The Absolute Best Way to Sell Farmland
Whether your farm has been handed down by family members for generations or you have put in your own hard work on the land throughout your life to pay for it, you likely have a deep attachment to it. So deciding to sell your farmland can be a tough and emotional decision.
What can seem more confusing is that the sale of farmland is not always cut and dried. However, if you've inherited land and have never had an interest in owning or leasing farmland before, selling your family farmland will likely be your most profitable decision.
Regardless of how you decide to sell land that you've inherited, you need to know how to get the best price for the real estate.
What Makes Farmland Unique
Selling a farm is different from selling a home. In fact, it’s not even quite the same as selling other types of rural property or lots. The sale of a farm could include multiple owners, multiple tracts, or multiple assets, such as barns and tractors.
Similar to the traditional real estate market, selling agricultural land requires the right buyer and the right price. But valuing your farm might be difficult. Land prices in your area might not reflect your full farmland value if the properties don’t closely resemble yours. Plus, selling a farm means more than just selling land, and the cost of other assets or value of potential income could drive up your price.
Even the tax implications of selling a farm is different from other land sales. When you sell your farmland, you may owe capital gains tax on the increased value since you originally purchased it. For example, if you bought your farm for $100,000 ten years ago, and sold it today for $200,000. The capital gains tax rate is 20% of the $100,000 increase, so you’d owe $20,000 when you sell.
No matter the reason for selling your farm, it’s important to remember that it’s a complex task. These examples are just a few of the ways selling farms is different from selling other properties.
There are a few different ways you can tackle selling your farm, though. Whether you’re working with a land real estate agent, a land broker, or an auctioneer, you have options to consider to make sure you get the best price for your farm.
The first step to deciding how to sell a farm is to determine if you want to sell it as an entire property or in tracts.
It’s not uncommon for agricultural land to be sold in tracts or parcels. It’s an easy way to break up a substantial property into manageable pieces that are more likely to sell. There’s also an opportunity to make more money when you sell land in pieces. Tracts are often priced differently per acre than entire properties, so you can set an asking price for each that collectively totals more than you’d get selling your farm as a single property.
Tracts not only increase your potential profits but also broadens your buyer pool. You’re more likely to find multiple people willing to buy small acreage tracts than one person who’s looking for a large acre farm. It allows you to cater to individual buyers, which opens up more opportunities to sell off higher total acreages.
To maximize the benefits of selling by tracts, it’s important to work with agents who understand local zoning and subdivision ordinances and have strong relationships with surveyors and other professionals who deal with dividing property. They can help you navigate the process of dividing your land by putting you in contact with the right professionals and ensuring everything is within local guidelines.
When auctioning your farm, you can list all of your tracts at the same time to maximize your chances of selling quickly. You can also set your auction date so you know exactly when each piece will sell with the peace of mind that you’re getting the fair market value for every tract of your land.
Sometimes it’s just easier to sell your farm as a whole. Especially if you have rural real estate with water rights or mineral rights attached to it, selling as a whole can be easier than figuring out how to split those up among multiple buyers.
Although it can be tough to sell a large piece of land, it’s much easier to find one right buyer than it is to find several. Land with high-quality, tillable soil and the promise of producing high yields is highly valuable to other farmers. Plus, you can still sell your farm through a land auction and enjoy all the perks of having a real estate professional handle the preparation, bidding, and closing process for you.
How to Sell a Farm
The two main avenues for selling farm real estate are auction sales and brokerage sales. There are pros and cons to each option, but your decision on which route to go will primarily be based on three elements:
- Timing – How quickly does a sale need to occur.
- The number of parties involved in the ownership structure – Oftentimes multiple parties cannot agree on the best method of sale or even the price.
- The local agricultural land market – Is the market appreciating, steady, or even declining? Changing market conditions can often dictate the best method of sale.
Regarding auctions and brokerage sales, there are some key differences that are crucial to understand.
Auctions are often the best option when it comes to selling a farm because land auctions are red-letter events among those in the farming community. Holding a land auction allows you to reach a wide pool of buyers at once, ensuring you obtain the best possible price.
Auctions are often thought of as synonymous with bargains. However, that is not the case when it comes to farmland auctions. Auction sales are a standard way of selling farmland due to high-quality competition. Buyers will come prepared to purchase land for market value prices or prices that exceed market value. Lowball offers are eliminated quickly in the auction setting, and direct competition between buyers in this setting often drives the price beyond market value.
One of the main benefits of a brokerage sale is that it gives you more control over the final price of your farmland. But this comes with a tradeoff. Though a brokerage sale gives you the ability to negotiate with potential buyers about the purchase price, there is no rush for buyers to put in a good offer. In comparison, an auction provides a set date, making buyers eager and ready to put in a good offer — sometimes even above the asking price. If you can't afford or aren’t interested in having your farmland sit on the market for months, then a brokerage sale will not be your best option for selling farmland.
Regardless of which way you go about selling the property, it's always wise to work with a real estate agent who is a land specialist. Land Specialists will already have a firm understanding of what the current local land values are and what the existing pool of buyers consists of. Working with someone who thoroughly understands the local farmland industry is essential when it comes to getting the best price for your property.
Why You Should Consider Auctions
So, why should you consider an auction for selling your farmland? Auctions are often the best option when it comes to selling a farm because land auctions are red-letter events among those in the farming community. Holding a land auction allows you to reach a wide pool of buyers at once, ensuring you obtain the best possible price.
If you need to quickly liquidate your farmland because of a complicated ownership structure of the land or other reasons, a farmland auction will be your best-case scenario. Land auctions create a sense of urgency, while also creating maximum exposure for the property you're selling.
Ultimately, an auction setting gives you more control as a seller. You will be able to set a specific date and time, for the sale of your property, you can set the terms and conditions of the sale, and you can also set a reserve price on your farmland before the auction commences. All the above, coupled with competitive buyers, will ensure that you obtain a premium price for your land under terms you can set.
Weeks Auction Group Can Help
Regardless of how or when you decide to sell your farmland, you need to get in touch with a professional auctioneer or professional land broker before making any major decisions. Preferably, it would be best if you got in touch with both types of professionals to learn the pros and cons of listing your farmland for sale and selling it at auction. A professional can help you understand the process and will have insider knowledge about the local land prices and potential buyers.
Selling your farmland is not something you want to go into alone. Many meticulous details go into selling property that can quickly become frustrating and overwhelming to someone who doesn't thoroughly understand the process. If you want to get the premium price during your farmland sale, then you'll want to consider working with an expert within the industry.
If you're looking to sell farmland in the southeastern United States, a great first step would be to contact the professionals at Weeks Auction Group. Our team has over 60 years of experience in the land selling process both through auctions and traditional sales. We've continually helped sellers and buyers get the results they want without any of the hassles or headaches that can come along with selling property. The farmland selling process can feel overwhelming, but by working with Weeks Auction Group, it doesn't have to be. Contact Weeks Auction Group today to get started on your farmland selling process.