The Supreme Court’s ruling in United States Army Corps of Engineers v. Hawkes Co., Inc., set a precedent that landowners may challenge the Corps’ jurisdictional determination specifying that a piece of property contains a “water of the United States.” Read more.
Farmers, some whose families have owned and managed their property for generations, are now facing difficulties managing their own land. The government’s ability to claim a property falls under Waters of the US means the owner may be required to get a federal permit before they can do common tasks like plowing their own field. The looming U.S. Supreme Court decision on U.S. Army Corps of Engineers v. Hawkes Co. will have a big impact on the land owners’ rights regarding WOTUS. Read more.
If this title had you thinking, “Oh good, I’ll just read this, gather a few pointers and be on my way to selling that ranch!” — think again! This topic would be a great Napoleon Hill “brainstorming” session, wouldn’t it!
My fellow Accredited Land Consultants (ALCs) could all write this article, and certainly could elaborate on it based on their own knowledge and procedures. I hope this piece will help those new to selling larger land parcels, including ranches.
Ranches–first of all–what are they?
They come in all sizes and uses including hunting, hay, cattle, fishing and recreation, high fenced exotics, vineyards, and true working ranches. This will not include a discussion on agricultural production, other than hay as that is an entire subject regarding farmland and not part of this article.
You have secured a wonderful ranch listing, discussed the aspects of the ranch with your sellers, and counseled with them regarding the listing and selling process, expectations and potential results.
Have your sellers tell you what they have loved about the ranch, and different parts of the property. How is the lighting different in the summer versus the winter? What have they changed, built, or modified since they purchased? What would they still change if they were to continue as owners? You need to really get the ‘feel’ of this property, and your sellers are your best resource–now you can share that through your marketing to potential buyers and agents.
Gather your data–no shortcuts!
Surveys; legal descriptions; tax information; how property is assessed (agricultural, timber, wildlife, etc.); mineral ownership; production; water rights; wind rights; BLM leases or other agricultural leases; conservation easement documents if applicable; well logs; zoning information; local utilities; inventory list of exclusions and inclusions (talk to your sellers about this, get this early in process–it will still probably change!); income/expense/proforma statements (as many years as possible); off record items.; distance to airports and FBOs; know the length of runways for private jets, all jets are not equal and require different distances.
Have there been any environmental assessments done on the ranch? Many buyers will want, at minimum, a Phase One–we all know most ranches have their own “landfill” somewhere! Also, inquire about government programs, CRP, Grassland Reserve, etc.
As you move forward, gather information on competitive properties and projects as well as sold and closed properties within a determined area where buyers would look for similar properties. This could include several states! Collect regional and local information and articles–if in a resort area, sell that! If your ranch has development or conservation potential, put together development costs and estimates.
You will want to gather all building descriptions and specs, floor plans, building diagrams, blueprints, etc.
Study your subject–maps, maps, maps!
Know your boundaries. How much is wooded, how much in crop production, hay production, native grasses? How many water features? What’s the size and depth of ponds and lakes? Check with your local NRCS office as they have great maps. With your mapping programs, create boundary, aerial, topo, FEMA and flood maps. Locate improvements and points of interest on your maps. Now, create your soils maps–NRCS has a great site for this as do most mapping software. This is important to buyers! Figure the carrying capacity of your pastures; knowing how many AUMs in certain climate conditions will be beneficial information for some buyers. Know the current pasture plans in place; when and how often it is fertilized; how about weed control, planting, sprigging, and so on. Can this be improved? How?
Regarding fences, know which are boundary and which are cross fences. If a ranch is high fenced, find out who built it and when it was built.
When it comes to hunting and fishing amenities, get photos–elk, deer, turkey, cat, ducks, geese, fish sell! If a ranch is primarily used for hunting and recreation, there is a host of other categories on which to gather information. It is also important to know the areas in certain parts of the country, how many tags a land owner gets, licensing, season dates, etc. If outside hunting is allowed and if a business is part of ranch, then, all financials are important. Same goes for dude ranches, vineyards and all income production which contributes to value of the ranch and is part of what you are selling.
Yes, assembling all of the critical information that makes you as knowledgeable as the seller about your ranch listing is paramount. Now you can decide your marketing strategies. Foremost is determining if your ranch listing is a local, regional or global property in its appeal. Most ranch brokers utilize the excellent esoteric publications of our business. These magazines were our “bibles” and served as our main Multiple Listing Service (MLS) for years! Now, they can be strategically placed on coffee tables for high-end buyer prospects.
Publications and websites catering to hunting, fishing, and equestrian properties should be considered depending on scope of property. Print publications such as the WSJ, for high end properties, have regional market advertising options. Of course, if a property is more local in scope, then, use your best local marketing publications.
If you have a potential conservation property, consider highlighting that aspect and explain state tax credits and federal tax deductions associated with easements in your marketing materials.
Offer a resource of qualified agricultural lenders. Invite them to be part of your “Open Ranch” tour. It puts you miles ahead if you can offer a knowledgeable ag lender to a prospective buyer and agent. Inexperienced large land buyers may think their local lender or private wealth management lender will secure their financing. We have all been down that path!
Nailing the “Open Ranch”
Yes, have an Open Ranch and invite your network of farm and ranch brokers. These brokers have buyers! This was certainly a successful part of marketing and had great support among the members of the Colorado RLI Chapter while I was there. Texas is vast and properties can be combined with other local ranch listings to showcase your unique properties to your broker network.
Certainly we all know that the “basics” are important in selling a ranch and they are far more reaching when selling a home. A well-staged home and barn is important. The property must have all deferred maintenance completed, be the cleanest it’s ever been. Barns and out buildings must be clean and organized. Fences should be fixed with no sagging wire or broken boards; fence lines sprayed for weeds; etc. This list could go on and on!
Good photography, both still and aerial from a drone, is essential on large properties. Also, having the proper vehicle available to show your property is a must! A low profile car just isn’t going to work!
These are just a few of the aspects to consider when preparing to market and sell a ranch. Last, but as important as first, when you are counseling your sellers, ask them about their plans for “after”. Many sellers are not aware of tax deferred 1031 exchanges and how this IRS code can possibly benefit them. Have your trusted Qualified Intermediary in your resource list to provide to your sellers-this can possibly save them a lot of tax dollars.
Pull on your boots now and good luck!
About the author: Deitra Robertson, ALC, is President and Owner of Deitra Robertson Real Estate, Inc. She is a founding member broker of American Farm & Ranch and founding President of the Texas Land Broker’s Network. A member of the REALTORS® Land Institute since 1996, Deitra has served as President of both the Colorado and Texas RLI Chapters and on the ALC Designation Committee.
If you are a member of the REALTORS® Land Institute, you have a member profile that is seen by possible clients every day. The RLI Find a Land Consultant Tool was recently updated to make finding land consultants easier and faster than ever before. This is great news for you as an RLI member because this is an additional opportunity to put your best foot forward for potential clients–but only if your profile is updated! So, here’s how to optimize your profile to bring in new clients.
The Complete Package
You already know that you are a potential client’s best option for buying/selling their land. Now, you need to make sure they do too! The first step to an effective profile page is making sure all profile information–including a professional head shot image–is filled out in its entirety. Not only does this give the readers more information to make their decision upon, but it also adds credibility. It shows you care about your image and that you are making an effort to put your best foot forward for them!
Think about when you are looking to make an important decision. What do you consider that influences your choice? For most people its goes something like: How easy is it to find the information? Is the information useful? Is the information credible? Is the information appealing? and so on…
Completing your profile also has the added benefit of making you easier to find. The more information available for clients to find you by, the more likely you’ll be found. It seems common sense but most agents don’t realize how important adding information like specialties, countries served, designations, etc. is to having an optimized profile. Also, never bypass the opportunity to add a profile image. Putting a face to a name makes you more credible, trustworthy, memorable and personable–all key aspects to gaining clients!
Now that you have added all the information your potential clients need to find you and make an informed decision, make sure to keep it updated. There is nothing worse than searching for something and thinking you’ve found it only to realize it wasn’t accurate. In this industry, no one has time to waste so don’t frustrate potential clients from the start. Get a new cell number? Change companies? Have a more recent head shot image? Update your profile right away! One way to keep your profile updated is to set a calendar reminder for every six months to check and update information.
That’s it. Having a complete and current profile really is that easy and won’t take more than fifteen minutes to set up. The digital age is here, if information about you and your company can’t be found online, you’re missing out! RLI members can start optimizing their profiles at any time by logging in to the website and navigating to My Member Profile. Need assistance? Contact the Institute at 800-441-5263 or firstname.lastname@example.org
This piece was originally featured in the 2016 Winter Terra Firma Magazine
When people hear the term “optimization” they often think of search engine optimization (SEO), but it is so much more than that. Optimizing your website is all about making your website as effective as possible to help reach your business objectives.
When land and ranch brokers ask me to help them optimize their website, there are two fundamentals I hit hard before even talking about search engine strategies. First, ensure you build value into the experience your audience has while they are browsing your site. Second, ensure you build value into the properties your audience is coming to your site to explore. Brokers work very hard to build value into their business through the expertise they deliver, the trustworthy relationships they build, and the solutions they provide, but they don’t always understand how to extend that value through their website. Your website is the single most important tool to represent you online. Ensuring you have the basics in place will go a long way towards extending the same value online as you do, so naturally, in person. So, to build value into the actual audience experience, start by asking yourself these key questions.
- When you click on your home page, does it look like you? Your website should be consistent with all of your branding. Your logo, your color scheme and your content should all represent your company. You want people to recognize your name, your signs, your email signature, and your business card. It doesn’t cost any more to make them all match, and it helps people get to know and trust your brand.
- Is all of your property information up to date? There is nothing worse than having a potential client request information and having to tell them the website details are outdated. Your website technology and approaches should make the update process quick and easy so you never have a problem in this area. You can even eliminate the need to update your land and ranch properties on your own site by choosing a website provider like us who partners with Lands of America to completely automate that process. The key here is that providing consistent and accurate information builds trust with your prospects and clients, while providing outdated information breaks trust.
- Is your website easy to use? You want your audience to find what they are looking for quickly and easily. They do not want to be forced to view advertisements, fill out a form, click through multiple pages, or create complicated searches to find what they need. Take them where they want to go immediately, and ensure your phone number is visible from every single page of your website. You want to make it easy for them to call you when they are ready.
- Is your website mobile-friendly? As of 2014, there are more mobile users than desktop users, but many companies still have not updated their technology to make the experience a good one for smart phone users. The “pinch and zoom” method results in text that is too small to read, links that are too close together, and pictures that don’t fit the screen. This frustrates prospects and clients coming to your website to view property details and request information. Make sure your site is truly mobile-friendly.
Once you’ve built value into the audience’s website experience, the next fundamental area of focus should be building value into the properties your audience is coming to your site to explore. There are a number of things you can do to set yourself apart from the competition and draw more clients, especially sellers.
- Use only high quality photography. Do not settle for small, grainy, or even blurry photography on your website. It is a disservice to your company, your clients and often detracts from the property value. If you choose not to hire a professional photographer (which is preferred), at the very least make sure you use the highest possible quality setting on your camera. Many people take short cuts with high quality photography because it costs more and many website providers can’t accommodate it. Choose a website provider who can.
- Create property and agency profile films. When I say film, I don’t mean just posting a virtual tour or raw aerial footage taken from your new drone. I mean using video to tell an engaging story about your agency and properties that capture and maintains your audience’s attention.
- Use a high quality mapping service. I recommend moving beyond Google mapping of pins and boundary markers to a monthly service. One that drives value into your properties by letting you mark and label property assets such as wells, structures, roads, and other unique features that set your property apart. One that has no limits to the number of boundary markers you can map and, then, easily share all of the mapping details via email. Some even have apps you can use while standing on the property, whether to create the asset details or show a prospect through a mobile device on the spot.
Once you have invested in the online fundamentals above, it is appropriate to start investing in driving more people to your website. You are well positioned to convert those leads to sales, positioning for a better return on your investment.
- Include your website address on all advertising and social media. You may chuckle at this one, but you’d be surprised how many people over look this critical opportunity. Whether it’s on your listings, in a trade journal, on social media, or in the home town paper, prominently (and proudly!) display your website address. One caution, if you do not intend to manage and maintain your social media sites, do not create them. Neglecting updates to your social media can create negative results. Social media sites are an extension of your business and you must have someone manning the desk to build trust.
- Provide regular email communication with your clients. Everyone knows the best leads come from client referrals. Staying in front of your clients with valuable information is very important. Ensure you have a database of clients willing to receive emails from you and reach out to them regularly with new properties, updated property information, highlights of sold properties, or something engaging, like a link to your agency profile film on your website. (Use your website as a convenient place to opt in or out of such mailings.) Ask for referrals and always include your website address in your email signature.
- Invest appropriately in SEO and internet marketing. I say “appropriately” because it can cost quite a bit to get your company to rank within the top three spots of an internet search page. Your company, broker, and agent names should be built into your website pages to generate free, top search engine placement, but beyond that, you should anticipate spending a minimum of $3,000 – $6,000 per year for a good internet marketing campaign. When choosing an internet marketing company, avoid those who guarantees success without demonstrating a significant plan involving trial, error, adjustment, and continued investment to see what works. Ask for research that demonstrates the best key words for high ranking in your business and in your region, and analyzes how your competition is placing. Choose a provider who commits to regular traffic reports to analyze what is and is not working and understand that success is based on many factors out of your control, which change all the time. For instance, if you spend $500 in a month to ensure a key word important to your region places you on the top three results of a search page, but your competitor spends $1,000 in a month for the same word, your competitor will out rank you. This is how it works, so you need to approach internet marketing as an evolving strategy requiring long term investment, both in time and money. Your goal is to build a foundation that tells the search engines you are a reputable player so they send the traffic your way. You are competing with others trying to do the same.
As you can see, optimizing your website is all about making it as effective as possible to help reach your business objectives. I always remind people there is a lot you can do to reach your business objectives before investing in search engines, and even social media, despite the current hype.
Mike Ciesiensky is the President & Founder of LandBrokerWebsites.com, a Crystalcore.net division. Ciesiensky is experienced in helping land and ranch brokers create websites to meet their business objectives. Ciesiensky presented at the 2016 National Land Conference in Dallas and is a partner of the Institute.
Note: This post was originally published in the Winter 2016 Terra Firma Magazine, the official publication of the REALTORS® Land Institute.
Almost all articles about easements deal with their appraisal. Valuation of easements is important and the real estate professional can benefit by understanding these valuation techniques. However, this particular article is designed to assist the non-appraiser real estate professional in their discussions with buyers and sellers regarding the impact of easements on land.
WHY ARE EASEMENTS IMPORTANT
Most properties have easements and in some instances these easements can impact the utilization and even value. Knowing if there are easements present, where they are situated and what they are used for, is an important part of listing, buying, selling, financing and appraising land. Any analysis or presentation of a property should include a discussion of easements. A few thoughts on the nature of easements and how they may influence value can help ascertain their significance to the transaction. When the subject property already has easements, if there is going to be an easement placed on the property or if the comparable sales and/or listings used to value the property have easements, then, their possible impact should be considered.
WHAT IS AN EASEMENT
According to the Land 101: Fundamentals of Land Brokerage LANDU course,
An easement is defined as a right in law held by one person or entity to make use of land or property of another for a limited purpose. Under the terms of an easement, the owner grants a portion of, or interest in, his property rights to an individual or organization. An easement grants a portion or interest in the property rights of a property to another individual or organization. When it is recorded, an easement becomes part of the property’s chain of title.
Easements result in a diminution of uses to the landowner and sometimes, but not always, a reduction in the value of the property. The landowner can no longer build within the easement area. Depending on the easement document, he may be restricted from traversing or crossing the easement area. There could also be restrictions on the use of the subservice or aerial portions of the land within the easement area.
NATURE OF EASEMENTS
Each easement is unique. Easements are created by a document including the specific agreements between the landowner and the holder. These agreements may have a time limit or extend into perpetuity. Very few easement agreements are exactly the same. There are almost an infinite number of uses for an easement, the most typical of which are roads, pipelines, and electrical transmission lines. Each easement reflects the highest and best use, and other characteristics of the land it crosses, further adding to its uniqueness. An easement is not a highest and best use but the existence of one could change the highest and best use of the subject property. Often, easements are described as surface, sub-surface or aerial but these classifications are primarily physical and the easement agreement may include additional rights. For purposes of discussion, easements can also be divided into right of way (land) and infrastructure (improvements). Either the right of way or the infrastructure within it can impact the value of the land. Again, the easement agreement spells out the specifics of both the right of way area and the improvements which are allowed in that area.
Another factor of uniqueness is that an easement physically divides the property which it encumbers. A property with an easement can be said to have three physical parts: the subject whole, the portion burdened (also called right of way or acquisition) and the remainder (that part of the subject whole not encumbered). These distinctions are important when analyzing the impact an easement has on value as discussed below.
Easements are quite specific and, as mentioned above, are spelled out in a legal document. A title search may uncover an easement document and this agreement should be read. Many easements are visible at inspection but some are not. The landowner should always be interviewed regarding the presence of easements. Assumptions regarding easements should be avoided.
WHEN DO EASEMENTS IMPACT VALUE
In most cases there is no impact on value due to easements, particularly if they are of the standard utility or access variety. In some cases, the easement area itself will include significant infrastructure such as highways, electrical transmission lines or pipelines. Value impact issues may include proximity to improvements; visual impairment; crossing restrictions; location issues such as traversing the land through the middle rather than along the boundaries; and destruction issues such as loss of trees or improvements. Loss of value should be based on market data rather than subjective or anecdotal reasons. Individual markets react in different ways to a particular type of easement. For example, a natural gas pipeline causes little comment at all on the Gulf Coast of Texas while a similar easement could create a great deal of consternation in rural Vermont.
HOW EASEMENTS ARE APPRAISED
Easements are not valued per se. There is no market for easements in and of themselves. The value (impact) of an easement is always the amount of loss in value of the burdened property, not the value of the easement to the taker (user). Another way of saying this is that the value of easements is based on the underlying value of the land. There are two components of possible value loss to the land: reduction in the value of the easement area and loss of value to the remainder of the tract. As discussed above, the loss to the remainder can be caused by either/or the right of way itself or the infrastructure within the easement area itself. The total loss in value caused by an easement cannot exceed the value of the entire subject property.
The generally accepted methodology used by appraisers, and the one almost always accepted (required) by the courts, is the “Before and After” method. In practice, this requires the appraiser to perform two separate appraisals: the value of the property before the imposition of the subject easement and the value of the property after the easement and infrastructure is in place. The difference in value between the two is the impact of the easement. Since any appraisal is market based, comparable land sales will be used. In the before scenario, comparables without easements will be used, and in the after analysis, comparables that are encumbered with easements similar to the one to be placed on the subject will be used. Generally, these two appraisals and the data are presented in one report.
RULES OF THUMB
There are a number of alternative methodologies (rules of thumb) which are often used to estimate the impact (value) of easements. None of these rules of thumb reflect market value and should not be relied upon. In any event, they are not recognized by appraisers or courts of law because they are not supported in the marketplace. In the final analysis, alternative methodologies are not based on the underlying land value. Three examples of these rules of thumb would be: (1) linear expressions of value such as per rod or per running foot, (2) prices paid for other easements and (3) expressing damages (diminution in value) in terms of percentages.
Basing the value on linear expressions, such as dollars per rod or foot, is a commonly used rule of thumb particularly in pipeline easements. Many companies used this metric as a budgeting tool. It is not a reliable indication of value, however, for several reasons. There is no market for sales of individual easements in the market place. Many easement acquisitions involve eminent domain and, as such, are not arm’s length transactions.
The price paid for the acquisition of individual easements is usually based on many factors in addition to the underlying value. Examples of these would be negotiations based on timing of the project and holdout situations. Additionally, because of the uniqueness of each easement, the easements being purchased probably are not similar to the subject easement.
The use of percentages not based on comparable sales data does not reflect the market. An example would be to say that a power line easement reduces property value by twenty-five percent. This is a generalization which does not take into consideration such factors as differences in size of the property being affected; different sizes of the transmission line size and voltage; different neighborhoods; different highest and best use of the property; etc.
ADVISING YOUR CLIENT REGARDING A PROPOSED EASEMENT
In the event of the possibility of an easement being imposed on the subject property your client may seek your advice. The real estate professional should exercise a great deal of caution at this point and should not ever offer legal or appraisal advice. The party seeking to obtain the easement may have the right of eminent domain, and this introduces a legal environment which will require, in most instances, the assistance of an attorney. Recommending an attorney is fine as long as they are qualified to handle a condemnation matter. In the event that an appraiser is needed, the attorney usually selects one they have worked with in the past. Acting as a negotiator or expert witness for either party in an eminent domain matter should be given a great deal of thought before accepting the assignment. Most states require an appraiser license or certification before an individual may act as a valuation witness. Any comments about easements and values, particularly in public meetings, should be based on comparable data and not alternative methods or rules of thumbs.
Easements are important and can impact both use and value of the property. Generalizations about easements are of little use primarily because each easement is unique and does not fit a preconceived pattern. Generally speaking, both appraisers and the courts apply an underlying land value based approach (before and after) to the valuation of easements. The reason for this is that this method reflects how the market reacts. Rules of thumb to estimate value (impact) of easements themselves should be avoided.
About the author: Albert Allen, ALC, represents buyers and sellers of farm and ranch properties, rural recreational acreage and close in transitional land. His background includes growing up in a South Texas ranching family, graduating with a degree in Agriculture Economics from Texas A&M University and serving as a real estate officer in the US Army Corps of Engineers.
The Obama Administration continues its efforts to limit the use of Tax Deferred 1031 Like-Kind Exchanges. In their 2017 budget proposal, the Obama proposed a one million dollar limit on both real and personal property exchanges. The REALTORS® Land Institute advocates strongly that these exchanges are a vital contributor to the entire real estate industry and the US economy as a whole. Read more.