Agricultural Land Marketing Basics

We as agricultural professionals know how hard we work to find buyers and sellers of land. We spend years of hard work to build our clientele and our reputation. Marketing a property correctly and in a timely manner is paramount to selling the property. Getting the listing is just the first step in the process of selling the property. There is still much work to do. I am sure that most of us are already marketing our properties in an informative, professional manner, but we can all improve our marketing efforts.

Most medium to large brokerage firms have an in-house marketing department which handles flyers, mailers, websites, etc. Other smaller firms may use an outside marketing company. The first step as the listing agent is to get all the pertinent information to the marketing team in a timely manner. This information should include: The full address of the property, GPS coordinates, acreage, photos, aerials, the property description, property highlights, improvements, soils and topo maps, production records / yields, well information, location maps, zoning, permitting, future land use, and demographics. Multiple location maps should be used, as many buyers may live out of state or out of the country and need detailed information to understand the property location.

The completed flyer or brochure and any other pertinent information should then be posted on the company website. After this, the flyer is emailed to recipients in the company database. The recipients should be filtered based on his or her property interests. For example, if the subject property is a citrus grove, the email blast should be sent only to people interested in citrus groves. People tend to trash these emails or even block a sender who constantly sends information that is not relevant to his or her wants and needs.

The next step is to post the flyer and all pertinent information on the various real estate marketing websites. These may include MLS, LoopNet, Land Flip, Total Commercial, and Lands of America, just to name a few. You should make sure to have any additional pertinent information posted on these websites. There is plenty of room to add additional information such as detailed soils map, location maps, demographics, etc. The greater the amount of information, the better. In many cases, we are dealing with very sophisticated buyers. They need all the information they can get to make an informed decision. It is very frustrating when the only information provided is a plat map and a brief description of the property. We are professionals and should market our properties in a professional manner.

Sometimes, you have to get creative with property marketing. There are a few other methods which could prove effective or even critical. Some people, believe it or not, don’t have an email address. In this case, direct mail might be called upon to reach the buyer, whether through personal letters or postcards. There are various trade magazines and newspapers in which to advertise as well. Lastly, let’s not forget the old phone, whether a cell phone or land line. We must keep in touch with our buyers and alert them when we have new listings that might interest them.

I hope this article was helpful and informative. Good luck marketing your properties!

Fortenberry, ChipChip Fortenberry, ALC, MBA

When A Crop Kicks You in the Gut

I went to work on August 12th with a lengthy to-do list. I knew it was going to be a busy day and an especially interesting lunch hour. Like most of us involved in farm management and agricultural real estate, I was eager to hear the USDA Crop Report. In today’s fast-moving world, that report can affect the market strongly and swiftly.

All bets are off with USDA reports; I have been around long enough to know that. That said, I was trending towards the camp that was expecting bullish news. I am not sure where you sit while reading this, but in Central Illinois, I don’t see an enormous crop. I see a crop that struggled with record rainfall in June and in some instances, never even got off the ground. With that in mind, I had gone through every farm management account the previous day and gotten figures and delivery dates all lined up for some additional crop sales. I was ready! I just needed the report to be released. Then, the report came out…
The USDA raised the corn yield 2 bushels per acre and beans 1.5 bushels per acre. Immediately, corn was down 20 and beans down 60. In an instant, it sent producers and managers scrambling for answers and looking for “next steps”. It should be said that the USDA doesn’t necessarily do a thorough inspection of the crop, and in their defense that is probably an impossible task. Regardless, they put large projections–and in some cases, historic projections–on the states in the Western Corn Belt that have supposedly had more favorable weather. Whether ag experts think the USDA projection is off-base or not, the fact remains that the market trades off of these numbers and until there is new data or an unforeseen outside influence, this is what we have to work with.
cornfield
It is uncertain whether anything can spark substantial movement until farmers hit the fields. Only when grain crosses the scales will we know what crop we have. Until then, estimates are just educated and calculated “guesses”. Some theorized that FSA preventive planting numbers released on August 17th could’ve provided a bounce. Although there were over 2 million acres prevented from being planted in Missouri and Illinois, the 17th came and went without much movement. Extenuating circumstances abroad could move the pre-harvest market, but that is often harder to project than the crop itself. China’s currency devaluation was the buzz during the week of August 10th. Oil hitting a six-year low on Monday, August 17th is the chatter right now. What remains to be seen is whether any of these outside factors can substantially alter commodities in the interim. If we had gotten a hot dry-spell in August, that could’ve swung the pendulum…but that was a big if.
Perhaps the Pro Farmer crop tour will enlighten traders on what to expect. This annual tour encompasses teams from Pro Farmer scouring the entire Corn Belt with in-depth analysis. The USDA fails to get up close and personal. This crop tour has legitimate boots on the ground with plant population numbers, ear size measurements and ultimately provides yield checks on a multi-state level.
At the end of the day, the report came out and kicked the “Bulls” and optimists in the gut. We very well could be in line for some choppy trading during the next month. Perhaps an outside event or development could form, but I personally wouldn’t bet on it. Treading water until harvest is well-underway is our most likely immediate future. Harvest season is always exciting and often provides a few surprises. Until then, we can wish together that we pulled the trigger on sales the days leading up to August 12th.
Luke Worrell, ALCContributor Luke Worrell, ALC, Worrell Land Services
Luke Worrell is a Broker, Accredited Land Consultant and Accredited Farm Manager in Jacksonville, IL.  He specializes in agricultural real estate and land management in west central IL.  Luke enjoys all things sports and traveling.  He resides in Springfield, IL with his wife Allison and son Kale.

Section 1031 Exchanges are Important to a Healthy Economy

Over the past two years there have been numerous proposals to restrict or eliminate I.R.C. §1031 tax deferred exchanges. These proposals are based on misunderstandings about §1031 and do not account for the powerful stimulus impact that §1031 exchanges have on the US economy. This article will debunk a few of those myths and discuss the findings of a couple of recently released studies that quantify just how important §1031 exchanges are to a healthy US economy.

Myth: Section 1031 allows taxpayers to avoid capital gains taxes, and to defer gain indefinitely.

Truth: Under §1031, taxes are deferred—not eliminated. Section 1031 exchanges structured under the IRS regulatory safe harbors are neither tax savings vehicles nor “abusive tax avoidance schemes.” Payment of tax occurs: 1) upon sale of the replacement asset and 2) incrementally, through increased income tax due to reduced depreciation deductions. A recently conducted study entitled “The Economic Impact of Repealing or Limiting Section 1031 Like-Kind Exchanges in Real Estate” conducted by Professors David Ling and Milena Petrova (“Ling & Petrova Study”) examined more than 1.6 million commercial real estate transactions between 1997 and 2014. It found that nearly eighty-eight percent of properties acquired in a 1031 exchange were ultimately sold in a taxable sale, rather than a subsequent exchange.

Myth: The absence of a precise definition of “like-kind” is administratively difficult for the IRS and creates the opportunity for abuse.

Truth: The definition of “like-kind” is well understood, §1031 is neither administratively difficult nor abusive. Like-kind exchanges facilitated by professional Qualified Intermediaries, and conducted within the regulatory safe harbors, are straight-forward transactions that follow a well-understood set of rules (including definitions), procedures and documents.

Myth: Like-kind exchanges are used only by the wealthy.

Truth: Like-kind exchanges are used by a broad spectrum of taxpayers at all levels.Section 1031 is fair, benefitting taxpayers of all sizes, in all lines of business, including individuals, partnerships, limited liability companies, and corporations. A 2011 industry survey concluded that sixty percent of exchanges involved properties worth less than one million dollars, and more than a third were worth less than five-hundred thousand dollars. Exchanged properties include real estate, construction and agricultural equipment, railcars, vehicles, ships and other investment and business-use assets.

Myth: Elimination of §1031 like-kind exchanges will raise significant revenue.

Truth: Elimination of §1031 would result in a long-term reduction in Gross Domestic Product (“GDP”) of the US. Section 1031 is a powerful economic stimulator, encouraging investment in small and medium sized growing businesses, thereby promoting US job growth. Section 1031 exchanges contribute to the velocity of the economy by stimulating a broad spectrum of transactions ancillary to the actual exchange which, in turn, generate jobs and taxable income through business profits, wages, commissions, insurance premiums, financial services, and discretionary spending by gainfully employed workers. This transactional activity raises state, local and federal tax revenue through transfer, sales and use taxes and increased property taxes.

Ernst & Young recently released a macro-economic study, Economic Impact of Repealing Like-Kind Exchange Rules, that found that the U.S. economy would contract by approximately $61 – $131 billion over ten years if §1031 was eliminated.

Other key findings of the Ernst & Young and Ling & Petrova studies included:

Like-kind exchanges encourage capital investment. On average, taxpayers purchased replacement property that was approximately thirty-three percent more valuable than their relinquished property;

Elimination would increase the cost of capital and slow the velocity of investment;

Like-kind exchanges contribute significant federal tax revenue. Thirty-four percent of exchanges were only partially tax deferred; some federal tax was paid in the year of the exchange. Additionally, eighty-eight percent of replacement properties are eventually sold in taxable sales rather than in a subsequent exchange, resulting in higher taxes paid due to increased capital investment. Elimination would result in less federal revenue.

Like-kind exchanges create jobs. Real estate acquired through a like-kind exchange is associated with greater investment and capital expenditures (job creating property improvements) than properties acquired without the use of a like-kind exchange.

Elimination of §1031 would impact the overall economy, with an unfair concentration in certain industries including real estate, construction and equipment manufacturing and leasing.

The complete Ernst & Young and Ling & Petrova studies can be found at:http://www.ipx1031.com/wp-content/uploads/2015/03/EY-1031-Economic-Study-3-2015.pdf and http://www.ipx1031.com/wp-content/uploads/2015/07/Ling-Petrova-Economic-Impact-of-Repealing-or-Limiting-Section-1031.pdf.

Both studies quantify that like-kind exchanges are important to a healthy economy. They increase transactional activity, provide an incentive to improve properties and increase investment in the US. Make sure your elected representatives know the facts. Click hereto send them a letter telling them that §1031 is important to you and your livelihood.

Assistant General Counsel for IPX1031®

Contributor James Miller, Assistant General Counsel, IPX1031®

Jim Miller is the Assistant General Counsel for IPX1031® a Qualified Intermediary, a national leader in §1031 tax-deferred exchange transactions and a wholly owned subsidiary of Fidelity National Financial. He is an approved LANDU instructor for the “Tax Deferred 1031 Exchanges” course, “Advanced Tax Deferred 1031 Exchanges for Land Professionals” course and helped author the ALC Exam and the “ALC Core Course Manual.” Miller can be reached at 602-850-8630 or at james.miller@ipx1031.com. To reach your closest IPX1031® office, call 888-771-1031 or visit www.ipx1031.com.

This piece was published in the 2016 Fall Terra Firma publication.