How to Sell Farmland for the Highest Return
Selling your farmland may be one of the most difficult decisions you make. Whether it is the family farm passed down through generations or land that you have improved through hard work and investment of capital, the sale of your farm is not always cut and dry.
Economics & Fundamentals of Farming
Land values, like corn and soybean prices, fluctuate based on economics. Typically, when optimism about the grain markets and expected returns are high, land prices tend to increase. Today, demand remains strong for the purchase of land; however, commodity prices and future return expectations are much lower. This said many buyers are in a strong cash position to purchase your land as soon as we list it on the market.
Timing of Your Listing
Much can be said about the timing of putting a farm for sale on the market, but historically, more buyers are looking at land that is for sale when they are not busy with other work. Buyers often prefer to take possession of a farm before the next crop season and many sellers enjoy ending the calendar year with a sale and cash at closing. Farms can be sold during every season, but when the “for sale” sign goes up, you’ve established control of the market and are not leaving it up to chance.
What is my farm really worth?
The basics of farm land values boil down to four criteria: 1) Location 2) Rainfall/Precipitation 3) Soil 4) Drainage. Additionally, knowing as much as possible from the sales over the last few years are the foundation for getting the most net dollars. Remember, not all farms are created equal. Differences in size, shape, economics and the basic four criteria of farmland affect value. Understanding the basics and consulting a land broker will give you the confidence to sell and achieve your goal for a well-deserved profit.
Planning ahead for tax implications such as capital gains is vital to maximizing your net return on the sale of farmland. There are other tax reduction vehicles (trusts, TOD, charitable remainder trusts, etc) that could be beneficial depending on your unique financial position. Work with a knowledgeable land broker and estate planning expert to navigate your options.
About the Author
Johnny Klemme is a published author, graduate of Purdue University and Land Broker specializing in farms & land in West Central Indiana. Born and raised on a local farm, his commentary on issues important to the farming community and land values can be found at www.PrairieFarmland.com/blog
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