Preparing your Farm or Ranch for Sale

January 1, 2020

A Guide to Selling Your Ranch or Farm Property

When the time is right to sell your ranch or farm it’s very easy to become overwhelmed with the many steps involved in the process.  Many properties have multiple generations of family ownership which makes for a lot of history and memories.  Hopefully, this article will help the prospective seller get a feel for some of the things they can do prior to and while the property is listed for sale to make the transaction process go more smoothly and prevent any unnecessary roadblocks along the way.

 

The first item to be determined is the price the seller will be asking for the property.  While there is always the temptation to price a property above the market and hope for an aggressive buyer to come along and pay that high price, this will often turn buyers off and you may receive very little interest at all.  If the seller’s goal is to get the property sold in a timely fashion, it pays for them to sit down with their real estate broker and work through how the property should be priced and why it should be priced that way.  Every farm or ranch has different attributes and those command different valuations that combine to create the total price of the property. It’s also very important to discuss with your broker about the best time of year to bring your property to market.  Many of Montana’s farms and ranches are located in areas that receive large amounts of snow in the winter which often makes them difficult to show to a buyer.  Also, interest in farm and ranch properties is typically highest during spring, summer and fall so putting a property on the market during these seasons is usually helpful.

 

Once price has been determined it’s very important for the seller to be aware of potential tax consequences of the sale. Many farm and ranch properties have been held by the same family for a long time and therefore have a low basis. When the property is sold at a much higher price a significant capital gain may be realized.  All sellers should consult their own tax professional to determine the best way to manage their particular situation. Often a 1031 tax deferred exchange is a good way to minimize tax consequences by exchanging one property for another like-kind property.  It’s best for a seller to consult an attorney that specializes in this type of exchange before moving forward with this process.

Now that the property has been put on the market, it’s important to prepare to negotiate a sale with a potential buyer.  Most farms and ranches possess a long list of personal property including tools, equipment and household items.  These goods can be included in the overall price of the property as a “turnkey” sale or may be held by the seller and used as negotiated items during the sale process.  Either way it’s a good idea to make a list of these items and try to determine their actual value.  Also, it’s a good idea to be prepared to negotiate who will get the value of the crops in the field or in the bins or haystacks.  Livestock may be a negotiable item in the sale as well.  Either way, it’s necessary for the seller to know the value of these items ahead of time because they often will become part of the sale.

 

As the seller’s broker begins to show the property to potential buyers he will need to be aware of the actual property boundaries. Often fence lines do not follow actual property boundaries so it would be helpful for the seller to let his broker know about any discrepancies he may be  aware of.

 

If a seller knows of any possible issues concerning easements, access or water rights pertaining to his property he should attempt to remedy these issues before the property is placed under contract.  All buyers will perform their due diligence before closing and if they find problematic issues in the title report or during their water rights review it can often cause delays or even result in termination of the contract.

 

A farm or ranch seller should also review all leases in place on the property and be aware of the requirements to transfer any government leases. It’s also a good idea to inform any lessees on the seller’s property about a pending sale so they can prepare to evacuate the property or negotiate a lease with the new owner.

Lastly, for a buyer, first impressions are often what make the difference of whether they are interested in the property or not.  Mowing weeds, painting buildings, picking up twine and old wire and parking machinery in an orderly fashion will go a long way in attracting the attention of a farm or ranch buyer.  Also, finishing up projects such as fencing, pivot installation, etc. and paying for them will help simplify the transaction process as it moves toward closing.

 

Hopefully, these tips for getting your farm or ranch ready to sell will help a prospective seller wrap their arms around the processes needed to perform before the property is marketed and shown to buyers.  At 18 Land Company we can help you find your way through the hurdles of farm and ranch sales. We have lived it as brokers and owners on both sides of large land transactions and we would like to put our experience to work for you.

If you have questions or would like to talk to one of us about preparing your farm or ranch for sale, we welcome you to contact Nate Finch at 406.660.2601   or  nate@18landco.com

Here are some additional resources to help you through land transaction decisions:

How to Start a Successful Montana Ranching or Farming Operation

 

Navigating a Montana Land Sale: Do I need a broker or realtor?

 

Five Tips for Listing Your Farm or Ranch Property

 

How to Maintain Your Montana Ranch Property