August 16, 2019
Five Mistakes to Avoid When Selling Your Land
Selling farmland can be a difficult and stressful process as landowners are inundated with a seemingly endless list of tasks, paperwork, and financial decisions.
Selling farmland requires specialized knowledge about how to value agricultural land and how to communicate that value through effective marketing to farmers and farm investors. All of this complexity can easily lead to mistakes that cost landowners significant amounts of time and money.
In this post, we’ll discuss how to avoid five of the most common mistakes landowners make when selling farmland.
1.) Incorrectly Valuing Farmland
The first thought most landowners have when they consider selling their property is “what is my land worth?”
Naturally, landowners want to make sure they’re getting a fair price on what is likely going to be the largest financial transaction of their lives, but often don’t know how or where to begin.
Setting aside the prospect of potential commercial or residential development, which can require a lengthy development planning process, dealing with zoning issues, and a substantial amount of capital investment, most farmland will be sold for an agricultural purpose.
Valuing agricultural land requires the seller to understand what drives fundamental value in farm prices.
This often includes researching local soil quality, water rights, and historical crop yields. You can learn more about valuing farmland in our two part series on the subject.
2.) Overlooking the Details
Farmland buyers have very specific interests and considerations when evaluating a property, as discussed above in Mistake #1 - make sure that your listing speaks to all of those concerns.
Does your property have a well? Has it been precision leveled? How does your farm’s productivity and past crop yields compare to the county averages?
These details all inform the price of agricultural land and help a buyer get a sense of your property beyond just looking at a tract map.
Be specific and detailed in your property description and always include high-quality photographs when possible.
3.) Forgetting the Paperwork
Speaking of tract maps, many landowners don’t maintain current maps or other relevant paperwork for their property.
If a potential buyer calls to ask about your land, you don’t want to ask them to wait while you go searching for surveys, government records, and old photographs.
For a complete list of the information we recommend gathering on your farm, you can download this useful checklist of documents that could help you sell your farm.
4.) Choosing the Wrong Buyer
Land owners should take the time to consider what kind of buyer they are looking for.
As a general rule, sellers should always check to make sure their prospective buyer is qualified and has the means to complete the transaction before spending too much time on any lead.
If you are expecting an all-cash transaction, be prepared to discuss this with buyers who inquire about seller-financing of your land. An all-cash buyer can often complete the transaction in a more-timely manner without having to arrange debt with a lender.
Sale-leasebacks are becoming increasingly common for farmers who desire to continue producing on their farm but want to access cash that was previously tied up in their land.
In addition to leasebacks, some buyers may also include a right of first offer on any resale of the land they purchase from you. These flexible buyer agreements can be a great advantage to landowners, and are hard to put a monetary value on.
If you’re interested in a leaseback or right of first offer, be sure to include that in your discussions with potential buyers.
5.) Confusing Assets with Liabilities
For obvious reasons, farm owners may expect that the old home, barn, or other structures on their property will increase its value.
Unfortunately, many farm structures are often seen as more of a liability than an asset by potential buyers. That old barn may need to be torn down, for example, and renting out a home or dwelling can be difficult in rural areas with few prospective tenants.
When listing your farm, you should certainly highlight any structures on the property, but keep in mind the complexity these assets can add when developing your asking price.
Selling land is a major decision, but landowners can save themselves time and trouble by avoiding these five common mistakes when selling their property.
AcreTrader’s experienced professionals deal with these transactions every day. Speak with us to discuss how we can help you with your property and connect you to thousands of potential buyers.
Please note: this article is meant to be a topical overview and, as such, does not include specific financial advice. Every situation is unique, and you should consult with a licensed attorney, accountant, and/or financial advisor prior to entering any written contract or verbal agreement.
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