Need help to sell family farm.

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Robert4016
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Need help to sell family farm.

Post by Robert4016 »

As suggested, I have revised the title of this earlier post. Based on comments and received questions I will edit the original submission.


Once again I am asking for your assistance and wisdom.

I own a 50% share in a working farm. There are two other owners (owner one and owner two) which recently inherited 25% each. After some discussion, all three owners have decided to sell. The question is, what is the best method to sell this property.

Background:

I inherited 50% of this property 15 years ago. My sibling inherited the other 50%. For the past 15 years the farm has been leased and the profits shared equally. My sibling passed last year and that 50% share was passed to the children. I now hold 50% and they hold 25% each. A recent appraisal values the land at $1 million. While the farm lease will expire at the end of this year, it is renewable. This is farm land only. There are no buildings on the property. The farm has been used to grow cash crops (corn, beans, wheat).

Owner one (25%) and two (25%) live within commuting distance of the farm.I reside 1500 miles distant. The farm is located in a rural area in Minnesota, one hour from Minneapolis and 40 Minutes from Rochester. Since the demise of my sibling 10 months ago, owner one has been trying to manage the lease. All three parties agree that the farm should be sold. I have no pressing need for the money. Owner one and two have stated that there is no pressing need either. None of the three owners have experience in farm sales.

Owner one views the farm as found money and is apt to accept the first offer, this has been expressed verbally. Owner two is only concerned about what to do with the proceeds. I would like to sell at a price that is close to the recent appraised value of $1mil. The farm should be sold before the next planting. Owner one does not want to expend much effort in the sale process. Owner two just wants to be told what is happening.

Concerns:

How do you sell a farm from long distance? Do you hire an agent? If so, how do you evaluate an agent? What is the customary fee for the agent and what service should I expect from the agent?

Can I manage the farm sale from long distance? I have already contacted the renter and am awaiting a purchase proposal. We are willing to accept take a lower amount if sold to the lessee. How will I evaluate this proposal?

The owners will be meeting late July to discuss the issue and hopefully prepare an action plan. I am asking the wonderful BH members for comments on what I should do.

While these comments may be out of sequence, I will attempt to answer each question received to date.

The appraisal is current. It was performed by a licensed appraiser that is knowledgeable in the area. It is very comprehensive.

There is no need to expedite the sale. My estimate is one year from today. None of the owners say they need an urgent sale.

I agree with the need for a discussion among the owners. This will be conducted late July. All parties are agreeable and there is no conflict. At this late July meeting, all owners will evaluate the situation and develop a disposal plan.

I agree that the lessee has been faithful and deserves a price consideration. This will be discussed at the owners meeting.

There are no conservation easements on the property. I think the land is too large for a gentleman farmer. It is a production farm.

The current lessee has been contacted. He is the most likely buyer and is preparing a purchase proposal.

Good point about the title structure. I have it in a trust but will have to check with the other owners. Thank You. The title should be clear but I will verify.

I have always be apprehensive about auctions but I will certainly look into this. I appreciate you mentioning this.

Once again the BH have come through. You have helped tremendously and I certainly appreciate it. My DH thinks you are fantastic. I will use all received and addition comment to develop an action plan. It may take a while but I will inform you of the outcome.


Thank You
Last edited by Robert4016 on Tue Jun 27, 2017 5:33 pm, edited 1 time in total.
Doohop65
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Re: Problems with sale of property. Please help.

Post by Doohop65 »

You have a variety of options that shouldn't cost you a great deal of money.

I assume this is a working grain farm which makes the sale much easier than a cattle operation.

Without knowing your location I will offer some insights based on my location(Midwest). Given you have an appraisal in hand I would start with that number.

Search the Environmental Working Group(ewg) website for grain subsidies in the counties surrounding your farm. Identify the top 15-20 largest subsidy recipients. This will be the easiest way to find your buyer pool.

I would suggest finding a good real etstate attorney to help with the next part. They can help craft an appropriate letter to solicit offers based on a minimum offer above your appraisal. If your land is in a high Ag area this will get you several offers.

Your attorney will be able to help with your local due diligence and contracts.

There are other options including land auctions, real estate agents, etc but the option I suggest is highly effective and low cost if you are in the right area.

Good luck.
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Pajamas
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Re: Problems with sale of property. Please help.

Post by Pajamas »

There are usually real estate agents who specialize in farms, timberland, or other large acreage properties in an area as opposed to houses or regular commercial properties. Since you are selling long distance, that might be your best bet.

You can identify those agents through a Google search for "farm sales XXXXX county".
not4me
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Re: Problems with sale of property. Please help.

Post by not4me »

1st, be thankful you have a better situation than if the 3 of you were at odds on the various things you mentioned!

All real estate is local -- meaning that the better approach depends on lots of local considerations. Some areas of farms are doing better than other areas. Some are closer to bigger towns/cities than others, etc. But, you can most certainly handle from 1500 miles away; especially since you have 2 partners reasonably close.

Have you read the 'recent' appraisal? Farms of a certain size require a more specialized appraiser (not that other commercial property doesn't also). They often (or at least frequently) will indicate how quickly a willing buyer could be obtained for the price they appraise at. Looking at the comparisons they use to determine the price should give you an understanding of how to evaluate an offer.

After reading the appraiser, I'd call them & ask any clarifying questions, but also ask them for suggestions. They will have dealt with buyers, etc in that area. I would also call the Farm Services Agency for that area. They are a US government office that deals with farms daily & may be able to suggest contacts. I would ask about a good banker. Bankers in those areas lend money annually to farms & often know who is on lookout for land etc. They may also be able to point you toward a farmers cooperative that would offer help.

These folks may suggest a good lawyer or real estate agent, but otherwise I personally would defer that unless you get a strong, personal recommendation. Some of them are good -- some aren't. Some may suggest you need to consider options such as developing, etc.

You may also need to be thinking about how important it is to you that it be "done" before the next planting. I would expect that you can negotiate a transition in the case it isn't.
psteinx
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Re: Problems with sale of property. Please help.

Post by psteinx »

I would suggest you amend the thread title. At a minimum, say it's farm property - ideally be more specific on the kind of farm and at least general location. I would venture that the vast bulk of property discussions on this forum are about residential or perhaps standard commercial property, and without more specificity, those with farming knowledge might bypass this thread. And search this forum for past threads on buying and selling agricultural property.

(I am not a farmer, FWIW.)

So the property is worth in the neighborhood of $1M, and your chunk is worth ~$500K, and the other owners are not likely motivated to get top dollar in a sale. I would offer the somewhat unfounded speculation that the difference between net realized price from doing it right versus doing it fast and easy might be 10% or more - so $50K+ for you, and a big chunk for your co-owners/nieces/nephews, too. Unless you are quite wealthy, this is likely a large sum for you. So I would be prepared to invest some time and money in doing this right.

First, you should have some discussion with the other owners about general approaches, who will be in charge of the sale, target costs of the sale, and to what extent your own costs (should you lead the charge) can be deducted from the gross. i.e. If you spend $5K out of pocket, will they allow you to deduct that from the total sales proceeds, or would you fund that basically out of your own share. Obviously, brokerage fees or auction fees or the like should be deducted from the gross for the whole farm, but there may be specific costs that you incur - particularly personal travel. It may be simpler or more harmonious just to eat these yourself, especially if the part-owner who has been managing the property for a time has not been charging anything to the other co-owners for his/her efforts and perhaps, modest expenses.

Yes, do research on the internet, make phone calls in advance, and so on. But you might find it useful at some point before you go too far in the process to schedule a trip to the location in question. It will cost a bit, and take some time, but again, the amount in question is enough to make this worthwhile for most folks. I think you can get a better feel for things being on-site, and directly interacting with various locals, than you would doing it long distance. You can also look at the property with fresh, seller's eyes, and compare it to other properties in the area, especially those that are for sale or have recently sold. You could also sit down face to face with the other owners. Being on-site may also give you more ideas for how these kinds of things are done, versus trying to work at a distance.
Last edited by psteinx on Tue Jun 27, 2017 3:40 pm, edited 1 time in total.
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bigROI
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Re: Problems with sale of property. Please help.

Post by bigROI »

I would try to avoid an agent for this sort of sale. If they are trying to get 6% you will toss 60k to them. If the suggestion of contact to the top 10-15 subsidy receivers in the region yields no offers or bids then maybe a flat fee listing might be something more economical and spend some on the proper RE attorney to be sure its all done well. I would let the current lessor know that you will be considering bids when you look for thier offer. Sometimes in the farming community an obligation is felt to give a good deal to a person paying cash rent over the years. This is up to you and the other owners, I would look purely at the value and soundness of the offers you receive.
A penny saved is much more then a penny earned when you consider the tax/SS/medicare cut.
EagertoLearnMore
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Re: Problems with sale of property. Please help.

Post by EagertoLearnMore »

Is there a conservation easement on the farm? People sell the rights to ever develop the property in exchange for a cash payment. If so this would mean that the farm must be used as a farm and development of the land is restricted.

There are realtors that specialize in land and especially farms, whether for gentleman farmers or farmers that intend to heavily use the farmland.
not4me
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Re: Problems with sale of property. Please help.

Post by not4me »

Several good suggestions & I'll throw in some added thoughts. There are several things like conservation easements which could affect the sale & would have to be disclosed to the buyer. They should have been addressed in the appraisal -- again a good starting point. The FSA office will know most of them as well.

You implied that your brother had been managing the property; would he have passed along to "owner one" any info that might indicate others he considered as renters? possible previous offers to buy? Neighbors who have been helpful in the past? How long has current renter been working this farm? To me, the current renter is the most likely candidate IF they have the financial means to do so & it fits in their farming operation. Assuming they want to continue working the land, they also have a vested interest in getting the "right" buyer. If the current renter offers you close to the appraisal, then in interest of family harmony & your time, you may be well served to take it (or minimally negotiate it). Contacting the "big players" first is fine, but they may start low on price. Again, if it is close to the appraisal, it could be quick. Without knowing the buyer 1st though, you'll still be left wondering if they are coming in low.
not4me
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Re: Problems with sale of property. Please help.

Post by not4me »

One more item on using EWG as a source. It may still be something to check out, but I was intrigued enough to get on it & see what it would say about a couple of specifics I was familiar with. Keep in mind this was very limited sample. What I found was the entity that received the subsidy -- for example, 'irrevocable trust for John Doe heirs'. It organizes them by the mailing address. I found one friend of mine showing up a few hundred miles from what used to be his family farm. The data was cumulative through 3 years ago & he made the list because of farming over a decade ago. His name stuck out since he's been dead for so several years!! The site has several disclaimer footnotes about the accuracy & usefulness & I quickly understood why.
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lthenderson
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Re: Problems with sale of property. Please help.

Post by lthenderson »

I live in the Midwest. I too would avoid real estate agents unless it was negotiated for a flat fee versus a percentage of the $1 million assessed value. Unless it is something specialty related, the top dollar and probably easiest method to sell land is through a land auction. You contact your local auctioning service in the area, found by reading the classified for other land auctions in the area, and discuss the details. For something like that, they typically have a flat fee (much lower than real estate agents) that covers advertising and the actual auction services. They generally advertise a couple months in advance to get word out to all neighboring farmers which are most likely going to be the most interested individuals. The day comes and the auction is over. Generally here they expect a down pay published % downpayment the day of the auction and sign a pre-approved contract. Usually 30 to 60 days later the balance of the money is due to the seller.
staythecourse
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Re: Problems with sale of property. Please help.

Post by staythecourse »

First and foremost the biggest question is: How is the title structured? That will ultimately determine how you can legally sell the property.

Common sense tells me the options are mostly: 1. Hire a real estate agent and get a price all agree on and sell, 2. Find a buyer yourself an get a price all agree on and sell, or 3. If there is disagreement on selling price buy out the other two folks at a fair assessed market value and then sell it yourself when you get a price you want.

The MOST important thing I would recommend is DON'T cause problems. A 10-20k this way or that is not going to matter in the end if it means fracturing/ straining family relationships.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
knightrider
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Re: Problems with sale of property. Please help.

Post by knightrider »

I am not sure how it was appraised, but be prepared for a big shock when you find nobody wants to buy your business for anything close to $1m. From my experience, people don't want to buy a job, which is what a business is. Your inventory might be worth something. Just my two cents. I have seen far too many business owners with inflated sense of their business's worth. Since you've never sold a business, this is something to consider.
Doohop65
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Re: Need help to sell family farm.

Post by Doohop65 »

There is a large difference between selling a true business and selling the acreage from a farm. If the appraiser is worth anything at all they should be close if the majority of the farm is land value.

I would suggest there is no need for a home town discount to the current renter. You may consider giving them the last option to purchase but that would be it.

If you find yourself looking at the auction route here a few tips. You can and should set a reserve before the auction begins or reserve the right to accept or reject any and all bids. This protects you in the event the auctioneer does not do a good job for you. More than one auctioneer has left an auction owning what he was selling for a tidy profit.

The other thing to note is buyers paying the commission on top of the sale price is getting to be more common. If you go the auction route you will want to see about going that route to save you the commission.
not4me
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Re: Need help to sell family farm.

Post by not4me »

Sounds as if you are well on your way! I think a 1 year estimate is reasonable (without really knowing that local market). If the current renter comes through with a solid bid, it may be much easier. However, if that doesn't seem to be the case, you may want to give added thought to the lease agreement for 2018. Certainly, think through what a mid-year sale might mean. But also realize that some may use rent as a rough equivalent for "yield". That is, looking at the purchase as an investment, they'll get some $ from rent & also (hopefully) appreciation on the value of the land. The FED will have research papers talking about the farm economy, pressure on cash rent from low commodity prices, etc should you feel the need to brush up on that
4ransom
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Re: Need help to sell family farm.

Post by 4ransom »

Go to the court house and look what look up what similar farmland has sold for in the last few years; it should be in the public record, I know it is in the state I live in. I have seen some good appraisals and some that are ridiculous.
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dm200
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Re: Need help to sell family farm.

Post by dm200 »

I inherited (much smaller scale) half of the family farm (about 120 acres) with my brother when my father died. I live a long distance away, but my brother lives there and took care of the matter. At the time of my father's death, the land was rented to a neighboring farmer - so it was simplest (and best, in our opinion) to sell to the farmer who was renting.

If the current renters are good, then (after an independent valuation) I would lean towards a sale to them - at a good, but fair, price. Perhaps, since there seems to be no urgency of getting all the cash immediately, on some stretched out basis.
alex_686
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Re: Need help to sell family farm.

Post by alex_686 »

Robert4016 wrote:While the farm lease will expire at the end of this year, it is renewable.
There are specific laws in MN that you are going to have to bone up on. I forget the exact time period but one has to give the tenant farmer a huge time frame when terminating a lease. I think you have to give notice about now if you want to terminate the lease for the 2018 planting season.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Pajamas
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Re: Need help to sell family farm.

Post by Pajamas »

alex_686 wrote:
There are specific laws in MN that you are going to have to bone up on. I forget the exact time period but one has to give the tenant farmer a huge time frame when terminating a lease. I think you have to give notice about now if you want to terminate the lease for the 2018 planting season.

That is another good reason to use a broker who specializes in farms and other large land holdings.
mnnice
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Re: Need help to sell family farm.

Post by mnnice »

dm200 wrote:I inherited (much smaller scale) half of the family farm (about 120 acres) with my brother when my father died. I live a long distance away, but my brother lives there and took care of the matter. At the time of my father's death, the land was rented to a neighboring farmer - so it was simplest (and best, in our opinion) to sell to the farmer who was renting.

If the current renters are good, then (after an independent valuation) I would lean towards a sale to them - at a good, but fair, price. Perhaps, since there seems to be no urgency of getting all the cash immediately, on some stretched out basis.
It might not be much bigger Midwest land values are trending down but have been very high in that neck of the woods.

In my experience living where Iowa, Minnesota, and South Dakota converge auction is by far the most common way to sell unless the younger generation is slowly buying out the older one.

There is a Zillow type website for age land, but the name escapes me at the moment. It should show recent sales in the area.
IowaFarmBoy
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Re: Need help to sell family farm.

Post by IowaFarmBoy »

+1 for the auction. In Iowa many times farmland has a March 1 closing date but your auctioneer can fill you in on local customs.
koala
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Re: Problems with sale of property. Please help.

Post by koala »

Doohop65 wrote: Tue Jun 27, 2017 11:32 am You have a variety of options that shouldn't cost you a great deal of money.

I assume this is a working grain farm which makes the sale much easier than a cattle operation.

Without knowing your location I will offer some insights based on my location(Midwest). Given you have an appraisal in hand I would start with that number.

Search the Environmental Working Group(ewg) website for grain subsidies in the counties surrounding your farm. Identify the top 15-20 largest subsidy recipients. This will be the easiest way to find your buyer pool.

I would suggest finding a good real etstate attorney to help with the next part. They can help craft an appropriate letter to solicit offers based on a minimum offer above your appraisal. If your land is in a high Ag area this will get you several offers.

Your attorney will be able to help with your local due diligence and contracts.

There are other options including land auctions, real estate agents, etc but the option I suggest is highly effective and low cost if you are in the right area.

Good luck.
I just came across this old thread and wanted to ask a follow-up question, since I’m currently looking to sell some family farmland.

I’m particularly interested in Doohop65’s suggestion to identify a “buyer pool” on the Environmental Working Group website. I’ve done that and derived a great list of potential buyers that I’d like to contact. Incidentally, I also found useful information on the AcreValue website which saved me loads of time and effort in finding recent buyers and land sale prices in our region.

I’m now preparing to hire an attorney and my questions are:

1) How did you and your real estate attorney handle the solicitation letter and subsequent communications? I’m thinking that we would send out the letter on the attorney’s letterhead stating our minimum offer price, and have the replies sent back to me. And then if I got a good offer, I would reply and then have the attorney handle the rest (i.e., “local due diligence and contracts,” as noted by Doohop65).

2) Are there other details that I should discuss with the attorney in setting up the process?

I hope these questions are not too naïve, but I’ve had almost no experience in real estate transactions.

Thanks very much.
koala
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Re: Need help to sell family farm.

Post by koala »

Thought I'd try this one more time. I'll be grateful for comments from anyone who has dealt with farmland sales.

Thanks.
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PalmQueen
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Re: Problems with sale of property. Please help.

Post by PalmQueen »

koala wrote: Thu Jul 19, 2018 10:36 pm
Doohop65 wrote: Tue Jun 27, 2017 11:32 am You have a variety of options that shouldn't cost you a great deal of money.

I assume this is a working grain farm which makes the sale much easier than a cattle operation.

Without knowing your location I will offer some insights based on my location(Midwest). Given you have an appraisal in hand I would start with that number.

Search the Environmental Working Group(ewg) website for grain subsidies in the counties surrounding your farm. Identify the top 15-20 largest subsidy recipients. This will be the easiest way to find your buyer pool.

I would suggest finding a good real etstate attorney to help with the next part. They can help craft an appropriate letter to solicit offers based on a minimum offer above your appraisal. If your land is in a high Ag area this will get you several offers.

Your attorney will be able to help with your local due diligence and contracts.

There are other options including land auctions, real estate agents, etc but the option I suggest is highly effective and low cost if you are in the right area.

Good luck.
I just came across this old thread and wanted to ask a follow-up question, since I’m currently looking to sell some family farmland.

I’m particularly interested in Doohop65’s suggestion to identify a “buyer pool” on the Environmental Working Group website. I’ve done that and derived a great list of potential buyers that I’d like to contact. Incidentally, I also found useful information on the AcreValue website which saved me loads of time and effort in finding recent buyers and land sale prices in our region.

I’m now preparing to hire an attorney and my questions are:

1) How did you and your real estate attorney handle the solicitation letter and subsequent communications? I’m thinking that we would send out the letter on the attorney’s letterhead stating our minimum offer price, and have the replies sent back to me. And then if I got a good offer, I would reply and then have the attorney handle the rest (i.e., “local due diligence and contracts,” as noted by Doohop65).

2) Are there other details that I should discuss with the attorney in setting up the process?

I hope these questions are not too naïve, but I’ve had almost no experience in real estate transactions.

Thanks very much.
I recently completed the sale of farmland.
The best advice I received about the process (from multiple sources) was never share your minimum price with anyone.

We sold using a public auction and the auctioneer didn't even want to know our minimum price in advance. The terms of the auction included a statement indicating that the seller reserved the right whether or not to accept any offer. The term for this is that the auction has a "reserve" as opposed to "no reserve". The auctioneer had a team at the auction. When I felt our reserve was met, I let them know. At that time the auctioneer announced "I have permission from the owner to sell at the current bid or higher."

The method of sale depends on several factors including the quality/desirability of the land. I would discuss this with the attorney and also speak with auctioneers in the area. Auctioneers are also usually appraisers and real estate agents, so they handle all types of transactions and would know which would be appropriate for your property.

Something similar to what you're describing (which would probably bring a higher price) is an invitation auction. It's done over the phone at a set time. You identify prospective buyers, contact them and then at a set date/time your attorney or auctioneer phones them in a certain order and they bid over the phone.

I fear you may short-sell yourself by going the do-it-yourself method ("when I get an offer I like, I'll turn it over to the attorney"). Real estate is complex and in my experience professionals have always earned their fees. Attorneys are great for handling the closing, but I'd recommend finding someone who specializes in finding buyers and closing deals first. Your attorney can no doubt recommend someone who can do that for you.

Another way to find a farmland real estate professional is to call the local banks in the community where the property is located. They can tell you the names of the appraisers they use who can also connect you with auctioneers/realtors.
koala
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Re: Need help to sell family farm.

Post by koala »

Thank you for the very helpful comments, PalmQueen.

I’ve gotten mixed feed-back about auctions, but it sounds like yours was successful. One problem, I’ve been told, is that an auction that doesn’t make a sale raises a “red flag” over your property, at least among local potential buyers. In any case, Ill definitely discuss this approach with our attorney, who should be able to recommend auctioneers. The invitation auction is particularly interesting, since I’ve already identified a pool of potential buyers.

Your advice about not revealing a minimum price is well taken. This is probably a novice’s first mistake, which I will certainly avoid. I’ve learned enough about the complexities of real estate to know that I don’t really want to take a complete DIY approach. I will definitely rely on the professionals to guide me through this. Finding real estate people through the local banks sounds like a good idea.

Thanks again.
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PalmQueen
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Re: Need help to sell family farm.

Post by PalmQueen »

You're on the right track in doing your research. I'd be skeptical about limiting myself to the pool of potential buyers you've identified though.
The local auctioneers/realtors also have their own lists of probable buyers which could be added to yours. There's another type of auction where it's advertised publicly, but rather than a live auction, interested parties register and the auction is conducted over the phone.

The best sales method is dependent local customs and characteristics of the property. A good auctioneer/realtor can advise you which route will work best for your situation.

Have you sorted out other issues such as timing of the sale and providing legally required notification if someone has been leasing the property? Different states have different requirements on giving notice. Each community has their own norms regarding times of year when farmland is sold.
koala
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Re: Need help to sell family farm.

Post by koala »

Thanks for the additional advice, PalmQueen. I agree that we can probably expand the potential buyer pool. I have the names of several auctioneers that I can contact for opinions about the best approach, including the phone-in auction which sounds like an efficient way of doing it.

I have an annually-renewed lease with a local farmer who cash-rents the land. He is aware that we’re looking to sell the land and is protected by a clause in the lease allowing him to complete his cropping operations if we sell. I’ll discuss this with our attorney to be sure we abide by state and local laws.

Your comments have been very helpful. Any others are also welcome.
Doohop65
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Re: Need help to sell family farm.

Post by Doohop65 »

Koala,

Sorry for the delay, I have been on vacation and away from communication. You have received some good advise on not sharing your number with anyone.

If you decide to go the auction route keep in mind auctioneers are not to be trusted. They provide a valuable service but are one step below used car salesman....if they are talking they are lying. They look out for themselves first,second, and third.

If you decide to go with the solicitation letters it really is as simple as providing a description of what you are selling with a timeline for getting their bid back. I would send it yourself and skip the lawyer letterhead.

Depending on your need to sell I may suggest you wait on your sale. Commodity prices are depress and talking to an AG banker friend of mine prices have come down substantially. If you are looking to maximize your sale price you may with to consider waiting until corn prices go back up $5 per bushel. You will be rewarded for your patience.

Let me know if you have further questions.
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PalmQueen
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Re: Need help to sell family farm.

Post by PalmQueen »

Doohop65 wrote: Tue Jul 31, 2018 9:20 am Koala,

Sorry for the delay, I have been on vacation and away from communication. You have received some good advise on not sharing your number with anyone.

If you decide to go the auction route keep in mind auctioneers are not to be trusted. They provide a valuable service but are one step below used car salesman....if they are talking they are lying. They look out for themselves first,second, and third.

If you decide to go with the solicitation letters it really is as simple as providing a description of what you are selling with a timeline for getting their bid back. I would send it yourself and skip the lawyer letterhead.

Depending on your need to sell I may suggest you wait on your sale. Commodity prices are depress and talking to an AG banker friend of mine prices have come down substantially. If you are looking to maximize your sale price you may with to consider waiting until corn prices go back up $5 per bushel. You will be rewarded for your patience.

Let me know if you have further questions.
I second Doohop65's suggestion regarding consideration of crop prices. Farm income is taking a hit in the corn and soybean belt.
koala
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Re: Need help to sell family farm.

Post by koala »

Doohop65 and PalmQueen,

Thanks for the input. I know that commodity prices are down, but I’ve been seeing rising land prices over the past couple of years in my region. Recent farmland sale prices have been high enough that we think it would be worthwhile to try and sell.

I’m using the solicitation letter approach recommended by Doohop65, and am planning to mail the letters myself. I contacted a lawyer, but I’ll probably use his services only for any sales transactions. If this approach doesn’t give satisfactory results, we’ll probably consider an auction.

With regard to revealing the price, the lawyer noted that giving no asking price in the solicitation letter will invite very low bids, while asking an inflated price will probably scare off potential buyers. I guess if only low bids come in, I can try to negotiate the highest ones up to my desired price. I’ve derived what I consider to be a fair price, and was thinking of adding 10-15% to that as an “offering price” in my letter. Do you think that would be a mistake?
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lthenderson
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Re: Need help to sell family farm.

Post by lthenderson »

koala wrote: Thu Aug 02, 2018 5:06 pm With regard to revealing the price, the lawyer noted that giving no asking price in the solicitation letter will invite very low bids, while asking an inflated price will probably scare off potential buyers. I guess if only low bids come in, I can try to negotiate the highest ones up to my desired price. I’ve derived what I consider to be a fair price, and was thinking of adding 10-15% to that as an “offering price” in my letter. Do you think that would be a mistake?
I personally would leave the price off the solicitation letter as the farmers in the area who are the most likely potential buyers will be well versed in what land prices are going for in the area and you definitely risk scaring some off by over asking. The key to getting the best price selling is to find two or more farmers in the area who are actively trying to buy land. Land close enough to farm isn't an abundant commodity and can't be moved closer so if two (or more) farmers in the area are looking to expand and the location is attractive to both, that is when the price starts going up.

Also, I disagree with the person above who stated that auctioneers only lie and are beneath car salesmen. In this situation, I think the best person to ask on who the above mentioned farmers who are actively looking to expand their land holdings would be an auctioneer who auctions farmland. It is in their interest to sell the land for the highest price (working on commission) and they would know exactly who has been bidding on land in the area and who hasn't.
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PalmQueen
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Re: Need help to sell family farm.

Post by PalmQueen »

lthenderson wrote: Thu Aug 02, 2018 5:38 pm
koala wrote: Thu Aug 02, 2018 5:06 pm With regard to revealing the price, the lawyer noted that giving no asking price in the solicitation letter will invite very low bids, while asking an inflated price will probably scare off potential buyers. I guess if only low bids come in, I can try to negotiate the highest ones up to my desired price. I’ve derived what I consider to be a fair price, and was thinking of adding 10-15% to that as an “offering price” in my letter. Do you think that would be a mistake?
I personally would leave the price off the solicitation letter as the farmers in the area who are the most likely potential buyers will be well versed in what land prices are going for in the area and you definitely risk scaring some off by over asking. The key to getting the best price selling is to find two or more farmers in the area who are actively trying to buy land. Land close enough to farm isn't an abundant commodity and can't be moved closer so if two (or more) farmers in the area are looking to expand and the location is attractive to both, that is when the price starts going up.

Also, I disagree with the person above who stated that auctioneers only lie and are beneath car salesmen. In this situation, I think the best person to ask on who the above mentioned farmers who are actively looking to expand their land holdings would be an auctioneer who auctions farmland. It is in their interest to sell the land for the highest price (working on commission) and they would know exactly who has been bidding on land in the area and who hasn't.
Good advice lthenderson! I'm in total agreement with everything said above.
chedv
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Re: Need help to sell family farm.

Post by chedv »

As a corn farmer, please tell me when this will be so I can better position my farm. :D

The corn price is no different than trying to time the stock market. From my viewpoint, the US is producing another record corn crop which will further depress the corn price. If the ethanol mandate was ever reduced, the price would plummet.

If at all interested in selling, I would advise to sell now. I believe land prices are still inflated because of the prior boom years.
PalmQueen wrote: Tue Jul 31, 2018 10:34 am
Doohop65 wrote: Tue Jul 31, 2018 9:20 am Koala,

consider waiting until corn prices go back up $5 per bushel. You will be rewarded for your patience.
I second Doohop65's suggestion regarding consideration of crop prices. Farm income is taking a hit in the corn and soybean belt.
koala
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Re: Need help to sell family farm.

Post by koala »

Interesting comment, chedv. From what I’ve seen, farmland has been selling at reasonably good prices lately in our region, so it looks like a good time to sell.

Market timing, including commodity markets, is way beyond my pay grade!
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lthenderson
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Re: Need help to sell family farm.

Post by lthenderson »

koala wrote: Thu Aug 02, 2018 9:34 pm From what I’ve seen, farmland has been selling at reasonably good prices lately in our region, so it looks like a good time to sell.
Most articles I have read say that land prices here in the Midwest have stabilized after a couple years of decline.

http://www.startribune.com/minnesota-cr ... 476500293/
niceguy7376
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Re: Need help to sell family farm.

Post by niceguy7376 »

I am an immigrant whose family is in agriculture in our Home land. I would love to own some farm land for emotional reasons but cant think of the 100 plus acres lots.

In general, what would be the annual income of the OPs land (200 acres near Minneapolis) from the farmer/business that is growing crops on that land?
Is that dependent on the crop prices and the yields or a fixed amount irrespective of how much the farmer makes?
not4me
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Re: Need help to sell family farm.

Post by not4me »

niceguy7376 wrote: Fri Aug 03, 2018 9:11 am I am an immigrant whose family is in agriculture in our Home land. I would love to own some farm land for emotional reasons but cant think of the 100 plus acres lots.

In general, what would be the annual income of the OPs land (200 acres near Minneapolis) from the farmer/business that is growing crops on that land?
Is that dependent on the crop prices and the yields or a fixed amount irrespective of how much the farmer makes?
It is dependent upon several factors. The US Dept of Agriculture has just put out an annual look at cash rents & as an aggregate for Minnesota the rent was $166-$192 per acre for cropland. That variation being largely whether the land is irrigated or not. Pasture land is much less. That is income & not net of taxes, etc. Other times of the year they will also have it at a county level. That is, don't consider those numbers as the highest & lowest, but broad averages across a state, crops, etc

In addition to "cash rent", some arrangements use "crop shares" in which the owner gets a percentage of that years crop. Of course, this is all negotiated between the owner of the land & the one working the land. Some land is better than other, etc so there will be much variation. The Dept of Ag and also the Regional Federal Reserve Banks have much info that you can look into. Also, most states will have universities that work with agriculture & they also produce data.
not4me
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Re: Need help to sell family farm.

Post by not4me »

koala wrote: Thu Aug 02, 2018 9:34 pm Interesting comment, chedv. From what I’ve seen, farmland has been selling at reasonably good prices lately in our region, so it looks like a good time to sell.

Market timing, including commodity markets, is way beyond my pay grade!
Thought I'd chime in on the timing. There is at least one big reason that timing farmland is even harder than timing the stock market -- liquidity. If you are basing a buy decision off commodity prices, you need to look not at todays price, but the price in (at least) 12-18 months out. Its also quicker to sell stock than land. Plus, all real estate is local. All shares of one companys stock are the same, but one acre of land is pretty much never the same as another acre.

Koala, along those lines I wish you the best with your solicitation letters. I hope you've determined that approach works in the area that you are interested in. I don't have any insight into sending those, but I do in receiving them. If they don't work out for you, don't get discouraged as there are other approaches to try. Good luck!
BIGal
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Re: Need help to sell family farm.

Post by BIGal »

I inherited some farmland in IA and SD. I cash rent without any problems. It may take some research and investigation to manage the property from a distance but it isn't impossible by any means. Maybe you should consider buying out the other 50%. Once the golden goose is gone, so are the golden eggs. I would certainly consider all options rather than just selling. My 2 cents.
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TierArtz
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Re: Need help to sell family farm.

Post by TierArtz »

My sister and I inherited a section of farmland in the Midwest. I grew tired of dealing with an operator/renter we did not know from 900 miles away, so we turned the farm over to a management company. They will get roughly 10% of the income, plus a base fee, but I figure a little local management expertise/oversight, and grain marketing skill, could easily pay for that.

We have been very pleased with Farmers National Company so far: https://www.farmersnational.com/

They also sell farmland, and the local agent would know which operators and owners were looking for more land.
J295
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Re: Need help to sell family farm.

Post by J295 »

In my professional life before retirement I was involved in sales of a wide variety of assets, including farmland.

If I were in your situation I would do some due diligence on potential ag real estate agents/auctioneers, then hire one. I would absolutely not take this on as a do it yourself project.
koala
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Re: Need help to sell family farm.

Post by koala »

This is what is so great about this forum. The diversity of viewpoints and opinions really makes you think through a problem. It’s sort of like an academic seminar!

I don’t know if the solicitation letter approach will work, but we’re prepared to give it a try under advisement of a real estate lawyer. We have an acceptable price in mind, but will not state it in the letter. If no one is willing to meet our price (or close to it), we won’t sell. Our next step would then probably be an auction at a later date, depending on land price trends.

I’ll report back here later with a progress report.

Thanks again to everyone for the great discussion. I’ve learned a lot.
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dm200
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Re: Need help to sell family farm.

Post by dm200 »

It has been a long time since I left the family farm. Back 50+ years ago, where I grew up - our family farm of about 120 acres was able to be "profitable". Now, it would not be. After my father's death - we sold the land to a neighbor - who had much other land and it fit into his system.

The value of small farms is often very dependent on how that land fits with potential buyers.
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