The decision to sell a farm or ranch is never easily reached. The hard work continues even after an owner of farmland has decided to part ways with some or all of their land. The sale process and the work needed to find a buyer are not small tasks.
But there are ways to make these steps toward finding buyers and selling farmland more manageable and quicker for everyone involved. In this blog post, we’ll walk through a few tips and suggestions that you can use if you are looking to sell farmland or rural property.
Total number of farms, farmland area decreasing
The number of farms in the United States has been decreasing for years. Data reported in the 2017 Census of Agriculture from the U.S. Department of Agriculture showed that trend is continuing.
There were just over 2 million farms and ranches in the US in 2017. That total is down more than 3% since the previous census conducted in 2012.
The amount of farmland fell 1.6% to 900,217,576 acres, while the average size of farms in the US increased from 434 acres in 2012 to 441 acres in 2017.
These statistics show why the farmland market can be incredibly competitive right now. This likely will be an advantage for anyone looking to sell quality land.
Who is buying farmland now?
Recent farmland value surveys from Iowa State University Extension and Outreach show that while sales of farm property have slowed, there are still plenty of trends that you should be aware of that paint a better picture of who may be interested in buying farmland.
According to respondents in the most recent survey from December 2019, most farmland sales, 72%, went to existing farmers. Most of those farmers were local. The next-highest buyer category is investors at 21%.
In Illinois, an even more recent survey from this year showed that investors were gaining ground there with 59% of the buyers being local farmers and 35% being investors.
Now that you have an idea of who may be interested in buying your land, let’s get to our tips on making the process much easier to handle.
1. Put in the research beforehand
As with any major decision regarding your farm, having as much information on hand as possible is absolutely vital to making sound decisions and knowing how best to proceed. Selling farmland is certainly one of the moments when there is no such thing as having too much information.
Gathering that information, through research and due diligence, takes time, but it will save you and your realtor or other partners involved in the transaction even more time down the road. For example, you will want to double-check and make sure you know who exactly is listed as having ownership of the land.
On top of those issues, you will also need to make sure you know your farmland – and the answers to questions people will have about the property – like the back of your hand. This will involve precise total area, how much of that is used for production, where there is timber, irrigation needs and many other facets of the operation that buyers will want to know.
2. Know what you want to reveal – or not – about your financial situation
Selling farmland to balance the books is common, but it’s not always a reason and message you want to broadcast to neighbors or potential buyers. Certain ways of selling farm property could reveal more information than you want.
An example of this can often be auctions, which some people could interpret as happening because the landowner is going through a financial rough patch. Still, auctions can fetch a very high price for high-quality land.
3. Surround yourself with a strong team
Farm or ranch sales often involve many people from many different areas of expertise. It’s important to build a team of people who you trust will work hard to deliver the deal you want for your land.
Some of the people you may want to add to your team include a CPA, estate planning and real estate attorney, commercial real estate agent, investment advisory and several others depending on your situation.
4. Choose the best broker possible
There are many brokers who specialize in selling agricultural and commercial properties, but you must select wisely whom you work with. The right broker will deliver the best price possible for your land and will help keep the entire transaction process as smooth-flowing as possible.
Look for a real estate agent who will market your property aggressively to get it in front of buyers. You should also choose an agent who understands farm, ranch and rural land. A good real estate agent should be able to answer any questions you or a buyer have about water and mineral rights, environmental topics, land surveys, easements and much more.
Finally, think closely about who may be interested in buying your land. We went into some detail about who is buying farmland above, but take the time to define your own target buyers. The real estate agent you work with should be well connected with those potential buyers.
5. Know the finance and tax issues that affect you
Finance and tax issues. Now there’s a topic worthy of an entire article on its own. There are many different taxation considerations that farmers selling their land need to take into account, including business structure, valuation and tax rates for assets in the sale and tools that can help save money when tax payments must be paid.
There is an excellent farmland selling guide over at land.com that goes into great length on the issues of taxes for various farm business structures. Use that resource, but also be sure to consult with your banker or accountant on issues that could directly affect you and your transaction.
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