Below are five major considerations to review and think about before listing your farmland for sale.
- Ownership - The first item to consider when listing and selling farmland is who legally owns the property. Oftentimes land may be the sellers but has never been correctly transferred. An example could be land owned by deceased parents. Probate has never occurred therefore the land legally is still owned by the deceased parents. This is an easy fix but could ruin a sale if not handled before placing the property on the market. Other ownership issues arise with heir property. Grandpa verbally left the land to the first born son and that son left the land to his first born son. Due to the lack of a written will all of Grandpa’s children and their descendants have equal ownership in the property. Ownership issues that cloud title need to be resolved before selling the property. Sellers should seek legal counsel experienced in property ownership.
- Plans for Use of Sale Proceeds - Before listing and selling an owner should define their goals for the sale. Is the seller planning to sell and buy other land? Will the sale proceeds be used to buy other types of assets such as securities, bonds, precious metals, etc.? Will the sale proceeds be used primarily for personal consumption or some mixture of the above? Sellers should seek a certified public account to discuss their sale and tax implications regarding different uses of the sale proceeds.
- Time Frame for Selling - Sellers must determine their timeframe for listing and selling. This should be determined in conjunction with determining use of sale proceeds. Depending on the timeframe may change the way a seller markets the property and the aggressiveness of a marketing campaign.
- Environmental Consideration - Preventing environmental issues is the best approach but issues may arise when selling property. Underground storage tanks, agricultural chemical barrels, and oil drums all could cause a property not to sale. Old tires, trash dumps, or old building sites could also be an issue. It is important to review and clean up any environmental issues appropriately before listing and selling. The best approach is to have documentation of property clean up is to hire an environmental engineer to oversee correct clean up.
- Encumbrances - Oftentimes encumbrances are not disclosed before a sales contract is entered. Not disclosing could cause an agreement to fall through. Encumbrances are not ownership interest but are duties owed to a third party. Examples are easements, deed restrictions, liens, taxes, government contracts, leases, etc. Reviewing property encumbrances before listing is important because they may harm the selling price or ability to sell.
- Hiring a Real Estate Broker - Working with a broker specialized in land such as an Accredited Farm Manager through the American Society of Farm Managers and Rural Appraisers (ASFMRA) or Accredited Land Consultant through the Realtor Land Institute (RLI) will help a seller maximize the sale to meet the goals and objectives. Only land professionals with experience and commitment to professionalism achieve the aforementioned designations. These land professionals find solutions to fulfill clients goals and objectives.