farmers (24%), active farmers (16%) and investors (7%).
The number of farmland sales across the state seems to be remaining steady compared to the data from 2018. According to the survey, 48% of respondents reported that there was a similar number of sales. However, 27% of respondents reported that they felt there were more sales this year, while 25% said that there were fewer sales compared to last year.
Who is buying farmland
Sellers wanting to have a good understanding of the current land market should also know who is currently buying farmland. ISU’s survey again groups the most common buyers based on the information provided by respondents.
For buyers, the most common groups are existing local farmers, existing farmers who are relocating, new farmers, investors and a general other category. Most sales, 72%, were to existing farmers. Of those sales, 70% were to farmers who already lived in the local area.
Investors made up the next biggest buyer category with 21% of reported sales going to them. New farmers were the buyers in 5% of the sales, while existing but relocating farmers were buyers in only 2% of the reported sales.
Why people sell farmland
Selling farmland is sometimes the easiest way to cover expenses and help rebuild a farm’s financial health. In today’s farm economy, you aren’t alone if there’s pressure to sell farmland stemming from the balance sheet.
As Iowa State’s survey notes, most landowners who find themselves in an economic downturn won’t sell land. However, the survey continues, a continued decline in farm income and profitability may lead more landowners to take another look at retirement and sell their farmland. This scenario is unfortunately unfolding in areas throughout Iowa. But, because the land supply in Iowa and throughout much of the Midwest remains low, there is a good amount of demand for high quality land.
On the other hand, the survey’s authors point out, anyone with eyes on the farmland market needs to watch whether farm incomes improve, which could lead to some landowners also considering selling their land because values may then rise.
When people are looking to buy land
Not everyone is always on the lookout for good farmland to buy. In fact, it is sometimes best to put up your listing when farmers aren’t preoccupied by other work, such as before the next crop season.
Of course, it’s possible to sell land at any point throughout the year, but time the listing well and you could find yourself sitting a little more comfortably cash-wise at the end of the calendar year.
List or public auction – which is better?
In general, there are two tried and true ways of selling farmland. A seller can either list the land or work with a firm to schedule and organize a public auction. What sales type a seller chooses can often depend on their financial situation or quality of the land they are trying to sell.
For owners of high-quality farmland, a public auction can often lead to very desirable prices, especially with a market that’s been tight as of late.
However, auctions aren’t for everyone. This is especially true if a farmer looking to sell is not in the best financial position. An auction could lead to more attention to this fact than is often desirable. In these situations, it may be best to list the land with an experienced realtor.
Better information makes decision-making easier
If you are considering selling you land, then you have to go into the process ready to gather as much information as possible. This will help you make informed decisions – which is critical because these can be emotional sales in many cases.
One of the most important pieces of information you need to collect is who is listed as owner on the deed. This can prevent headaches if it’s not who you think it is – and discover this further along in the process.
The other bit of data that can go a long way in helping is to look for comparable sales prices. This helps you set a better asking price. An experienced professional can help you get this information and lock down a good sale price.
Also, discuss your sale with a CPA who can walk you through potential tax scenarios.
Learn what your land or property is worth
Getting the most out of selling your land requires being armed with as much information and knowledge as possible. At Advantage Realty and Land Management, we specialize in real estate services but also bring to the table a wealth of knowledge in land management, crop consulting and more. For prospective farmland sellers, that means you can trust that we’ll put our experience and countless hours spent on farms and in fields to work for you.
Contact us today for a free estimate of what your land or property is worth and get the Advantage today!