Should I sell farmland now?
Believe it or not, now is the perfect time of year to sell a farm.
We get this question from customers all the time, “When is the best time of year to sell a farm?”. The truth is, the best time is when it fits for you. The answer can vary, however, depending on your circumstances, your needs and your goals. Every farm and scenario is different, but no matter what, we’re here to help!
Some people may have concerns about selling a farm that is leased. This concern can have a big effect on farmland sales. However, when selling farmland that is leased, the tenant will become the tenant of the new buyer; nothing will change about that lease. We guide sellers through this process very often. We cover more about selling farms with tenants in another blog post which can be found here!
What kind of farm do you own? Is it cropland only? Is it a mix of farmland, pasture ground, and timberland? Or is it a timber only property? Cropland will sell very well all year long. A farm that is predominantly timber for hunting purposes will likely have more demand in the fall, coinciding with hunting season. In terms of pasture ground, we have found that in the demand lies in the late spring when buyers are often working diligently to obtain this type of ground. As Auctioneers, we like demand - it creates competition which achieves higher price points for our clients.
Terms and Conditions
Each season during the year will result in different terms and conditions, but there is no bad time of year to sell a farm. The majority of the differences come with how the farm income will be split (whether it be income from tenants, crops, or other sources). For example, if you sell a farm on March 1st and have the entire crop year ahead, its probably best to let the new buyer have the income or possession for that crop year. If you sell on July 1, you might split the income with the buyer, but if you sell on December 1 with possession on March 1 of the following year it’s more likely to be an auction with no split of the income.
More and more farmland is becoming a popular long-term safe investment by people that are not typical landowners. For them, the purchase is a business decision with long and short term considerations, and they have money to invest 12 months out of the year as an investor. For a neighboring farmer though, buying a farm at certain points in year means they are not able to farm it for up to 18 months. In that case, they would still make interest payments to the bank while splitting the income with the seller for their first year of ownership. The income split makes it financially easier for them to afford the farm when they can’t farm it right away.
The final price of your farm will be a correlation of how you set the auction up to fit the buyer’s situation. Sellers who invest in that income split for the first year have seen it benefit them, as they receive full market value for their farm when it is sold during the crop cycle.
We often recommend that the farm income gets split with buyers using a credit at closing. This means the seller would collect the actual farm income, and pay it out to the buyer through a credit when the sale is closed. This is beneficial to our sellers because they do not have to come up with any cash, as they are just taking the buyer’s money and giving it back to them at the closing.
High Land Value & Sales
If you, the seller, are worried about the price or even the value of your farmland, the USDA recently released an annual report summarizing farmland values for 2019. According to the report, the U.S. farm real estate value, a measurement of the value of all land and buildings on farms, averaged $3,160 per acre for 2019, which is up $60 per acre (1.9%) from 2018. The U.S. cropland value averaged $4,100 per acre, an increase of $50 per acre (1.2%) from the previous year, while the U.S. pasture value averaged $1,400 per acre, up $30 (2.2%) from 2018. To learn more about this report, read our blog post here!
Demand for Land
It’s no secret that there is a high demand for high quality farmland across the entire Midwest. With that being said, there is a wide range of buyers looking to make that investment in land for a variety of reasons. Neighboring farmers looking to “close the gap” of the land near them, beginning farmers, and investors are just a few of the potential buyers for your farm! Although the highest and best continues to be the farmer, we still continue to see investor activity in the market. As many investment ﬁrms look at farmland and become more organized in their approach to farmland investment, it creates competition in the market that expresses itself in farmland values.
Farmland will sell 365 days a year, and it will sell well - there is no “down” time. We at DreamDirt know the markets, we know the land prices, and we want to help you maximize your success! If you are considering selling farmland, be sure to contact us with questions as soon as you want to begin the process. Our goal is to be a resource that provides landowners with the most honest information about the choices they have in how they sell land assets. The worst thing you can do is wait - contact us today!