Common Misconceptions in Selling Row Crop Land
Troy Stafford
Minnesota Land Specialist | CPA
In the sales evaluation process, there are number of common misconceptions in selling row crop land that people fear may be completely unfounded as it relates to the sale of said asset. Each situation is different, so there is no one-size-fits-all approach. A professional should always be consulted to address your specific needs. Here are a few examples of such misunderstandings.
1. We cannot sell our farmland as we are under a contract with the grower for the upcoming year or multiple years?
This is a widespread misconception—and it’s not true. Land is frequently sold while under contract for the upcoming or even future years. In most cases, the buyer assumes the rights and obligations of the existing lease. This makes the transition smooth. Rents and property taxes are typically prorated based on a 365-day year and the closing date. For example, in case of a June 30 closing, the sellers would get credit for ½ of the annual rental income and be responsible for ½ of the annual property taxes. As with most terms of any purchase agreement, these terms are negotiable between the buyer and sellers.
2. I inherited this property with my siblings and we cannot come to a consensus to sell therefor my hands are “tied”?
This answer on this situation depends on the type of ownership type (Tenants in Common or Joint Tenants) in relationship your state specific statutes. In some cases, you may be able to sell your undivided interest. The buyer would then become a co-owner with the same rights to the entire property. That said, this can get complicated. A better option may be to get everyone aligned early. An experienced land agent can help guide all parties to a fair and informed decision.
3. My parents (grandparents) went into a nursing home and there is a lien on the farm so I cannot sell it?
This is another common misconception among land owners. The farm can still be sold, and the lien can be paid off at closing, much like a mortgage. This process is relatively seamless as well and has minimal impact on the sales process.
4. Any real estate agent can sell a farm so it really does not matter who I chose to sell it?
Unfortunately this statement is true and profoundly not true in the same vain. Unlike residential agents, land specialists understand key factors like soil types, fertility, tiling, drainage, easements, zoning, government programs, and local markets. These details can make or break a deal. A knowledgeable land agent adds value at every step.
Each and every property is unique and working with a land specialist will add value every step in the process. That also means different approaches sell different properties much more effectively, this is one reason knowledge is so powerful. The right agent also knows which sales method—live auction, sealed bid, or traditional listing—is best for your property. They’ll market your farm with high-quality video, drone footage, and photos to make it stand out to buyers. This ensures you get maximum exposure and the best possible return. You also want to select an agent the produces “top-notch” marketing material inclusive of high quality videos and pictures to ensure that your property looks as good as possible to potential buyers.
At the end of the day, since this is more than likely one your largest lifetime decisions, it is imperative that you find an agent that specializes in land transactions to help you in the preparation work up to and including through the sale. This agent should be someone you trust that is going to work hard on your behalf with your best interest in mind!
Disclaimer: Please note the above information is meant a guideline and should not be considered tax or legal advice. You are encouraged to contact us in addition to your tax accountant or attorney for information specific to your situation!
Do you want to learn more?
If you’re considering buying, selling, or managing land, reach out to a local High Point Land Company Agent today. For more questions regarding land real estate, visit our YouTube Knowledge Center.
Living in the Dodge County area all his life and working on two local dairy farms throughout high school and college gave Troy immense respect for farmers. After seven years in public accounting, Troy has worked in various private industries in both Controller and CFO capacities, including 10+ years working for two different farm supply, producer owned, cooperatives. Mr. Stafford also holds an active CPA license and has an MBA degree. Contact Troy at 507-259-3047 or email Troy@highpointlandcompany.com.