Public Relations: The Land Real Estate Professional’s Ultimate Weapon

Public Relations has become the most fundamental tool for shaping public opinion, investment markets, company reputations and business outcomes. As a land professional, your career is tied to a commodity with many stakeholders and many opinions on how land is to be managed and regulated. Far from being a “nice to have,” PR defines success—and failure—in today’s world.

Land professionals and Accredited Land Consultants (ALCs) have a right-down-to-the-soil impact on the physical and economic well-being of America. In a high-risk world, land—particularly commodity-producing acreage—offers roots of stability and a solid base for expansion. Land professionals, including brokers, agents, appraisers and auctioneers, together comprise the infrastructure upon which land is profitably conserved, exchanged and utilized.

Public Relations Gets You Known

But who really knows these things about land professionals?

By survey, one of the biggest hurdles a land professional faces is trying to explain what they do, what their knowledge and skills are, and how to care for the land and livestock on that land—free range, antibiotics vs. organic, and so forth. Ninety-eight percent of the general public has no knowledge of agriculture. This is a strong indication that effective public relations is not in play. The objective of PR is to make your business well-known and highly regarded so that you don’t have to repeatedly explain yourself.

If what you do, your purpose and the benefits you provide as a land professional are not clear to your public, some other perception will take its place—one that usually favors a competing interest.

Public Relations is About Reaching Minds: It Manages Emotions and Directs Attention

Public opinion regarding land management, its resources and the concept of stakeholder (the general public) over shareholder (the owners) is being shaped today by social media. And that social media, uncontrolled, has the liability of amplifying emotions over logic, presenting inaccurate data as fact, and omitting balanced points of view. It is a runaway horse, and only the art and science of public relations can manage.

Strong new community realities, such as sustainability; natural resources stake holding; environmental impact management; the control of interrelated natural systems such as navigable waters (Waters of the U.S. or WOTUS) and wildlife habitats—along with many other concerns—have created tension with private ownership. All of these factors influence legislation and can negatively affect land prices. Look carefully at any new legislation that affects land profits or limits sales—or any successful repeal of legislation—and you will usually find a publicity campaign that preceded it.

PR is often confused with activities that are more properly parts of branding, promotion and marketing, or it is thought to be only a plan to put out press releases now and then. While it has high synergy with these activities—even making them more effective—PR has its own precise scope.

It takes only a quick look at the news today to see that we live in highly opinionated times. People with strongly held beliefs and agendas often seek out only the news and information that support their viewpoints, and will disregard conflicting reports. Imagine, for example, trying to sell a fervent Republican on a Democratic candidate—the facts would be flying back and forth, but neither side would be listening to the other. Impasse! PR would need to step in, find the real issues people care about, and either makes a bipartisan solution well known, push a workable compromise, or show one side (or the other) to be the best solution.

PR—not money—is how the world turns today. It’s PR first that determines how the money will be spent.

As simple as it should be, the buying and selling of land will face increasingly complex challenges in the immediate future as more organized groups and government agencies seek to exert influence on how land is managed, transferred and used. Each will be passionate about their position.

Public Relations Creates Agreement

PR is the art and science of creating agreement and cooperation. It achieves this by framing the real issues involved in such a way that both sides might better work together.

Take, for example, the Clean Water Rule. Its stated purpose is to ensure that waters protected under the Clean Water Act are more precisely defined, more predictably determined, and easier for businesses and industry to understand. A visit to the EPA website shows the scope of the rule. But the comments on the regulations.gov website range from fear that individual farms will be decimated to fears that a government conspiracy aims to take over control of farming.

PR exposes the real issues in a strategic fashion in order to gain agreement, and in so doing, a solution often appears that everyone can get behind. Sometimes it’s simply a matter of reframing an issue to eliminate unproductive bias or false data. We want a clean flow of water. We also want viable farms and sustainable lands. Workable resolutions bring about mutual understanding and progress.

Public Relations is Proactive

A recent seminar by Hertz Farm Management, Inc., revealed that most farmers are over sixty-five years of age, and that forty-two percent of them plan to retire within the next five years. Many of them have yet to identify a successor. The number of farmers under the age of thirty-five is dwindling. These factors could change the characteristic of the farm market within this decade—more farms for sale by auction. A land professional who proactively prepares to take on a leadership position will be able to take advantage of shifts in the marketplace—but to do so, requires a PR strategy. Many prospective buyers are investors. They may run their own numbers and valuations, but they look for brokers with strong local savvy—someone who can connect the dots for them and has easily referenced credibility. Keeping yourself in the news, leading thought with insightful articles, and making public your good works are invaluable.

PR releases are written specifically to change perceptions, create strong affinities, forward strategies and form profitable perceptions. They are not fluff pieces full of bragging. Some common errors that show up too often, wasting valuable time and money, include:

  • Written by a committee. You’ve heard that a camel is actually a horse designed by a committee. Don’t let anything you publish sound like it came from a group. No one will read it, and no media will pick it up. Writing has to connect on a one-to-one basis. PR releases with strong points of view and a persuasive story/argument directed at the right public are pure gold.
  • Deliver a relevant message. It is the whole point, really. However, incredibly, it is often missing or overshadowed by less important details. Every PR campaign has, as its purpose, to deliver a specific message and make it stick in the minds of the public. A message is really what the reader comes away thinking, once he or she has read the release.
  • Keep it lean. Factually, you have about 1/125th of a second to grab attention, and from there, every word has to count. Short and sweet communications get read. They stand out from the ocean of verbosity online.
  • It’s not about you. Bad releases often come off as too self-serving and are rarely newsworthy. How great you are is not news, how you can serve your public is.
  • Not written for humans. Releases and web content cranked out to attract the eyes of keyword searchers with sentences built for search engine optimization don’t engage anyone, and make the reader think the writer doesn’t know what he or she is talking about.

Public Relations is Causative—It Gets Results

As a land professional, public relations technology really is your ultimate weapon. You are dealing with the most basic commodity on earth—Earth—and you are living in a time of unprecedented attention on how we manage our natural resources. Your efficient use of PR can help you get out ahead of non-optimum legislation before it happens; influence those who might otherwise oppose you; secure your business leadership; and create a stable future. These benefit everyone.

This article originally appeared in the 2016 Winter Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

Karla Jo Helms, Public RelationsAbout the author: Karla Jo Helms, is the CEO and visionary behind JoTo PR. She has patterned her agency on a combination of her hard-won Public Relations experience, uncompromising high standards and exacting nationwide market research. Karla hosted two breakout sessions and a round table discussion at the 2016 National Land Conference.

real estate auction

Real Estate Auctions Just Don’t Work In My Area

Real estate auctions just don’t work in my area! Oh, how many times I have heard that over the years. I always find that statement amazing as our company has completed over 1,200 auctions in just the last five years and, as near as I can figure, in my 35-year career I have been involved in somewhere around 2,500 land auctions. Auctions have been around for more than 2,000 years. Records handed down from the ancient Greeks document auctions occurring as far back as 500 B.C. At that time, women were auctioned off as wives. Now, those of us that have been doing this a while know of landowners who might be willing to auction their wives or husbands for a well drained 160 acres of land even today.  All joking aside, if you’re trying to enhance your image as a full service real estate professional, real estate auctions should definitely be a part of your business.

What is a Real Estate Auction?

A real estate auction is an intense and accelerated real estate marketing process that involves the public sale of property through competitive bidding. The word ‘auction’ derives from the Latin word “auctus,” which means increasing. Well run, successful real estate auctions can create momentum for future business for you; increasing your income and enhancing your image as the person that can get things sold.

Is every property a good auction prospect? No and not every seller is a good auction prospect. As a real estate professional, it is your job to understand what makes a good auction property and if your seller will be a good auction prospect. I’ll talk more in detail about qualifying the seller and the property a little later in the article but, for now, let’s look at some types of real estate auctions that I have successfully used in my business and their advantages and disadvantages.

Absolute Real Estate Auctions

In an absolute auction there is no minimum bid. The property is sold to the highest bidder, regardless of price. The advantage of an absolute auction is that it attracts more buyers because they know the property is going to sell. The disadvantage is that it provides no safety net for the seller, which makes it difficult to recommend to seller client’s in some situations.

Minimum-Bid Real Estate Auctions

Sometimes called a minimum published bid auction. In this type of auction the lowest acceptable price is pre-determined by the seller and the auction firm. The minimum price is then stated on all the marketing materials. When the bidding reaches the minimum amount, the property will sell.  This is a good type of auction to use when you have a property that might have been on the market for some time and is market weary. The advantages of this auction is that it lets buyers know what the minimum price the seller is willing to take for the property, and it still creates a safety net for the seller; unlike an absolute auction. The disadvantage is that sometimes the inexperienced agent and a demanding seller may set the minimum bid too high and buyers will not be willing to bid.

Reserve Real Estate Auctions

In a reserve auction, the seller reserves the right to accept or reject the highest bid. The owner, with the advice of his agent, determines the price at which he would be willing to sell the property. This pre-determined price is not published or disclosed to the public. Sellers are not obligated to accept any other price than the pre-determined reserve price or above. The advantage to this type of auction is that it provides a safety net for the seller while still giving the real estate professional the knowledge at what price the seller is willing to let the property be sold. The disadvantage is that many prospective buyers do not want to take the time or go to the expense of investigating the property when there is no guarantee that they will receive the property even if their bid is the high bid. Over the years I have had many buyers tell me that “We don’t come to auctions to bid, we come to buy, and so, until I know that the reserve has been met, I am not going to bid.” This can be a problem with this type of auction, so, it is very important that the seller and agent establish a very realistic reserve price.

Sealed Bid Real Estate Auctions

All bids are confidential. Usually, they are submitted to the agent and then opened at a predetermined time and place. This type of auction can also be used in conjunction with the three listed above. The advantage is that if you have a buyer with a very strong personality or presence in an area and other buyers don’t want to publicly compete with him they can do so. The disadvantage is that by doing everything confidentially, some buyers may question whether there really were other competing bids. You also lose the excitement created at a public out-cry auction that often times will cause competing bidders to pay more than they thought they would for a property.

Multi-par Real Estate Auctions

This type of auction works well for large parcels that need to be offered in smaller parcels to attract the most buyers. It allows the bidder to bid on one parcel or any combination of parcels. The advantage is that it allows bidders who want only one parcel and bidders who may want several or the whole thing to compete. The disadvantage is that the buyer who wants to buy the whole parcel does not need to compete until the end. It also requires a very knowledgeable staff to keep track of bids and help potential buyers submit bids that keep them in the winning position.

There are other types of auctions that can be used, but these are the ones that work best for me. As technology has advanced, online auctions and online bidding is becoming more common. However, since I often hold auctions in areas that I don’t have even good cell phone service let alone internet connections, this type of bidding has been a problem for me. These auctions are being used very successfully in the selling of livestock and personal property, and I do see them becoming more common in the land business in the future.

What Makes a Seller a Good Candidate?

Now, let’s talk about what makes a seller a good candidate for a real estate auction. Here is what I consider the top five questions you need to ask as the real estate professional:

  1. Is there adequate equity in the property?
  2. Is the property being sold to settle an estate or divorce?
  3. Has the property ever been listed?
  4. Does the seller have realistic expectations?
  5. Is the seller familiar with the auction process?

A “yes” answer to these questions would be positive towards an auction. A “no” answer would lead to the need for additional questions to be asked before deciding on encouraging the use of an auction.

What makes a good property to auction?

As a general rule, a property that is in good condition and in a desirable location will sell successfully at an auction. Am I saying that only good, well located properties should be auctioned? Of course not! The auction method can successfully be used in the marketing of just about any type of property. It is very important though that you analyze the seller, the property and the market to see if there would be positive demand for the property.

An auction should be a well prepared and carefully planned event. It definitely is not a one man show.

If you do not plan to become an auctioneer yourself, it is very important that you choose an auction company wisely. There is a saying, “There are three types of lies used in the marketing material of a lot of companies, lies, damn lies, and statistics.” Don’t just rely on the statistics presented to you in their marketing material. It is important that you attend a few of their real estate auctions, and don’t be afraid to ask for references from past clients. The entire auction team needs to be competent and professional in both their dress and their actions. Many times you will have people attend your auctions who are considering an auction on their property in the future. A well conducted auction is a great selling tool, but if the auction is disorganized and poorly ran it will be a reflection on you and you won’t get their future business.

Auctions can be a win-win situation for all. The sellers get their property sold at an acceptable price. The buyers purchase the property at fair market value, knowing the price was determined by open, competitive bidding and you as the agent have a happy client and a successful transaction.

I can’t possibly tell you all the things you need to know about auctions in this article. If you would like to know more about auctions and the auction method of selling real estate I would encourage you to take the Real Estate Auctions course offered by the REALTORS® Land Institute. This course will give you a very good background in auctions and how to use them to market real property.

I can tell you from experience that auctions do work and that the auction tool is one you, as a real estate professional, need to have in your tool box.

This article originally appeared in the 2017 Winter Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

Sam Kain, ALC, Real Estate Auctions LANDU InstructorAbout the author: Sam Kain, ALC, is the Assistant Vice President – Real Estate / National Sales Manager for Farmers National Company in Des Moines, IA. Kain served as the 2005 National President of RLI and continues to be active in the organization as a LANDU Instructor for the Real Estate Auctions course.

The Value And Uses Of Pore Space As A Property Right

The Emergence of Pore Space as a Property Right

Pore space, although rarely thought about, should be viewed as just another private property right. Pore space is generally thought of as a subsurface property right. Although it can be defined in a number of different ways, pore space, by its simplest definition, is the empty space between grains of rock, fractures, and voids.

Until very recently, pore space was hardly considered a property right at all. However, the surge of interest in carbon capture and sequestration (CCS), as well as the need to store salt water produced by the oil and gas industry—as a waste product arising from oil and gas production and from hydraulic fracturing—has made pore space ownership an increasingly popular, yet extremely underdeveloped area of the law.

pore spaceLike most property rights, pore space ownership has evolved out of common law property rights, which are traceable to the old common law maxim known as the “ad coelum doctrine.” The ad coelum doctrine states “cujus est solum, ejus est usque ad coelum et ad inferos,” meaning “to whomever the soil belongs, he owns also to the sky and to the depths.”  Taken literally, the owner of the surface holds title to the entire tract from the heavens to the depths of the earth.  This form of ownership, although no longer as broad as it was originally, is the simplest and broadest property interest allowed by law, which is known as a fee simple interest.  Determining ownership of pore space is very straightforward when a fee simple interest is involved because the fee owner holds title to both the surface estate and the mineral estate.  However, once the fee simple interest is severed into differing estates and burdened with a variety of other property interests, determining pore space ownership can become a confusing and complicated issue.

There are two common ownership structures once the mineral estate has been severed from the surface estate: (1) the non-ownership theory, known as the “English Rule”; and (2) the ownership in place theory, known as the “American Rule.”

Application of the English Rule vests pore space ownership with the mineral estate—which is clearly the current minority rule within the United States.

The American Rule, on the other hand, “involves the severance of a mineral right from the interest in the whole geological formation.”  When applying the American Rule, the mineral estate owns the minerals beneath the land, but the geological formation, is owned by the surface estate.  The American Rule is currently the majority rule in the United States.

In addition, although the American Rule vests pore space ownership with surface estate, the mineral estate still has the right to explore and remove minerals from the land, which allows a mineral estate the right of reasonable use of pore space for mineral exploration. As a result, in states applying the American Rule, it cannot simply be said that pore space belongs solely to the surface estate. It must also be determined if the reservoir has been depleted of minerals because until depletion occurs, the mineral estate still has a right to use the pore space.

We researched pore space law in Arkansas, Colorado, Kansas, Kentucky, Montana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Texas, Wyoming, Michigan, Louisiana, New York, and West Virginia to determine if there is a trend towards vesting ownership of pore space with the surface or mineral estate. Six of the states were undecided, four states have a clear statute vesting ownership with the surface estate, four other states have case law supporting surface estate ownership, and one state had a case arguing pore space could be owned by the mineral estate.

As such, landowners should be mindful of the following legal and practical considerations associated with their pore space rights. Landowners, and those representing them, must be cognizant of how title to pore space can be modified through various contracts, easements, litigation, releases, and other agreements landowners routinely enter into.

Legal and Practical Considerations of Pore Space Rights

Valuation of Pore Space

As surface owners become more educated about pore space ownership and as technology advances, it is highly likely that operators will need to acquire rights to the pore space in order to engage in directional drilling or inject wastewater in areas outside of the drilling units. Yet, placing a monetary value on pore space can be just as complicated as determining ownership. For instance, valuation of pore space will likely be difficult to determine as it will depend on the particular use and what the user is willing to pay as opposed to the actual value of occupation.

CO2 Sequestration

As previously mentioned, pore space can be used for carbon capture and sequestration (CCS). CCS can potentially remove eighty to ninety-five percent of the CO2 emitted from power plants.  Studies have also indicated that global sequestration capacity in depleted oil and gas fields is substantial, with the capacity to store 125 years of current worldwide CO2 emissions from fossil fuel fired power plants.  Although CO2 is routinely injected into subsurface pore space in an effort to aid in the recovery of oil and gas, and though large-scale sequestration sites have been identified within the United States, there are currently no large-scale, commercial sequestration projects underway in the United States.  Still, pore space owners should be mindful of the opportunity and their right to use depleted oil and gas reservoirs for CO2 sequestration.

Underground Natural Gas Storage

In addition to CO2 sequestration, pore space also has the potential to be used for underground natural gas storage. Natural gas, unlike oil, is more easily stored by re-injection into underground rock pore spaces, which are typically geological formations or common sources of supply whose pore spaces formerly held producible hydrocarbons that are now substantially depleted.  In some states, surface owners retain the right to depleted geological formations and; therefore, should request compensation for storage of natural gas in depleted geological formations, and for injection of wastewater produced from out of section wells.

Subsurface Trespass

In additional to potential uses for pore space, pore space owners should be aware of the high potential of a subsurface trespass.

Traditional Oil and Gas Subsurface Trespass

The most obvious example of an actionable trespass in this context is a directional well that bottoms out under neighboring property.  This situation gives rise to an actionable trespass due to the well-established principle of property law that prevents the use of the surface to support mineral extraction activities on other lands.  However, operators can avoid a trespass situation by seeking an appropriate release from the pore space owner.

Hydraulic Fracturing

A subsurface trespass can also occur during hydraulic fracturing. However, courts tend to rule that an injury must occur in connection with the subsurface trespass as hydraulic fracturing prevents underground waste of hydrocarbons by allowing its recovery from tight reservoirs that would not otherwise be productive and thus, meets an important social need.  Although this reasoning wisely protects the well-established and necessary practice of hydraulic fracturing, it also gives an inference that courts may be reluctant to find a subsurface trespass of pore space as a result of hydraulic fracturing.

Secondary and Enhanced Recovery Operations

Secondary or enhanced recovery operations are used to maintain or increase production of a well once the reservoir’s natural production decreases.  Although states often recognize secondary or enhanced recovery as a valid public interest, trespass issues can arise in instances when an operator injects a substance, such as salt water, carbon dioxide, chemicals, or natural gas, into the subsurface of its own property in order to increase production and the injected substance invades the subsurface of the neighboring property.

Generally, when secondary recovery is involved, it appears that most courts are unwilling to find the migration of wastewater onto neighboring properties to be a trespass. This is likely because secondary recovery is in the best interest of the public and industry. With that said, there appears to be no clear case law challenging this logic specifically in the realm of pore space.

Wastewater Injection Wells

Wastewater injection wells can be associated with subsurface trespasses. In this situation, a subsurface trespass occurs when fluids from a wastewater injection well migrate beyond the legal surface boundaries of operator’s rights. It is likely that the operation of many wastewater injection wells result in the subsurface trespass of pore space to some extent, as common sense says that when a commercial wastewater disposal operator only owns one acre yet injects hundreds of thousands of barrels of wastewater into a wellbore on that one acre, the wastewater is migrating to an area outside of that one acre. However, that being said, it would be difficult to prove. Nevertheless, pore space owners should always be mindful of wastewater injection wells near their property and the potential for that wastewater to migrate onto their property. As the law on pore space develops, surface owners may seek compensation from these commercial wastewater disposal operators or may even try to prohibit the injection.

Conclusion

Evaluating pore space as an underground property right should be considered in every land deal. The development of pore space as a valuable property right is an increasing area of consideration for REALTORS®, title examiners, landmen, policymakers, attorneys, and judges. As such, it will be increasingly important to consider the implications every deal may have on this emerging area of the law.

For a more in-depth analysis of pore space, you can download a copy of the 2015 thesis and other writings on the topic by visiting www.LandownerFirm.com.

This article originally appeared in the 2017 Winter Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

About the author: Trae Gray is a Mediator, Entrepreneur, Lawyer, Speaker, and Expert Witness with specialized expertise in ethics and natural resources. With a nationwide practice he is listed by Super Lawyers and The Top Trial Lawyers in America as a Lifetime Member of the Multi-Million Dollar Advocates Forum – something that is achieved by less than 1% of U.S. lawyers. More can be found online at TraeGray.com.

 

About the author: Ryan Ellis, a partner with LandownerFirm, is a legal research and writing specialist with specialized expertise in Class Action, Environmental, Energy, and Natural Resource legal matters. She graduated with honors from the University of Tulsa College of Law where she completed the Sustainable Energy and Resources Law Program, which offers one of the most advanced energy, environmental, and natural resource legal educations in the nation. More can be found online at LandownerFirm.com.

Top Four Considerations When Finding a Real Estate Mentor

I listened to Zig Ziglar say once “The fastest way to get what you want is to help other people get what they want.” I didn’t understand this until I had a real estate mentor for a couple years and realized what Zig said was true. Whether you are the mentor or mentee there are great benefits to the relationship that can be established.

When I was looking for a real estate mentor, four things came to mind when I started my search that I felt were important.

The first thing that was important to me was finding an individual who was successful. The success that I was after was not just in the finical category but rather a list that I constructed when planning who I wanted to surround myself with. Successful to me was an individual who worked with integrity, spent time away from work with friends and family, was healthy, financially very well off, and had a process and system to their business. I have learned you can make more money than you can count. However, if you do not have a passion or dreams to go after with that money, more is actually less.

The second thing I looked for was someone who was not going to be a “card holder,” which also meant that this individual I was after probably was not going to be a direct competitor. When someone is a direct competitor, or sees you as a threat to their business or their current way of life, they most likely will not show all the cards and truly want to help you along your road to success. My mentor choice was a couple hours away and almost never worked in my area which also made it easy when it came to referral opportunities on both sides.

The third thing I looked for was time. How much time am I willing to give to my real estate mentor and how much time is he or she going to give to me. I have a very tight structure to mentor meetings. I want this person’s knowledge and friendship, and know I need to appreciate their attention like it is gold when they offer it to me. First, I list out all my sales numbers, transaction types, goals, and executions. Second, I listen to what they have to say or ask about whatever I have documented. I usually try to keep the time with them to one hour or less and write down three to four action items that I am going to do between the meeting and the next time we meet.

The fourth thing I found important was knowledge outside of my typical “sell more farms intentions.” Once I find the money, what can I do with it so I don’t have to go find it again? How do I make it find me? The mentor I was looking for needed to be an investor with lots of tax knowledge. If you are going to make money to waste it, you can skip the making step and save yourself lots of time. I was looking for someone that had answers to investment and savings questions as well.

If I was going to find another real estate mentor, I would use a simple set of questions for myself. What do I want? When do I want it by? Who do I know or can I meet that will help me to best help myself get it? and when am I going to set up and appointment with that person? In my experience, with the right mentor for you and documented goals, there is nothing the land business cannot provide.

About the Author: Jacob Hart, ALC, is a licensed real estate broker and auctioneer in Minnesota, Iowa, and Wisconsin. His firm, High Point Realty & Auction, specializes in land sales and management of agricultural row crop and recreational ground.  He attended SDSU in Brookings, SD, then studied at the World Wide College of Auctioneering.

1031 Tax Exchanges

Section 1031 Like-Kind Exchanges: Current Threats to A Hundred Year Old Tax Tool

Almost one hundred years ago, Congress enacted Internal Revenue Code Section 1031, permitting deferral of capital gains and recapture tax on 1031 like-kind exchanges. Two primary purposes of the tax law were: 1) to avoid unfair taxation of ongoing investments in property and 2) to encourage active reinvestment. These purposes are even more relevant today in our global economy than they were in 1921. Section 1031 not only permits efficient use of capital to preserve and manage cash flow, it also encourages U.S. businesses to reinvest in their domestic operations, rather than offshoring business activity.

Impact of the Presidential Election on 1031 Like-Kind Exchanges

Fast forward ninety-five years to the 2016 Presidential election. In a surprise finish to a long and sordid year of election drama, Donald J. Trump was elected President and Republicans retained majorities in both the House and the Senate. This trifecta of power centers ratchets up the threat to Section 1031.

Mr. Trump’s refusal to disclose his tax returns during the campaign, and the disclosure of a $916 million tax loss claimed by Mr. Trump in 1995, set off a firestorm of media speculation about tax strategies that may have enabled a tax loss large enough to wipe out his income taxes for up to eighteen years. A plethora of news articles were published, listing various “special interest tax breaks” that ordinary real estate owners would think of simply as common business tax provisions, such as depreciation.  Unfortunately, the §1031 like-kind exchange was swept up in this commentary, mischaracterized as an abusive loophole used by wealthy real estate developers to repeatedly exchange properties and never pay the tax.

This is unfortunate because it is wrong on many levels.  First, Section 1031 is not a loophole; it is a legitimate tax tool used by a broad spectrum of taxpayers including individuals of modest means, farmers, ranchers, small and mid-size businesses, as well as taxpayers at the higher end of the income scale. Second, developers that build or rehab properties and then sell do not qualify for tax-deferral treatment, because their properties are considered inventory, not investment assets. Third, tax is deferred, not eliminated. After reviewing more than 1.6 million real estate transactions over an eighteen year period, a recent study concluded that in one-third of all exchanges, some tax is paid in the year of the exchange, and that 88 percent of replacement properties acquired in a §1031 exchange are actually disposed of through a taxable sale, not a subsequent like-kind exchange.  Tax is ultimately paid on the overwhelming majority of exchanged properties.

The agriculture community has the broadest use of 1031 like-kind exchanges.  Farmers and ranchers use §1031 to combine acreage, acquire higher grade land, exchange breeding livestock and upgrade farm machinery. Retiring farmers are able to exchange their most valuable asset, their farm, for other real estate without diminishing the value of their life savings.

Section 1031 also promotes conservation and environmental goals.  Grants of conservation easements can be structured as tax-deferred exchanges, facilitating programs designed to improve water quality, reduce soil erosion, sustain critical wildlife habitat, and provide recreational green-space for all Americans. Section 1031 makes the economics work so that these landowners can acquire more productive acreage in less environmentally sensitive locations.

Blueprint for 1031 Like-Kind-Exchanges Tax Reform

In June, 2016, House Ways & Means Committee Chairman Kevin Brady (R-TX) and his predecessor, Speaker of the House Paul Ryan (R-WI), announced the “Blueprint for Tax Reform,”  an ambitious Republican plan for radical simplification and complete rewrite of the tax code.

With Republican control of Congress and the White House, a comprehensive tax reform package based on the Blueprint is now expected to be fast-tracked through a process called Budget Reconciliation. Tax reform included in a budget bill that has been agreed upon by both the Senate and House could not be filibustered and would require only a simple majority to pass. The whole process could be concluded within the first few months of 2017.

The authors believe that the Blueprint will achieve three distinct goals:

  1. Create jobs and economic growth
  2. Make the tax code simpler, fairer and less burdensome
  3. Transform the IRS into a kinder, gentler, taxpayer focused agency.

The Blueprint calls for reduction of income tax rates for all taxpayers, with three brackets for individuals at 12 percent, 25 percent and 33 percent. A 25 percent rate would apply to income generated by pass-through businesses, such as partnerships, and a 20 percent rate would apply to C-corporations.  The Blueprint also calls for elimination of the Alternative Minimum Tax (“AMT”) and abolishment of the Estate Tax. Capital gains, dividends and interest income would be subject to a 50 percent exclusion, resulting in effective capital gains tax rates of just 6 percent, 12.5 percent and 16.5 percent.

The path to achieving massive simplification and rate reductions appears to be elimination of most deductions and exclusions in favor of larger standard and personal exemptions.

On the plus side, businesses would be permitted to claim an immediate expense deduction of 100 percent of the cost of newly acquired tangible and intangible business investments, including real estate improvements, but not land. Unlimited net operating losses could be carried forward indefinitely. The flip side is that taxpayers would lose the expense deduction for interest paid on business debt.

Section 1031 and the Blueprint

The Blueprint is silent as to 1031 Like-Kind Exchanges but many of the details are still unknown. There is concern that the tax writers may assume that with lowered rates and full expensing, §1031 would be unnecessary.

It is imperative that 1031 Like-Kind Exchanges be preserved for exchanges of land and other assets that are not covered by immediate expensing. Of particular concern to real estate owners is the potential combined whammy of the inability to expense land value with the elimination of the business interest expense deduction. Given that land values represent approximately 30 percent of the value of commercial and multi-family residential improved properties, and up to 100 percent of agricultural land investments, landowners would be particularly disadvantaged if they had neither the option of a tax deferred exchange nor expense deductions for land acquisition and interest on related debt.

Recent studies on the economic impact of repealing 1031 Like-Kind Exchanges have concluded that without a tax-deferral mechanism, a lock-in effect occurs.  The immediate recognition of a gain upon the disposition of property would impair cash flow and could make it uneconomical to replace that asset.  If property owners are faced with reducing the value of their investments and life savings through capital gains or recapture tax, even with lower rates, they will likely hold onto these properties longer. This leads to reduced transactional activity, slowed rate of investment, and reduced property values. Section 1031 removes the lock-in effect, and permits taxpayers to make good business decisions without being impeded by negative tax consequences.

Proposals to Limit 1031 Like-Kind Exchanges

For the past several years, the Treasury’s annual proposed budgets have included a proposal to limit annual gain deferral under 1031 Like-Kind Exchanges to $1 million per taxpayer and to disqualify artwork and collectibles from tax-deferral treatment.  This Democratic proposal is unlikely to go anywhere in a Republican controlled Congress, but it remains an idea that could be picked up as a “pay for.”

Such a limitation would be particularly harmful to the economic stream generated by like-kind exchanges of commercial real estate, agricultural land and other assets. The value of these assets generates substantial gains. Transfers of large commercial and agricultural properties generate economic activity and taxable revenue for brokers, appraisers, surveyors, lenders, inspectors, contractors, attorneys, accountants, title and property / casualty insurers, architects, exchange facilitators and more. High volume equipment exchanges provide inventories of affordable used assets for small businesses and taxpayers of modest means. Turnover is key to all of this economic activity.

Summary

A broad coalition of organizations, including the REALTORS® Land Institute, the National Association of REALTORS®, and the Federation of Exchange Accommodators are working to make our policymakers aware that 1031 Like-Kind Exchanges needs to remain in the tax code. Like-kind exchanges stimulate economic activity in the United States – property improvements that benefit communities, increase property values, and generate jobs ancillary to the exchange transactions. Recent economic impact studies have quantified that either eliminating or restricting like-kind exchanges would increase the cost of capital, slow the rate of investment, lower property values and reduce transactional activity, resulting in economic contraction of up to $13.1 billion annually.

You can make your voice heard by sending a letter to your legislators, letting them know how important §1031 is to you and your business here or access information to help educate your members of congress.

This article originally appeared in the 2017 Winter Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

Suzanne BakerAbout the author: Suzanne Baker is Executive Vice President and General Counsel of Investment Property Exchange Services, Inc.  She also Co-Chairs the Government Affairs Committee of the Federation of Exchange Accommodators, and serves on its Board of Directors.

Top Reasons to Invest in Buying Rural Homes & Properties

This article originally appeared in the 2017 Winter Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

As fall and winter are around us, I can think of nothing better than to drive out in the open country side and appreciate the views, the rolling pastures and the calm. You may want to stop and smell the fresh air and the crispness as it surrounds you. No vehicles except for an occasional farm truck or tractor. This is the country. For me, this is the land that lies between Houston and Austin and San Antonio.

Our offices are constantly asked about moving to the country. Their reasoning is the return to their hometowns, different lifestyle, out of the hustle and bustle, maybe the love of the land. But it is also investment. This is all the land we have. There cannot be any more manufactured for growth, enjoyment, recreation.

Our location is rural from towns of less than 100 to those of 15,000 or more. But the air is cleaner, fresher, the small town lifestyle of festivals, fiestas, parades and other fun and unique gifts of small town living abounds.

Rural Land Real Estate

So what is rural living? Obviously the population is much less. Our houses are spaced more widely apart. Even in town lots are larger. Go outside city limits and tract size grows by leaps and bounds. There is room for grazing animals, large pieces of agricultural land and greenery. We live in nature, which has a very positive effect on our health. Pollution levels are lower due to fewer vehicles and less industry. Our technology is catching up, and many people in rural areas have short to no commutes and work shorter work weeks. You have privacy, it is peaceful, and there is tradition.

Groceries, pharmacies, and medical facilities are more accessible than ever. Hard working people, who still care about what they do, provide services equal to or better than those found in urban areas. People hold the door open and ladies or the elderly are first to pass through. Politeness and manners still matter more than in most urban areas and are always noticed. It is safer, but as the larger cities grow out towards our country towns, the reality is you still need to take heed of what is around you. However, being in the country, you will also find many people carry handguns and you will still see pickups with a gun rack–a natural deterrent in the country.

The problem arises when the property is more expensive than expected, when a buyer thinks they are aware of the costs of building, upkeep and hard work it is to own a country property. This is no different from any other area of the country. Most of all, they think fifty acres is their goal but have no idea what it means. They get out on property and they are shocked to see how big it is, quickly twenty acres or ten acres is much more in their plan. Naturally, there are still large parcels available for the farmer or rancher want-to-bes. That is part of what we do in the farm and ranch business. It is essential that we as land specialists help the buyer with what purchasing a farm or ranch really means.

Property for $5,000 to $100,000 per acre and all in-between are possible to locate. But where do you want to be? Are you going to live permanently on the property or is it a weekend, future retirement property. Our property in this triangle is not inexpensive. That being said, I just sold a half-acre lot in a very desirable in town subdivision for $200,000!

A question remains: How are we going to be proactive in rural areas and not hang on to the success of the past? How do we encourage young people to want to be involved in rural farming if you don’t have a proactive message? You are competing against the world and opportunities everywhere in more urban areas. Young people need opportunity to continue to run the family farm or ranch or to stay in their hometowns and not feel they cannot make a living in small town America.

Rural America encompasses nearly seventy-five percent of the land area of the United States. It only accounts for fifteen percent of the country’s population. The census bureau classifies rural areas as open country and settlements with fewer than 2,500 residents.

Industry and college educations have pulled our young citizens into urban areas where they marry and grow their families. Most of them do not return to their rural roots. However, as we see in our area of Texas, more young families are coming back, not in droves but in steady thoughtful ways. Family roots, family farms and ranches and a slower pace. We still need to find a way to make rural America enticing enough for those in their twenties and thirties and forties to stay, work and raise their family.

How do we do that? This area for certain is seeing growth due to our most desirable location in that magical triangle spoken of before. An hour to Houston, 1.5 hours to Austin and 2.5 hours to San Antonio makes this a great place to be. Our economy has turned to tourism as a major factor to entice the public here. Fifty years ago it was agriculture mostly driving the economics. New companies are eyeing our area due to the location, as our Economic Development and Chamber of Commerce work diligently to increase work places and jobs.

Second home ownership is driven by amenities and age. Let’s get the children back to our family roots and be closer to grandparents. Let’s buy a weekend place so we can breathe, relax and socialize in a different way. If our area is 60 percent second homes, that is a huge population to get engaged when owners only come to the country maybe twice a month, if that.

farm house

Another point of rural living is scientific. It is confirmed what every urbanite has long suspected, life in the city is more stressful. Those people who are born and raised in urban areas are more likely to suffer from anxiety, depression and schizophrenia than those brought up in the countryside. Studies show, that exposure to green space reduces stress, boosts health and makes us less vulnerable to depression. This information comes from a study of the brains of volunteers from urban and rural areas.

Pollution, toxins, or noise could all contribute, however, other studies show access to green space soothes frayed nerves and improves wellbeing. Further studies show, that those with access to the county side are less likely to have heart disease or strokes.

Is this what contributes to the rise in retired people moving to our area? I say so, but also our area is culturally diverse. Orchestra performances, plays with professional actors, restoration of old buildings, shops with high end goods, restaurants and other venues for concerts and music of all types as well as restaurants with more refined menus are popping up all over. The rural arts are benefiting all age groups as spectator or participants. Renovations to existing buildings, are giving them the ability to support more activities for young people drive the younger residents to stay and enjoy events and to invite their friends from the big cities. If we can culturally capture their interest, it is much better as they experience the benefits for all citizens. Years ago I would hear people say there was nothing to do here…. Not anymore!

Also, a small community lets you participate in helping others for fundraising to save a theater, museum, parks, libraries and hospitals. A great fear for country towns is not only the loss of the countryside itself but also the way of life and the community involvement. General concern and care of neighbors and generations of tradition is the focus. We take care of each other and work together to bring a new soccer field, sports complex and other fights for the community.

One thing about living in the country is that when the power goes out after a major storm, it could be days or weeks before power is restored. If a piece of equipment breaks down, it may take weeks to repair and this can mean trouble when it is essential to the running of your farm, ranch or small property. There are no push mowers on properties with twenty acres or more! You become self-sufficient because you have to be. You do a lot more hands-on repairs that you never dreamt of needing to do. It’s an exercise in patience, willingness to learn, taking turns and helping neighbors. In that way, you earn a pat on the back, a handshake, a beer on the porch and know that the person you just helped get a job done is a person you can rely on to assist you, too. Neighbors are key in the country. It is a pace of life you learn to live with.

That is not to say that being part of the country community can take some getting used to. From uninvited visitors, human and wildlife, to the internet not working, cell phones dropping calls in low areas, septic tanks instead of sewers, no streetlights or pavement, it is a far cry from many newcomers previous urban lifestyles.

I hope people will come to visit and stay a little longer than for an ice cream cone or a beer. I hope people come to experience our way of life, the more they can enjoy, appreciate and support it. Our future lies in being able to deliver sustainable communities with thriving local economies made for and by the people who live there.

Cathy Cole, ALCAbout the author: Cathy Cole, ALC, Owner/CEO of Heritage Texas Country Properties, the largest real estate company in south central Texas. She served as the Chair of the REALTORS® Land Institute’s 2016 Government Affairs Committee and as President of the Texas Chapter of RLI. Cathy serves on the Nominating Committee for Texas Association of REALTORS® and is currently a member of their Land Use Sub-Committee. She is also a founding member of the Texas Land Brokers Network.

The Risk of Buying Land Without Using a Land Real Estate Professional

Why do we buy land?  We buy land for:

  • Use as an owner/operator
  • Recreation
  • Investment
  • 1031 exchange
  • Development
  • A legacy
  • Retirement…..

How many types of land are there?

  • Agricultural – farms and ranches
  • Confinement operations: hog, dairy, poultry
  • Agribusiness uses: elevators, seed processing plants, etc.
  • Timber
  • Orchards/vineyards (permanent plantings)
  • Hunting/recreational
  • Development
  • Land-in transition
  • Commercial
  • Residential
  • …the list is lengthy!

Land real estateHow, then, do you make an educated decision in the acquisition or disposition of land?  How do reach your land goals and objectives?  Do you know where to start and the questions to ask?

When you work with a qualified land real estate professional, such as an Accredited Land Consultant (ALC), the land professional can assist you in reaching your goals and objectives through:

  • Asking the right questions to determine what those goals & objectives are
  • Once identified, to provide thoughtful analysis and innovative solutions to help you reach those goals
  • Presenting you with appropriate information on current economic conditions at the local, regional, national and global levels; interest rate trends; commodity prices and effect on land values/rents/sale prices; as well as updates on legislative issues that affect your land
  • Discussions to determine if you should/could do a 1031 exchange, DST, or other tax deferment with the sale proceeds based on your goals/objectives, how large a tax consequence there will be…
  • Determining the highest and best use of your land
  • Handling mineral or water rights issues using the proper legal avenues and guidelines
  • Marketing your property appropriately including through the REALTORS® Land Institute’s Land Connections listing site, Lands-of-America affiliation, as well as marketing at the state and national meeting marketing sessions.
  • … again, the list is lengthy due to the depth and breadth of issues for any tract of land.

Minimize the risk with your largest investment by working with an Accredited Land Consultant (ALC) who can provide the connections, education, experience, and expertise to guide you through the changing, complex world of today’s land market. Before you consider buying or selling a tract of land real estate, make sure to Find a Land Consultant to ensure you get the best representation possible.

Terri Jensen, ALC land real estateAbout the author: Terri Jensen, ALC, was the 2015 National RLI President. She is currently the VP Real Estate/Appraisal Operations at Upper Midwest Management Corporation. She is a licensed REALTOR®/Broker in Minnesota and Nebraska as well as a licensed appraiser and auctioneer in Minnesota.

The Value in Using a Land Real Estate Expert

“Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization. REALTORS ® should recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership.”Preamble to the NAR Code of Ethics

Accurate, reliable and timely information is vital to effective decision making in almost every aspect of human endeavor, whether it be for personal or business gain. It is absolutely essential for making the most informed decision. As one of our responsibilities as licensed real estate professionals we are to “protect the public.” In the absence of accurate information, people will make bad decisions. Being a member of the REALTORS® Land Institute provides the public with the information that you and I are considered as “the land real estate experts.”

Being the Expert
In today’s world of more highly educated adults and, more specifically, the millennial sector, the qualification of being more than fifty miles from home with a brief case doesn’t qualify a person as an expert. As part of today’s college educated society, the process for making a business decision in a specialty area outside that of your educated profession is to hire an “expert.”

When a client hires an expert, the most important quality they look for is someone who presents themselves as a professional. A potential client will evaluate a REALTOR® on how articulate they are, their personal appearance, and the degree of comfort they demonstrate with the specific area of expertise.

Most likely you’re already fluent in several specific areas of real estate. You may know a little bit about several different types of real estate, but stressing overall knowledge doesn’t let you stand out from your competitors.

Alternatively, consider your unique interests, experience and passion for a specific area of agricultural real estate. Look at your business and calculate where the source of the majority of your transactions comes from.

In essence, what is it about real estate that attracts you and gets your juices going? Do a strong and precise evaluation of what you know best, what you wish to know more about, and what will get traction in your area. Then, focus on those issues that come out at or near the top of the list. In order to gain the edge, you will need to acquire all of the detailed information that is available in that area. Sources can be online, seminars, and/or professional meetings with networking opportunities. Accurate information is crucial to nearly every professional and academic discipline because facts are the only way humans can ascertain truth. With that said, the purpose of this article is to emphasize the importance of providing accurate information to our clients and some processes to attain that information.

Communication of information is key
Based on nearly forty years of experience in farm land sales, management and consulting, I have prepared what I consider to be a comprehensive checklist of detailed information that is the basis for listing a property for sale or when representing a buyer, it’s used to acquire the right information. One of the most frustrating issues for me is when I am evaluating a property for a potential buyer and the listing agent provides only a general summary of the information and, in some cases, inaccurate information.

I would like to illustrate a perfect example of why using a land real estate broker with specialized expertise in these types of transactions—preferably an Accredited Land Consultant—is necessary. A while back, I received information on a farm, provided to me by a farm broker, that was not his listing. That fact was disclosed, which is the correct process. The property included a nice residence and several outbuildings. The large barn had been refurbished into a family party facility and the farm did contain some tree and berry crops. The information packet from the listing broker contained significant information about the improvements but very limited information concerning the crops, soil types, crop varieties, historic crop yields, and lease history.

I use this as an example to illustrate two things: First, in my opinion this is not providing the seller of the property appropriate fiduciary service on selling their farm. Second, as a farm buyer’s agent, I will either pass up the farm right away or have to spend significant time acquiring the appropriate detailed information required to make an informed decision for my client.

The “rest of the story,” as Paul Harvey always said, is that the broker whom presented this property to me did end up doing the work researching the appropriate detailed information. However, he had a very difficult time of acquiring all the usual crop history, even though he attempted, because it was a bit difficult working with the listing agent. Again, the farm broker worked very hard and did the best he could.

Again, I use this example for a few reasons: First, you would not be providing your client (the seller) “expert” service, because as a result of not providing adequate detailed information, many potential buyers will simply pass on the deal. Second, as a member of the elite RLI you would not be appropriately representing our society. Third, you will be losing deals. With the technology available today, your goal should be to provide 95 percent of the information which a potential buyer will need to make an informed investment decision. I use 95 percent because no two investment experts think alike so there will always be some unique information that every potential buyer will request.

Where do you get the information?
First, start with a very detailed interview with the seller, the current tenant, and the respective Farm Security Administration (FSA) office. Be certain to get a letter signed by the seller giving you permission to access their information at the FSA office.

Second, verify the information provided. Even though the information is provided by the seller, I have found that sometimes their memory may not quite be totally accurate.

Third, you can use websites available for aerial, soils, topo, land-use, water permit registrations, drainage, and FSA information. I have a list of websites that may be of interest and am happy to share if you drop me an email.

Fourth, contact your fellow ALC colleagues for information about areas which you may NOT be real knowledgeable. The MOST valuable resource of information for my business is the tremendous network of colleagues that I have created through all the years of being a member for professional agricultural organizations like RLI. That is why I feel so honored to have earned the ALC designation this year and to become a member the most “elite land experts” in the nation. I have known many of the ALCs for years and am certain that when I call on one of them for assistance, there response will always be “what can I do to help you out?”; which would always be my response as well. However, if I have the opportunity to list a property which is outside my area of expertise, I contact one of my ALC colleagues whom I know is an expert in that particular type of real estate and refer the listing to them. For me, that is providing me the “expert” quality service to my client.

The network of professionals you create by attending the annual meeting, your local chapter events, and attending education classes will continually expand that network knowledge base for you to draw from. Having been in the business for many years I have been blessed with having done sales, management or consulting work on more than forty different crops in the thirty-nine of the fifty states. There are many other members with similar experiences and we all are your best resources to draw from for information.

Accurate, reliable and timely information is the key to “protecting the public,” which is a responsibility of our real estate license, providing our clients the top level “expert” fiduciary service, and will bode well for building a very successful business. The best information resource you have available is your fellow RLI ALC members. As a reminder, always make certain to use a disclaimer statement on all of your brochures.

One last testimony: I contribute a very large percentage of my success in the farm land brokerage, management, & consulting business to the networking relationships that I created through the REALTORS® Land Institute. Whenever I have called a colleague for help the answer has ALWAYS been, providing they knew the answer, “How can I help you?” In the cases where the person did not know the answer, they always knew someone to contact. I am willing to share my listing due diligence information checklist if you happen to be interested or if I can help you with any type of project, please contact me.

This article originally appeared in the 2017 Winter Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

About the author: Fred Hepler, ALC, has been involved in the land business for over forty-two years and is a licensed broker in multiple states for over twenty-five years. He has experience in selling, managing, and/or consulting in thirty-nine states. He is a past president of ASFRMA where he held numerous positions on committees at the state and national levels and is now looking forward to becoming more actively involved in RLI.

A Guide to Real Estate Mapping and Analysis Tools

This article originally appeared in the 2017 Winter Terra Firma Magazine, the official publication of the REALTORS® Land Institute.

Smart land agents will embrace technology advances and use them not just to survive but to thrive. Others may cling to their brochures and rolodexes, hoping that they can continue to be successful because things were better in the old days and that’s how things have always been done. Unfortunately, history and my experience have shown that nostalgia and longing are rarely good business strategies, especially when it comes to real estate mapping.

Real estate technology innovation is booming. The first wave focused on residential real estate with companies producing solutions like Realtor.com, Zillow, RedFin and StreetEasy. The residential market was ripe for disruption because the Internet was a natural place to expand listing services, engage people through interactive digital marketing and differentiate the realtor’s business with better information, not just lawn signs.

Innovation in residential real estate led industry leaders in other markets to more broadly adopt technology. However, the uptake has been slower despite promises to make their businesses and the lives of their customers better. For many decades, there’s been no reason to change workflows or processes because immense wealth has been created without disrupting the status quo. However, in the past three years we’ve seen a sea change in technology.

It’s now far easier to use and delivers bigger benefits more quickly. Buyers expect an interactive, digital experience and marketing automation. How do you make sense of all the hype, especially if you are a small business owner who is not tech savvy? Above all, where do you start?

Drones: No Longer Just for Dramatic Video Shoots

The excitement around drones has increased immensely in the past year and with good reason. New Federal Aviation Administration rules have reduced uncertainty on who can fly and where and, more importantly, the technology is at a point where anyone can now use them for a small investment.

Drones used to be used exclusively in marketing real estate. A drone mounted camera can produce cost-effective shots of a property. For large, high-end homes or big expanses of land, dramatic videos let you immerse yourself and experience tree top flights. Today, that immersion comes in the form of virtual reality-like 3D interactive experiences that let you fly around and view the scene from any perspective. In the University of Oxford example, shown below, the drone flew multiple paths over the city. The raw video imagery is used to create a full 3D model of the buildings, including exquisite detail for the build frontages, rooflines, gargoyles and chimneypots. You can literally fly down the streets and lanes, and land in any courtyard to explore the buildings.

The same data feeds used to map Oxford can be used in land management to create terrain surfaces which show perspective and hillshading. This can be used to detect slopes, hollows, banks and hidden landscape features which are not obvious in aerial or satellite imagery. Low level drone flights also create very high resolution data which can show changes in vegetation and land development with high degrees of precision such as in this montage below where we not only can see where a new road has been laid but also changes to the height of vegetation and small hollows where water is ponding or eroding the land.

Immersive scenes are immensely valuable for supplementing existing online marketing. What’s more the video data can also provide new perspectives, often quite literally. I recently worked with a land broker who was selling a large tract of land along California’s Mendocino Coast.  She had a drone fly over the pasture and old growth forest, up fern filled gullies and fishing ponds. Only after did she realize that the views of the homestead from the private vineyard were missing. They had flown the house and grounds but had not flown towards the house over the vineyard. The great thing was that even though the drones had flown different routes, we could still recreate a full 3D model of the house and grounds. Rather than have a static video, our client created a virtual fly through along the rows of grapes glistening in late summer evening sun, and then up and over the house to show the full grandeur of the setting. Better still, her clients can take the same virtual tour or browse a set of interactive snapshots she has created. She didn’t need to organize another drone flight. Everything she needed to properly promote her ranch was in the data files the drone had collected, we just needed to process it.

Data in the Cloud – Everywhere for Everyone

We’ve all experienced Google Maps and Google Earth. They have changed how we find and view maps and land data. The revolution Google drove is for online data. Today, there are millions of map layers from every corner of the globe forming a Living Atlas of the World. Local, regional and national Governments, private companies and even crowdsourcing volunteers are publishing authoritative and personally collected data into open libraries which anyone can use.

In the United States we have Federal Government data on everything from cropland to wilderness areas, maps of geology, soils, landscape, forest, flood zones, wetlands and hundreds more. Every one of these is freely available to use for analysis and overlay. In many rural areas, the data is better and more useful than cities.

One of the most valuable data sets is satellite imagery. Every frame of Landsat data, which has been imaging our planet since 1972, is available online. This is a valuable source of land surface change information and provides insights into seasonal changes in vegetation, soil moisture, crop growth and much more.

Many satellites have collected data which has been used to collect a high-resolution terrain model of the world. Since this data is also open to everyone, land owners and consultants can use it to understand more about the property throughout the buying process. One common use is gaining an understanding of soil drainage, as it has an important impact on crop production together with water and fertilizer use. Terrain profiling tools, like those shown above, can provide detailed analysis on changes in topography, drainage direction and soil moisture variations. In the example, we can see how the land slopes across the mile-long profile. Even small features of a few feet can be understood by tracking the profile against the aerial imagery. It is possible to identify old stream beds and even the site of a small quarry and ditch.

Sketching, Markup and Marketing

Many land specialists just want simple tools to access land parcels and property data. Open map and data standards mean that many communities are sharing their parcel data as online map services or files. Desktop and online software allow you to upload and fuse these files, trace parcels lines and find out ownership details like those shown in this suburban example below. Map services are simple, syndicated data feeds which create layers for each one you open in free real estate mapping applications like Google Earth or ArcGIS Earth. These “services” are more than pictures. You can query them, see attributes and, in many cases, use them to draw property boundaries by sketching straight onto the map.

Map services also now support social media and online storage sites like Facebook, Photobucket and Flickr. Photos which have been captured with your GPS on your smart phone or tablet contain location data that these sites use, so that these photos can automatically be positioned with your map. Tools to change the color, transparency, outline and shape of any symbols allow you to create high quality digital and print materials with no additional software, as shown below.

You can drag and drop spreadsheets with property addresses or GPS coordinates onto a web browser automatically turn them into online maps. A few clicks, and no coding later, the same spreadsheet can become an interactive property promotion or marketing resource. Rather than creating and mailing out paper books, land specialist can now email links to their properties, so clients and prospects can browse them at their leisure. Since the real estate mapping services which underlie these apps are dynamic, they automatically change when new entries are added to the spreadsheet. Better yet, web analytics tools embedded on your website can tell you how many people are browsing your properties and which ones are the most popular. Having real time listings, web analytics and links to your CRM means you can better market your properties and keep your clients coming back for more.

The Real Estate Digital Revolution

The full impact of the digital revolution in real estate is yet to be seen. The huge improvements in the simplicity of building web apps, promoting properties through interactive marketing tools and using different map layers, are producing a strong movement towards empowering the consumer and land specialist alike. Today, buyers expect to be able to access online information and experience the property without having to visit in person. They are more discerning buyers with many choices for who they do business with.

Real estate mapping, analytics and marketing in the real estate industry are moving on, and fast. Shouldn’t you be making the most of it?

About the Author: Helen Thompson is responsible for global marketing strategies in the commercial business development team at Esri. Her twenty years of experience in applied spatial analysis has helped advance the understanding and use of spatial technology in business and society. She is a graduate of spatial science and computing at the University of Wales Institute of Science and Technology and geography at Plymouth University.

 

drone with camera for real estate commercial use

Drones for Commercial Use: Taking Real Estate Businesses to New Heights

As I was browsing the internet today, I came upon a humorous article entitled Santa Delivered the Drone. But not the safety and skill to fly it. The article contained a number of “drone laments”, speaking of the excitement of getting a new drone for Christmas followed by the agony of crashing it on the first day or even the first flight. One Tweet read: “A holiday story: Give nephew drone. Nephew flies drone for like five seconds. Drone falls, breaks. Christmas ruined. Drones are stupid. The end.” This one gave me a good laugh.

It’s true that drones have become a very hot item in recent years. And as the technology has become more widespread and less expensive, drone sales have gone through the roof. The majority of the drones sold cost less than $200 and are best classified as toys. And most people who fly them lack a good understanding of flight principles, wind, and spatial awareness. Thus, the yuletide drone woes come as no surprise.

“The use of drones across all sectors has exploded in the past three years. The FAA estimates that over 600,000 drones will be flying commercially in the US in 2017.”

In real estate and many other businesses, drones for commercial use are definitely not toys. They are valuable and, I might add, critical tools for marketing and selling property. I have personally been using drones for over two years – thanks to my FAA Section 333 exemption. I can personally attest to their value in my business, BUT here’s the latest: my exemption doesn’t exist anymore. In fact, ZERO Section 333 exemptions exist. That’s because in August of 2016, the FAA enacted a new rule enabling people to become licensed specifically as drone operators. Previously, the only way to legally fly a drone for commercial purposes was to hold a pilots license and go through a lengthy approval process to get an exemption. Now, after taking online education and passing a written exam, individuals become licensed as drone operators and can fly completely legally, subject to certain regulations.

drone for commercial real estate use with camera

Due to this new rule, I have been encouraging every land broker I know to become licensed and start flying. You can buy a drone for less than $1,000 that has all the capabilities needed, and you don’t have to be a Navy fighter pilot to safely and efficiently fly your drone for maximum effectiveness. A little practice goes a long way and the more you fly, the more comfortable you will become. I often tell people that I could teach a ten year old to fly my drone in under thirty minutes – and I mean it. With the right equipment, the drone basically flies itself. This small investment of money and time has the potential to have huge impacts on your business.

An overhead view provided by a drone shows how a property fits together, how it is accessed, and the surrounding land and uses. On a large property, you can showcase more about a property in a sixty-second video than an entire morning of driving. Additionally, in the same way that digital photography and online mapping are considered standard today, drone video and photography are becoming just as commonplace. As land professionals, it is important to keep in step with emerging trends to bring the best service and value to our clients.

At the 2017 National Land Conference, I will be leading a breakout session on the use of drones in land real estate. We will briefly discuss how to become licensed as a drone operator but will focus primarily on how to best use this tool to increase value for your clients and increase business for yourself. If you have no experience or interest in drones, I invite you to attend and see if I can change your mind. If you have been flying drones for years as I have, I invite you to come and share your stories, as well as what works for you and what doesn’t. The format will be very interactive and I think everyone will come away having learned something new – including myself!

I hope to see you at the 2017 National Land Conference in Charlotte, NC, from March 31-April 2. In the meantime, if you have any questions about drones that I can answer, please give me a call or drop me an email.

mcdow, calebAbout the author: Caleb McDow is a land specialist for Crosby and Associates in Winter Haven, FL, with a Master of Science in Real Estate (MSRE) and is a FAA Certified Drone Pilot. McDow joined the institute in 2014 as a Military Transition Program (MTP) member.  He serves on the Institute’s Future Leaders Committee and regularly blogs on real estate issues. Caleb McDow can be reached at 352-665-6648 or caleb@crosbydirt.com