Environmental factors carry a considerable amount of weight in farmland buying and selling decisions – as they should. Certain factors relating to the environment could benefit both the buyer and the seller, while others could negatively affect the value of the land on the market.
In fact, one of the major influences across the entire world – not just here in the midwestern United states – on farmland value and location is an environmental issue: water.
Not all regions of the world are created equal when it comes to water access. Luckily, most of the Midwest has been blessed with good access to water. Still, value of the land here is still partially driven by this much-needed resource, whether it’s delivered to the land through irrigation or drainage.
But this is just one environmental factor that influences farmland values and sales. Continue reading to learn more about why the environment matters so much whenever farm real estate is concerned.
Environmental questions to ask before buying farmland
Any farmer that finds themselves in a position to acquire more land must find answers to several questions that pertain to environmental factors.
Potential buyers should inquire about gas, mineral and wind rights on the property. What happens to those rights as the land ownership changes hands? Are those right now the buyer’s? Are the rights already under a lease? Any mining or drilling activity that occurs on a property
Next, ask about how the property is zone. Ask whether there are any conservation easements that may place restrictions on how the property can be used. That could influence the land valuation.
Finally, be sure to always ask about water sources and the soil history for the land that is being considered in a transaction. Good soil is key to a successful farming operation, as is excellent water access.
Many land use decisions are based on environmental issues
Land buyers must be knowledgeable of environmental issues because they may affect how farmland is used.
For example, the environment may dictate or influence land use on any given piece of land. Marginal cropland, or land that is less productive, is a prominent example of this. Large areas of marginal land often shift in and out of production, according to the United States Department of Agriculture.
While this is a financial decision, as less productive land means lower yields, it also has environmental ties. The USDA states that research shows land that is lower in productivity is actually more environmentally sensitive than land that performs better. Wind and water erosion, as well as nutrient loss, can be more severe on marginal land.
So, it’s important to know how an area of cropland has performed in the past. If you are looking at bringing it back into production, or trying to increase production on that land, then there may be potential environmental consequences that a higher-quality tract of land would not be as likely to face.
Contaminants and hazardous substances can cause headaches
Unfortunately, the risk that farmland has been exposed to contaminants or other hazardous substances at some point is not negligible. This exposure can also do a real number on rural property appraisal.
There could be soil contamination to watch out for due to a former industrial plant being on the land, groundwater contamination from an underground storage tank and even pesticide runoff that’s coming from neighboring farms or rivers that run through or near the property.
Those possible hazards are well-known, but as Realtors Land Institute points out, there are problems that may be lurking that are not as well-known by the general farmer. That could include the outdated practice of farmers having once used long trenches filled with DDT-treated fuel oil to get rid of mites and insects on cattle. These were also known as cattle vats. These trenches were just filled in when the practice was no longer recommended.
Then there are underground storage tanks that may have once contained gasoline. We could go on with some other potential issues, but the response is the same: potential buyers need to take these factors seriously when looking at making an offer on farmland.
Talk to an experience appraiser about environmental issues
So, what’s a farmer to do? One option is to speak to an appraiser experience in determining land value when taking into consideration these negative factors. It’s important that buyers find an appraiser they trust and can rely on to deliver an accurate figure after having accounted for every environmental and non-environmental aspect of the land.
Not all appraisers may be knowledgeable when it comes to environmental problems such as hazardous substances. A good appraiser who does not themself have this knowledge will bring in another expert who does.
A solid appraisal that has taken into account correct and accurate information will only benefit both the seller and the buyer of any transaction. Lenders will also appreciate having transparent and accurate information to go off of when making their own decisions.
Consider an environmental audit before buying land
Another option when weighing possible environmental issues a piece of land may have or be at risk of facing is to have an audit conducted. Nobody wants to get stuck with land that comes with environmental problems that are difficult to address. That’s why it may be worth spending the money to have an onsite environmental audit conducted ahead of a purchase.
This environmental audit could help a potential buyer avoid having to pay for an expensive cleanup or mitigation operation down the road. ‘
That’s largely the reason why these audits have become so common in farm real estate transactions. An audit offers some liability protection for people involved in the transaction process.
Need to know what your land or property is worth?
Knowing the environmental factors that affect farmland value is just one part of a rather complicated equation. If you would like to learn what your land is worth, then get the Advantage: contact us at Advantage Realty and Land Management today for a free estimate.