soil

Sifting Through The Science of Farmland Soil Health

“Under All Is The Land” – the motto of the National Association of REALTORS® could not better encompass the enormity of that statement so succinctly. Indeed, the essence of all we do is upon, within, and determined by the land; its location, structure, depth, topography, and a myriad of other land factors that dictate and influence our lives and, certainly, our livelihood. We build our homes, cities, factories, and roads on the land, and put the lines and pipes to serve them under it. We till and farm and irrigate the land to feed ourselves and much of the rest of the world. We draw imaginary lines on the land and fight wars over it. Land is literally and figuratively our foundation. Of particular interest to the land brokers who comprise the REALTORS® Land Institute, is that portion of the land we call soil.

“It’s not dirt, its soil!”

“It’s not dirt, its soil!” is an often used distinction between what you plant your crops in and what you track into the house on your boots. While the words are colloquially used interchangeably, the study of soils is a fascinating exploration into the resource beneath our feet. Land brokers, particularly those involved in farm sales, can benefit from some basic soil knowledge. Many farm brokers were raised on farms and work in the ag communities where an understanding of “good dirt” is common. The underlying reasons, those identified by farmland soil science, are important to the users of the land, particularly farmers, and means that those who broker that land should also have a basic understanding of the elements of soil health.

Topsoil is the uppermost layer of soil and comprises the elements that make crop production possible. Topsoil is a very valuable and precious resource – it takes 500 to 1,000 years to create a single inch of topsoil that can be lost in minutes to erosion or improper management. Soil is developed from parent material (rock) over the span of millennia by the ongoing natural actions of weathering: wind, water, heat, cold, freezing, thawing, chemical and biological action, topography, and time. Constant, careful, and deliberate management measures must be applied to property manage our topsoil resource, keep it healthy and productive, and prevent unnecessary loss due to erosion.

The largest man-made environmental disaster in the U.S. was the great Dust Bowl of the 1920s and ‘30s. Because of mismanagement, and a lack of foresight and understanding, a vast area of the central U.S. was devastated by loss of topsoil due to improper farming practices and sustained wind which resulted in economic collapse and the largest relocation of our population in U.S history, as farms went broke and people left the land. This is not just past history that can be acknowledged and forgotten, because without vigilance, it could happen again. In just the last 5 years, virgin grasslands in sensitive, arid areas have been plowed and planted with the expectations of profits from high commodity prices. When those prices inevitably adjust downward, those fragile soils may be subject to excess erosion.

dust bowl dirt

In the wake of the Dust Bowl, the Soil Conservation Service was formed by the Federal Government to research the causes and prevention of massive soil erosion and take steps to train landowners, make relevant law and policy, and buy back and set aside formerly privately owned land for restoration. The establishment of our system of National Grasslands came about by these efforts. Other government efforts that offered landowner incentives to take highly erodible lands out of production produced programs such as the original Land Banking program and the decades-old Conservation Reserve Program, still in use.

The efforts of decades of the soil conservation movement are evident throughout U.S. farmland with the use of terracing, tiling, contour farming, grass waterways, strip farming, retention of crop residues, irrigation management, and numerous other practices that are a part of modern American agriculture.

Soil is very much alive. The makeup of topsoil includes the geosphere (rock and parent material), the biosphere (millions of bacteria, fungi, worms and other life), and the atmosphere (air and pore spaces for water movement, and oxygen for chemical and biological action). A healthy soil is teeming with life. Preserving and enhancing a soil environment that can host and encourage biological action is a goal of proper soil management.

Management and the health of topsoil are critical and include proper tillage methods, prevention of soil erosion, and retention of crop residue to enhance organic matter content. The Natural Resources Conservation Service (NRCS), formerly the Soil Conservation Service, is an agency of the United States Department of Agriculture (USDA) that provides information, education, services, and assistance to landowners to develop and maintain conservation plans. Most crop price support, crop insurance, and cooperative assistance programs offered by the Farm Service Agency (FSA) require that a landowner must have an NRCS approved conservation plan as a condition of participation in the program. NRCS is also responsible for creating and updating the Soil Survey, a valuable source of information in both printed and on-line digital form (more on that later).

nrcs soil texture

It is common for a farmer or landowner to discuss soil types in terms of the soil’s texture, such as a “loamy” soil or a “clay” soil. Soil is comprised of three soil texture types, all based on the size of the soil particles. The three basic soil textures, in order of size from largest to smallest, are: sand, silt, and clay. A loam is a mixture of varying amounts of sand, silt, and clay. Specific soil textures are determined by using a soil textural triangle based upon the percentage of sand, silt, and clay in a particular soil sample (see illustration). NRCS provides an online calculator that is a great resource for calculating soil texture.

Soil health and fertility status is best determined by an on-site sampling of soils, usually in a grid pattern, submitted for laboratory analysis.

The soil test lab report provides valuable information on the makeup of the soil, its pH (acidity or alkalinity), and cation exchange capacity (CEC). CEC is a determination of the ability of the soil components (primarily clay and humus) to allow for the absorption and transport of soil nutrients from the soil to the plant roots. It is essentially a measure of the soil’s ability to hold nutrients and feed the plants. Fertilizer recommendations are based on the results of a proper soil test. Variations of soil types on a farm, and even in a particular field, can be identified and accounted for. When the information is translated to geo-spatial formats, current precision agriculture technology using GPS location equipment has the ability to make on-the-go adjustments for varying soil types and fertilizer needs.

A farm broker often needs to provide soil information on a property to prospective buyers. As always, the landowner, manager, or operator is a good first source, particularly if they utilize the services of a crop production adviser who analyzes the soil conditions periodically. A very good general source of soil information is the USDA/NRCS Web Soil Survey, an online resource that provides information on most U.S. soils. A broker can readily create a soils map, from the Web Soil Survey, and accompanying summary of soil capability, average expected crop yields, and more.

The Web Soil Survey has links to a vast amount of soil information, education, and a tutorial on using the survey. A handy green “start” button opens the survey itself. The process is started on the Area of Interest (AOI) tab by defining the subject parcel as a specific area which narrows the parcel search to the level of section, township, and range. Other methods to find and define the AOI are street address, GPS coordinates, and other reference maps, in addition to the Public Lands Survey System legal description. Once the map is zoomed to the general selected area, a specific location is automatically plotted on an aerial map utilizing the AOI tool to define rectangular or trapezoidal parcel boundaries. Once the Area of Interest is defined, a click on the Soil Map tab creates a map of soil types shown on the subject parcel. Once presented with the soil map, a click on the Soil Data Explorer tab provides an extensive selection of soil attributes, analyses, and limitations on use for the area defined. Ag lands would utilize info such as crop production capability classes, expected yields, and erosion susceptibility. One can also find info and potential limitations in regard to septic system leaching fields, road construction, and other engineering and construction topics. Once the map and information is selected, the user clicks on the Shopping Cart tab to obtain the map and report in digital form for download, or in printable form. The information is free, despite use of the term “shopping cart.”

For the brokers who wish to provide basic soils information for a particular parcel, the Web Soil Survey is a quick, easy to use tool that provides the ability to create a comprehensive soil map and report for any listing. This is a good way to work with your clients to provide valuable information on a sale property and impressive data to prospective buyers. More specific information and education can be obtained locally at the nearest USDA Farm Service Agency. Most counties in the U.S. have an office and can direct you to the best sources of information, including a locally or regionally available soil scientist.

A comprehensive understanding of all things soil related would require much study and education, but a great deal of this valuable information can be obtained, analyzed, and presented for free through the programs explained here. Hopefully, you will have gained a bit of historical perspective and direction. If you are a landowner trying to sift through soil science, it is important to Find A Land Consultant with expertise on the subject, like an Accredited Land Consultant (ALC). If you are a land agent and interested in learning more on this topic, make sure to take RLI’s Agricultural Land Brokerage and Marketing and Land 101: Fundamentals of Land Bokerage LANDU courses.

This article was originally published in the Fall 2015 edition of the Terra Firma land real estate magazine published by RLI.

Kirk Goble, ALCAbout the author: Kirk Goble, ALC, has been a Colorado licensed real estate broker since 1988 and founded The Bell 5 Land Company in 2000. He specializes in farm, ranch, land, and water brokerage. He is a member of the National Association of REALTORS®, The Greeley Area REALTOR® Association, and the REALTORS® Land Institute. Goble was awarded the Land REALTOR® of America by the REALTORS® Land Institute in 2013 and is a LANDU instructor for RLI.

Building Your Land Agent Brand

Building your land agent brand can be a challenge in a saturated market, where many people think they can be real estate agents, and many of those agents also think they know enough to play the land game. Differentiating yourself from the social media savvy rookies who may be all hat, no cattle, is a newer battle land agents face today. However, the ongoing dilemma is sharing your unique advantages from even the seasoned agents, whether you share the same brokerage firm or are an independent agent competing with big name firms.

The foundation of consistently communicating your distinct value is a well-designed brand promise. You must be able to communicate not only the problems you solve, but how you solve them uniquely, in order to get people to part with their cold, hard cash.

The formula is simple: your name + solves this specific problem + uniquely this way + for these specific people.

However, filling in the formula with your details is not-so-easy. In fact, most people get stuck on the uniquely this way and for these specific people parts. Some of the vanilla answers business professionals use in an attempt to differentiate include claiming, “exceptional customer service” or “very experienced” as their unique way of solving problems, and identifying “anyone who wants to buy and sell land” as an ideal customer.

The reality is, countless agents in your market, let alone the country, could likely claim those exact same things. So they aren’t unique, nor are they specific. It is essential that you dig deeper, evaluating who your best clients are and what they all have in common. When you find the sweet spot of clients you enjoy working with and who are also your most profitable clients, it is time to study those people and try to replicate them through your branding and marketing efforts.

A Tale of Two Brands

To illustrate how a clear brand promise can increase your reach and revenue, consider the power of two high-end brands that consistently gain market share, despite their substantial price tags and limited audience: Rolex and Louis Vuitton.

You will never see them market, nor advertise in the same places as Wal-Mart or Dollar General. Wasting time and money advertising to the eyeballs that are interested in budget-friendly retail is not in their best interest. They are clear on who their exact ideal customers are so they can:

  1. Share their brand promises through compelling storytelling that emotionally triggers their ideal customers.
  2. Visually uphold their brand promises in a way that delights their ideal customers.
  3. Deliver on their brand promises in a way that meets the high expectations of their ideal customers.

How to share your brand promise through compelling storytelling

Your personal story holds all of the clues you need to differentiate yourself. By following the breadcrumbs you have left behind in life, patterns will emerge that combine your personal satisfaction and your ability to effectively contribute to people and situations. Consider all of your professional and personal experience when reflecting on what makes you unique. For example, if you have served in the military it communicates that you have achieved a special kind of discipline and dedication. You are likely to attract others who have or do serve in the military, as well as those who especially respect people who have military service. Does serving your country have anything to do with selling dirt? Not exactly, but it is a piece of your story that can create an emotional connection with your ideal customer.

Perhaps you have political experience, empowering you to navigate the law and key stakeholders involved in a deal. Or maybe you not only broker the land sale, you also offer land management. Or perhaps you are the third or fourth generation in your family to be a land agent. How do you think that stacks up against a rookie when you can reference a lifetime of multi-generation land conversations at the dinner table?

Be intentional about telling such stories through your blog posts, videos, social media, website copy, while networking, in media opportunities, when speaking, or through any other marketing activity you pursue.

land agent branding

How to Visually Uphold Your Brand Promise

Rolex and Louis Vutton both have visually compelling brands that invite prospects and customers into their story of luxury, prominence, and success. They are sharing a glimpse of what it feels like to sport their products. Their visual branding is designed to evoke an emotional response to trigger a purchase.

Of course, another reason why it is important to understand your target market is to understand what other brands they enjoy, thus giving you a roadmap of how to visually stimulate your ideal customer. You can simply ask your previous and current clients what their favorite brands are via a survey, or you can simply observe along the way. For example, if your ideal customer wears an Apple Watch, has an iPhone, and is concerned about how close the nearest Whole Foods is to the property you just showed them, you can do a quick scroll through those websites and social media profiles to get inspiration for your own visual branding and messaging. Whether it is font selection, the amount of white space, color selections, or the style of images, you can easily use those visual cues to help you craft your own visual brand.

Remember, you can’t illustrate a book until you write the story, so be sure the visuals for your unique visual brand represent your unique brand story. The visual side of your brand is merely an aid to telling your brand story. Importantly, your branding should always be consistent, so be sure whatever path you choose is the one you remain on day in and day out through all marketing channels.

rolex branding

How to Deliver on Your Brand Promise

If a Rolex watch or Louis Vutton purse had any issues, undoubtedly, its owner would know the respective company would fix it in short order. They are trusted to deliver on their brand promises of quality, excellence, prominence, and more. In the same way, you must make it clear that you will always deliver on your brand promise.

First, you must do good work. While that seems obvious to the experienced land agent, it is unfortunately not the norm. Simply doing what you say you will do will go far for your brand reputation. Further, be sure to secure testimonials as soon as you delight your customers. Allow your customers to toot your horn for you and reap the powerful benefits of peer reviews. Be sure to note any awards, certifications, education, and media coverage you received, as appropriate, which are also forms of social proof that you are great at what you do. While you may feel like you are bragging, any such announcement is a small blip on the radar of the average person who consumes an incredible amount of content each day. If you do not share your successes, how do you expect anyone to choose you instead of a less worthy agent who may not look out for their best interest? Save your potential clients from a lazy or inexperienced agent for the job by simply sharing the proof that you will have their best interest at the forefront of all you do.

Clear Branding Equals Clear Marketing

When you are clear on your brand you become clear about how to strategically market your brand for results. Understanding who you serve, what problems you solve, and how you solve them uniquely, empowers you to position yourself through targeted campaigns and strategic networking. You can’t be everywhere, all the time. Not every social media channel is for you, nor is every magazine, conference, or website somewhere you should invest time and money, as your ideal customers are not everywhere, either. Further, when you are clear on your brand, you can get clear on your internal processes and train your team to uphold your brand promise, as well. Remember, no one wants to be sold to, yet your ideal customer wants to buy from someone who attracts their business. If you effectively share your brand story and the results it gets, you will become the only option in your ideal customer’s mind, eliminating competition altogether.

Amber HurdleAbout The Author: Amber Hurdle Consulting empowers companies to strengthen their brands from the inside out through talent optimization. They do this in three ways: By working with leaders on their personal brands, so they become self-aware and see and harvest the greatness in others. By using a scientific, repeatable method to recruit, retain and inspire top talent, amplifying world-class employer brands; and by leveraging those strong leaders and a “best places to work” environment so that happy employees are serving happy customers, ultimately elevating their business brands. Amber is married to Geoff Hurdle, ALC, and together they have three children and a fur baby: Kristen and Brittany, also in the land business, Derek, a junior in high school, and Nashville Gibbs the Cavapoo, who continuously works on being Instagram famous. Learn more at amberhurdle.com.

Washington DC

News & Notes From Inside The Beltway: A Land Legislation Update From The Hill

Despite the rancor and polarization in Washington, D.C. these days, there is good news coming out of the nation’s capital. The following two issues show that positive developments can still happen to encourage economic development and protect property rights.

Qualified Opportunity Zones

The Qualified Opportunity Zones (“QOZ”) program was enacted in the 2017 Tax Cuts and Jobs Act to encourage economic growth in underserved communities through tax incentives for investors. Along with those tax benefits, it presents opportunities for real estate investment and development in those communities. American states and territories, including Washington, D.C., nominated areas (by census tract) to be designated as QOZs in 2018, and the IRS and Treasury finalized the designations that year. This temporary program (set to expire on December 31, 2047) presents opportunities for real estate investment and development in distressed communities. There are several potential tax benefits to investors who invest in a QOZ, if all requirements are met:

  • First, capital gains reinvested (within 180 days of a sale to a nonrelated person) into a QOZ are tax-free as long as they are held in the program, through 2026.
  • If held for five years, the tax ultimately paid on the reinvested gains is reduced by 10%; if held for seven years, that reduction is increased to 15%.
  • In addition, gains accrued on deferred gains funds while invested in a QOZ are tax-free if they are held for at least ten years.

Investments in “Opportunity Funds” (O Funds) may be gains from a previous sale (within 180 days) and/or non-gains funds, but only reinvested capital gains are eligible for the tax benefits. If both gains and non-gains funds are invested, they are treated as separate investments and will receive different tax treatments.

  • To qualify for the tax benefits, investments into a QOZ must be made through an O Fund, which may be a partnership or corporation organized for the purpose of investing in QOZ property. The requirements for an O Fund are:
    • Must hold at least 90% of the assets in QOZ property (which can be stock, partnership interests, and/or tangible property used in a trade or business within a QOZ, such as real estate);
    • Must certify with the Treasury and IRS, via a self-certification filed with federal tax returns (Form 8996).

Finally, the “QOZ business property” that an O Fund invests in must be “substantially all” in a QOZ, which under the proposed rules is met if 70% or more of the property is in a QOZ. The statute also requires that after an O Fund acquires QOZ business property that it be either “original use” (new) or “substantially improved,” which means investing at least as much on the improvement as was paid for the used asset. “Original use” commences with depreciation, so an unfinished asset purchase by an O Fund in a QOZ can qualify for original use as long as it has not been depreciated yet. In addition, vacant or abandoned property can be considered original use if it has been in that state for at least five years. The proposed rules state that the basis of the land a business sits on does not need to be included for the substantial improvement requirement, thus reducing the required investment amounts.

On December 12, 2018, the White House issued an Executive Order establishing the White House Opportunity and Revitalization Council, chaired by Housing and Urban Development (HUD) Secretary Ben Carson and comprised of 13 Federal agencies. The Council will focus on ways to revitalize low-income communities, through streamlining coordinating existing Federal programs to economically distressed areas, including Opportunity Zones. In May 2019, U.S. Department of Housing and Urban Development (HUD) released a notice that it will be offering new incentives for multifamily property owners to invest in Opportunity Zones.

Knick v. Scott Township, PA Supreme Court Case

The Supreme Court of the United States (SCOTUS) issued a landmark property rights decision on June 21, ruling that the federal courts are open to decide landowners’ claims for a Fifth Amendment “taking” of property by local regulatory agencies. In Knick v. Township of Scott, the nation’s highest court reversed a 1985 precedent that had forced property owners to first bring takings lawsuits in state courts, which acted as “gatekeepers” to block the claims from ultimately getting to federal court.

The 5-4 ruling in Knick holds that suits arising under the Takings Clause can be brought as an initial matter in U.S. trial courts, and then appealed as of right in U.S. circuit courts – just like any other alleged grievance to vindicate protections in the Constitution’s Bill of Rights. Such matters are no longer relegated to state judges for resolution. Federal courts are now proper venues to test the constitutionality of aggressive land-use decisions by local regulators, and can decide whether landowners are owed “just compensation” for a property taking.

Chief Justice Roberts’s majority opinion corrected the litigation dilemma for property owners trapped between the state and federal judiciaries. “The takings plaintiff thus finds himself in a Catch-22: He cannot go to federal court without going to state court first; but if he goes to state court and loses, his claim will be barred in federal court,” Roberts wrote. “The federal claim dies aborning.”

Roberts added, “Takings claims against local governments should be handled the same as other claims under the Bill of Rights. We now conclude that the state litigation requirement imposes an unjustifiable burden on takings plaintiffs, conflicts with the rest of our takings jurisprudence, and must be overruled.” The attorney representing the property owners before SCOTUS remarked that Knick “reject[s] barriers that unfairly deny property owners their day in court [and] sends a message that property rights are just as sacred as all other rights.”

Russell RiggsAbout the Author: Russell Riggs is a Senior Policy Representative with the National Association of Realtors in Washington, DC. For the past 23 years, Russell has advocated on behalf of Realtors on energy, environment, property rights, immigration and natural resource issues before Congress and federal regulatory agencies.

Russell also serves as the Advocacy Liaison to the REALTORS Land Institute, NAR‘s Global and Business Affairs Group, and NAR’s Resort and Second Home Group. Prior to his position with NAR, Russell held positions with the U.S. Department of Energy, the Council of State Governments, the National Governors Association and the New Jersey Department of Environmental Protection. Russell holds a Bachelors degree from Virginia Commonwealth University, and Masters Degrees from Tufts University and New York University.

land market outlook

Seeing 2020: Land Market Current Conditions & Outlook

The longest economic expansion in U.S. history continues to churn out more output and job additions with each passing month. November 2019 marks 125 consecutive months of growth and the momentum factors hint at the trend continuing into at least spring of 2020. Then what? A recession? Not likely, except for one policy error.

Though the populace is intensely polarized politically, as related to the economy, U.S. consumers are indicating high confidence. The consumer confidence index was 125 in September, well above the 100 neutral mark seen throughout 2019. For reference, the index has been under 100 for nearly a decade starting from 2007. The solid expression of confidence about the economy is without a doubt due to the very low unemployment rate of 2.7%, an all-time high in total household wealth in the country as the stock market boomed, and record high real estate values. The prior peak in the net worth of all households was $70 trillion in 2007 right before the last recession, sunk to $60 trillion at the depths of the foreclosure crisis, and then rose to $113 trillion as of mid-2019. Quite an incredible feat, though we should be reminded that wealth holdings have become much more concentrated at the top. All this could mean good things for the land market outlook in 2020.

Consumers consequently are opening up their wallets. Consumer spending rose 2.6% in the second quarter of 2019, after adjusting for inflation, and has been the prime engine for GDP growth over the past few years. Spending on consumer durable goods – with a long product life span – has been even stronger at 4.4%, attesting to the longer- term positive assessment of the direction of the economy. There is no over-borrowing to fuel personal consumption. Finances are coming from an employment growth of 2.15 million net new jobs, rising wages from $27.30 per hour to $28.09 over one year, and higher wealth by a few trillion dollars. Miraculously, there are more job openings today (7 million in August 2019) than the number of unemployed (5.7 million workers).

However, there is not as happy a story for businesses. Corporate profits are indeed very high, especially after cuts to the corporate tax rates a few years ago, rising from $1 trillion in 2008 to nearly $2 trillion now.

This partly justifies why the stock market is near record highs. But even with healthy financial conditions, companies have been less aggressive in spending the cash for machinery, factory expansion, and other investments.

Business investment spending contracted in the second quarter of 2019. Spending on equipment barely changed, but spending on commercial building fell by 4.7% from a year ago. Though assuring no oversupply of commercial real estate construction, the fact that businesses are pulling back is concerning and raising the question as to why.

gdp growth land market outlook

The timing of businesses getting cautious is directly related to the raising of tariffs and hostile rhetoric towards international trade. In fact, many companies in their public statements during quarterly earnings calls say they are cautious because of uncertainty related to trade prospects. REALTORS® specializing in commercial real estate have witnessed that trend as leasing activity markedly slowed in the second quarter to only 3.1% growth compared to better than 10% gains in 2016 and 2017, and 5% gains in 2018. Moreover, even business travel has weakened, as evidenced by falling occupancy rates at hotels, which is now at 72.4%, a full 100 basis points lower than from a year earlier.

The most troubling aspect is the actual slowdown in global trade. U.S. exports fell 1.7% recently while U.S. imports grew by only 2.6%. When both exports and imports decline for a few straight quarters, then a recession is near certain with job cuts. In a growing economy, both exports and imports should be rising by at least 5% per year. This slowdown in trade has had repercussions elsewhere. Just about every notable economy is experiencing slower economic activity in 2019 compared to recent prior years. The International Monetary Fund (IMF) cut its global growth estimate to 3.2% for 2019 after having forecasted 3.6% earlier in the year. The economies of the world appear to move in sync, like a rising tide lifting most boats — and the movement reverses when trade restrictions are put in place. The stock market has nearly always cheered at the promise of a trade agreement and sunk following the rhetoric of a trade war and retaliations of more tariffs. More positively, it is becoming clear that both the U.S. and China are looking for a deal. In such a case, business spending could boom.

One promising sector that could help with future economic growth is real estate construction. America is facing an acute housing shortage – for both single- family owner occupancy and for multifamily apartments. Home prices and rents have been rising far in excess of wage growth for five straight years.

Vacancy rates are at historic lows. The underproduction of new homes over the past decade has cumulatively resulted in around five to six million housing units that are needed today. Even in a normal year, only around 1.5 million new homes can be constructed. Therefore, increased construction needs to occur for multiple years. In 2020, specifically, housing supply is expected to improve, with housing starts expected to hit 1.4 to 1.5 million, up from 1.275 million in 2019.

With home builders still likely to be constrained by what they call the 5Ls — labor, land (lots), lending (financing), lumber (raw materials), and restrictive laws (regulation) — housing starts will still not match the demand from household formation (1.2 million), or the replacements for demolished or obsolete housing (about 450,000). All that means more demand for land and lots.

“…more demand for land and lots.”

In the commercial market space, industrial properties have outperformed retail spaces, arising from the stronger growth in online shopping and quick distribution warehouse needs. Investors are paying much more for industrial flex/warehouse properties on account of low rental vacancy rates and the sustained demand for e-commerce sales. Given that warehouses can be built in off- center sites far away from downtowns and population centers, the demand for land will grow in outlying regions.

In the meantime, the interest rates will be at near historically favorable conditions. The Federal Reserve will more likely cut its fed funds rate a notch in 2020 rather than increasing. It just means that 10- year Treasury yields will remain low at around 1.6% and the longer term borrowing rate at under 4%. In future years, watch what happens to the federal deficit, which is expected to be near $1 trillion in 2019 and projected to surpass $1 trillion in 2020. The total federal debt level, adding of all past deficits, will reach 100% of GDP in a few years, well above the 60% that many economists consider as manageable.

The bottom line summary is that while the economy is experiencing the longest running growth period in U.S. history, there is no reason why it has to falter. The economy is expected to finish 2019 with only moderate growth of 2% due to soft business spending activity, after having notched up a solid 2.9% in 2018. For 2020, a recession is not in the cards, but this assumes some type of truce in the trade war. A trade agreement will be better still and will lift business spending.

“…expect continued job creation, income growth, and rising demand for land.”

Construction spending has to rise to relieve housing shortages and low vacancy rates in commercial real estate. Therefore, expect continued job creation, income growth, and rising demand for land.

Lawrence Yun NARAbout the author: Dr. Lawrence Yun is chief economist and senior vice president of Research at the National Association of REALTORS®. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1.4 million REALTOR® members.

forest

Digging Up the Dirt on Land Contracts and Seller Financing

I sell LAND for a living, and I am often asked if the seller is willing to finance the property. Many times the answer is YES. Financing land can be problematic unless you are working with a lender who specializes in these type loans, for example, Farm Credit Banks. So, for the most part, the buyer has two options:

1) finance through a bank or lending institute

2) Seller/Owner Financing

A land contract (also known as Contract for Deed) is a contract between the buyer and seller of real property in which the seller provides the buyer financing in the purchase, and the buyer repays the resulting loan in installments.

Advantage Seller – Speed because no bank is involved. Sellers in some cases can get a higher price for their property and the principal and interest payments go to the owner instead of the bank. This can make your Return on Investment (ROI) look very appealing. If the buyer fails to make payments, the seller/owner takes back the property and keeps the payments made by the buyer.

Advantage Buyer –  Speed because no bank is involved. Having your credit checked repeatedly can negatively affect your credit score. Some buyers have marginal credit and financing through the seller makes lots of sense and saving fees related to a conventional loan such as appraisals, origination fees, etc.

When closing, the attorney will prepare documents (promissory note) that state the terms of the loan such as down payments, interest rates, term or length of the loan, due date for payments, and penalties for non-payment. If payments are not made, the seller/owner will begin foreclosure on the property. There are two types of foreclosures and the type will depend on the state you live in.

Judicial Foreclosure – Foreclosure by judicial sale, commonly called judicial foreclosure, involves the sale of the mortgaged property under the supervision of a court. The proceeds go first to satisfy the mortgage, then other lien holders, and finally the mortgagor/borrower if any proceeds are left. Judicial foreclosure is available in every US state and required in many (Florida requires judicial foreclosure). The lender initiates judicial foreclosure by filing a lawsuit against the borrower. As with all other legal actions, all parties must be notified of the foreclosure, but notification requirements vary significantly from state to state in the US. A judicial decision is announced after the exchange of pleadings at a (usually short) hearing in a state or local court in the US. In some rather rare instances, foreclosures are filed in US Federal Courts.

Non-Judicial Foreclosure – Foreclosure by power of sale, also called non-judicial foreclosure, and is authorized by many states if a power of sale clause is included in the mortgage or if a deed of trust with such a clause was used, instead of an actual mortgage. In some US states, like California and Texas, nearly all so-called mortgages are actually deeds of trust. This process involves the sale of the property by the mortgage holder without court supervision (as elaborated upon below). This process is generally much faster and cheaper than foreclosure by judicial sale. As in judicial sale, the mortgage holder and other lien holders are respectively first and second claimants to the proceeds from the sale.

This arrangement can be a win-win for both the seller and buyer. This is just another vehicle to help a buyer get into the property they want and help the seller achieve their goal of moving some property at a great price!!

This post was originally published on The Dirt Blog.

Kent Morris, ALC, is a Registered Forester and Associate Broker who has experience in fields such as timber appraisals, harvesting, thinnings, and timber sales.

new land agent

New Land Agents: Overcome These Barriers and Get to Work

Overcoming Expertise Barriers

Decide on your specialty – We believe the best foundation for finding your niche is to go with what comes naturally to you and what you have plenty of life experience with. It’s imperative that you have confidence in your ability to market and represent the real estate and the clients you choose to work with.

mentor

Find your mentorFind someone that does what you want to do, really well, and join them. Rural real estate will throw you a new curve on a weekly and, sometimes, even daily basis.  If you can align yourself with a solid team and/or an experienced Broker within your specialty, you’ll remove the majority of the risk factor and frustration for everyone involved just from their experience and willingness to help.  Nothing is more exhausting than having an inexperienced Broker floundering on one side of a land deal that doesn’t know how to troubleshoot, problem solve, and keep everyone moving in a positive direction, causing one side to do most of the work in the best interest of their own clients.

Take Courses – Organizations like RLI provide courses, like those part of their LANDU Education Program, that can give new agents the expertise they need to get started and thrive in the land industry as an agent. Make sure to seek out these opportunities and to continue learning throughout your career.

Overcoming Cost Barriers

Vehicle/Fuel costs – If you choose a niche that you’re already living, chances are you have the appropriate vehicle.  Just clean it up and make it presentable. Again, if you join a team, they may have a company UTV available for showing properties. Fuels costs can be somewhat alleviated by having a plan in place to pre-qualify your buyers as far as their wants and needs and their ability to finance. Don’t waste your time in a truck with someone that doesn’t have the stack to purchase the properties they’re asking to see.

Marketing costs within a team can be shared and the experienced Broker can advise a new agent on what works and what doesn’t saving a lot of unnecessary output. Your team or established Broker will usually have a marketing plan in place with appropriate websites and subscriptions that come with no added cost to their Brokers.

Land real estate allows us to make a living at something we’re made of.  It gives us the ability to spend our work days with people that love the same way of life as we do.  It’s absolutely rewarding and can sometimes be brutally hard. Just be prepared to gather more lifelong friends than you could ever imagine, and be sure you protect and treat every one of them like they’re family.  Submerse yourself in education and always do the right thing and you’ll have an amazing career in land real estate!

Clint Flowers, ALCAbout The Author: Clint Flowers, ALC, is the top producer nationwide at National Land Realty, a member of the REALTORS® Land Institute, their RLI Alabama Chapter, and the Chair of their 2019 Future Leaders Committee. He was the NLR Top Producer Nationwide in 2016, 2017, and 2018. He also won the 2017 APEX National Broker of the Year award for Timberland and was in the 2018 APEX Producers Club.

Lisa JohnsonAbout The Author: Lisa Johnson, ALC, is the Owner/Principal Broker at Horsepower Real Estate. Specializing in Farms, Ranches, and Equestrian Properties in Western Oregon, her and her team of land Brokers are among the top rural agents in the area. Lisa is a member of the RLI Pacific Northwest Chapter, and a 2019 Future Leaders Committee member.

timberland agent

A Day In The Life Of A Timberland Agent

One of the reasons consulting forestry, and now land focused real estate brokerage, has been so appealing to me is that the job is not monotonous. Each day presents new challenges and, while experience helps navigate those challenges, timberland agents are constantly learning and coming across new things. It is hard to describe a typical day because each one is unique. There are certain characteristics that make timberland brokerage a unique specialty.

I worked as consulting forester early in my career before transitioning into land agency. These early experiences prepared me for the more technical aspects of timberland brokerage. Brokers need a strong knowledge to help them allocate value among the component parts of properties. The value in timberland can be thought of as comprising two major components: the underlying or bare land and the timber growing on the land (there may also be improvement value). The agent must be able to quantify the timber portion separately from the bare land in order to form an accurate purchase or selling price.

timberland agent in forest

The first step in this process is accurately describing the timber on the property. This usually starts with a current forest stand map that details the acreages associated with each unique stand. A forest stand is an area of similar species composition and age. We prepare for the initial tract visit with an aerial photograph of the tract, and the first visit involves touring the property to identify the stands and stand boundaries. We then describe those stands in terms of species composition, age, site quality, silvicultural treatments, and any other relevant features. We take this field information back to the office and, using our GIS system, create an accurate and up-to-date stand map with associated acreages.

We then decide if the property requires a full timber inventory (cruise) to accurately value the merchantable timber. Ideally, all merchantable stands of timber will be inventoried prior to a purchase or sell. This gives either the buyer or the seller confidence in the timber value of the asset. If this is not possible, or the party does not want to incur the expense, an experienced forester or broker can provide estimates of the per acre value based on a thorough inspection of the property. Walk through or “ocular” estimates are not as accurate but are significantly lower cost, and may be sufficient depending on the goals of the buyer/seller.

The timber inventory should detail all of the species, forest products, and volumes in each timber category. If the agent is not a forester, they should seek to establish relationships with local consulting foresters in their work area, so that he or she can be engaged to perform timber inventory and appraisal services clients when needed. Pre-merchantable stands, those too young for commercial sale, have value that should be estimated as well. These can be valued if the agent can determine the age, species, and site preparation invested in planted stands or natural stands of timber.

timber forest

Agents specializing in this area of the land business need to have a strong knowledge of timber markets in their work area. They should know the area mills, what products they purchase, how the trees are merchandised (cut up when harvested), and current market pricing of all forest products for the market. In my area of North and South Carolina, I work in five unique timber markets within a 200-mile radius, and the values for the same forest products can vary greatly between each of these markets. If you are going to advise investors on where to purchase land, and help them forecast future timber markets, it is imperative to be networked with consulting foresters, procurement foresters, timber dealers, and mill representatives. These relationships will keep you updated so you can help your clients make good decisions. Armed with a deep understanding of the markets and forest product pricing in the area, a broker can use the timber inventory data to estimate the value of the timber on the property with a reasonable amount of certainty.

Equally important is the ability of the broker to value the underlying land on the timber investment. There are two primary approaches timberland brokers can use to value the land:

  1. Comparable sales. The sales comparison approach is the primary method used for smaller acreages that have less potential for regular (annual) cash flows. The broker should have a strong understanding of recent timberland transactions in their work area with as much detail as possible to estimate the bare land price realized in each sale (the allocation). This allows the agent to make an apples-to-apples comparison of sold tracts to the subject property. Land focused real estate brokers and local rural appraisers can help agents obtain comparable sale information. Professionals are usually willing to share information with other professionals, so be sure you return the favor to those who assist you.
  2. Land Expectation Value (LEV). The Land Expectation Value (LEV) approach involves using discounted cash flow analysis (DCF) to derive the net present value (NPV) of the net income stream produced by a property over time. The LEV approach does require some specific knowledge to complete accurately – primarily a way to project timber growth into the future. Generally, this approach is reserved for larger transactions with many acres and forest stands involved, those likely to generate annual or at least semi-regular cash flows through frequent harvest events. To complete this approach, the analyst will need to understand the client’s investment parameters as well, including likely holding period and required return. Specialized training and knowledge is required to value a property using the LEV approach.

Timberland is a specialty, and this is a very high level overview of the types of task a timberland agent might work on in a given day. The REALTORS Land Institute offers and excellent introductory class, Timberland Real Estate, as part of their LANDU Education Program. I recommend this course as a first step for those who seek expertise in timberland.

Chris Miller, ALCChris Miller, ALC, is a land broker and consulting forester for American Forest Management, Inc. in Charlotte, North Carolina.

prospecting phone calls

Prospecting Scripts For Land Professionals

Not all REALTORS® love cold calling, but most of those that are successful in the business have learned to do so effectively while making it an integral part of their daily prospecting. Dedicating a portion of your day to cold calling will ensure that you stay sharp on market trends and connected with the owners in your region. There is no better way to keep a pulse on landowner perspectives than by talking with landowners on a regular basis.

A few things to remember before picking up the phone:

  • Plan what you want from the call. Is your goal to get a meeting and/or listing, submit an unsolicited offer, confirm contact info, etc.?
  • Empathize, put yourself in their shoes. What type of land are you calling on and what type of owner are they? What is important to them? You will have a higher success rate if you are able to speak to a landowner about activity in the market and/or topics that are relevant to them.
  • Preparation will lead to confidence. Know the market and data – but, don’t be afraid to tell an owner you don’t know something in response to a question. It is better to let them know you will research it and get back to them, than to guess and get it wrong. This will help to establish trust with the owner while simultaneously giving you a reason to follow up.
  • Enthusiasm is contagious. Nobody wants to have a depressing conversation. You should be excited about what you do. But also, try to mirror the pace and tone of the person you are speaking with. This doesn’t mean copying them, but rather speaking to them how they are speaking to you.
  • Personalize your approach. We are better when we are being ourselves. This could mean adjusting any cold calling script to play to your individual strengths.

prospecting phone and note pad

Below is an example cold call prospecting script for land professionals along with a few variations depending on the nature of the conversation.

Introduction

Good evening/afternoon, this is (name) with (company/firm). May I speak with (owner’s name), the owner of the (land asset) located in (name of city/area)?

The reason for my call is:

Approach 1 (We have buyers)

We have been active in the market and are in contact with several motivated buyers looking for property similar to yours. Would you be interested in considering an offer if one of these prospects would like to submit on your property?

(Wait for response)

  • If they are receptive – Great, it would be helpful to meet and discuss your goals in more detail so that we are able to guide the prospects toward a deal structure that best achieves your desired outcome. What is your availability in the next few days?
  • If they are moderately receptive – I understand this is a big decision and you haven’t had the chance to think about it. At a minimum, could we schedule a quick meeting in the next few days to discuss the market and any specific goals that you have regarding your property?
  • If they are not interested – I appreciate the consideration. Would you like to be kept apprised of market data and see similar properties that we are bringing to market? Is there a reasonable time frame for me to follow up and see if things have changed, perhaps 12 months?

Closing – Going forward, is this the best number to reach you? Would you prefer email? Thank you for your time and I look forward to speaking with you again.

Approach 2 (Recent sale)

We recently sold (name or location of property you recently sold) at a price of (price/acre or another applicable unit) which represented a record value in the market (Alternative – Or use another data point – like the number of offers, quickness of the process, etc. – that may be a motivating factor for another owner) and was shown substantial buyer interest.

Have you considered listing your property to take advantage of the current demand and strong values?

(wait for response)

  • If they are receptive – Great, it would be helpful to meet and discuss your goals, as well as tour the property so that we may provide you with our estimate of value. What is your availability in the next few days?
  • If they are moderately receptive – I understand this is a big decision and you haven’t had the chance to think about it. At a minimum, could we schedule a quick meeting in the next few days to discuss the market and any specific goals that you have regarding your property?
  • If they are not interested – I appreciate the consideration. Would you like to be kept apprised of market data and see similar properties that we are bringing to market? Is there a reasonable time frame for me to follow up and see if things have changed, perhaps 12 months?

Closing – Going forward, is this the best number to reach you? Would you prefer email? Thank you for your time and I look forward to speaking with you again.

Approach 3 (General)

We are active in (your region, specific location of the land, specific land type, etc.) and are reaching out to owners to learn about their goals and so we are able to speak generally about each asset in the market. Do you have a few moments to discuss your property or is there a better time to speak?

(wait for response)

  • If they are receptive(Start asking questions.) Given how strong the values are at this time, have you considered selling? Would it be helpful to your estate planning if we were to provide a broker’s price opinion? Have you considered purchasing more land to increase the scale of your operation? How is everything going with your operation? Would you like us to send you information about activity to keep you informed about market trends? (have several potential questions to ask based on the type of property, specific market trends, and type of ownership).
  • If they are moderately receptive(get to the point) I understand you are busy. I wanted to quickly understand if you have considering selling, buying or are simply holding at this time…. Any information we could provide or questions about the market we could answer to assist you with your planning?
  • If they are not interested(ask to follow up with questions via email. If they don’t want to talk and won’t give you their email, MOVE ON.)

Closing  Going forward, is this the best number to reach you? Would you prefer email? Thank you for your time and I look forward to speaking with you again.

Through the practice of cold calling, you will become more comfortable and capable at gauging the conversation and guiding it in the direction you would like it to go. The bottom line is to pick up the phone and remember, an imperfect cold call is far better than no cold call. Happy calling!

Matt DavisAbout the author: Matt Davis is a real estate broker with Cushman & Wakefield. He is based in San Diego, CA, and assists clients with the disposition and acquisition of investment grade agricultural and transitional land assets. He is also founding member of the company’s Land Advisory Group and Agribusiness Solutions Team. Matt is a member of RLI and has served on their Future Leaders Committee.

hiking recreational land

Need To Knows For Buying Recreational Land Right Now

America is a land of wide-open spaces and with all its natural wonders how can you ever decide where to buy? What do you need to take into consideration?

My first consideration is made when considering the recreational opportunities desired. it sounds basic but you’d be surprised how easy it is to forget at the start that you need to have an end in mind. For example, for whitewater rafting you have got to have a river or if trophy whitetails make you heart race, let’s talk about deer habitat. You can’t have hiking trails without land anymore than you will have trophy bass without water.

bass fishing recreational property

Now that you have a idea of what you want to do with your time lets talk about how you get there.

I would recommend you start your search by talking with a Accredited Land Consultant (ALC) – find a land consultant. These are men and women that have spent years in the land business, completed education to enhance their ability to handle land transactions, and are masters of all facets of land sales. Most are outdoors man who live the lifestyle as well, hunting, fishing, etc.

If you decide that you want a property that can be managed for trophy deer your ALC will help you determine if the property you are looking at has the qualities it will need. Perhaps you will need a private wildlife biologist, or maybe you’ll need a heavy equipment operator that can clear travel lanes or create a pond for year-round water.

If you are considering buying a parcel that is in a national forest, have you considered all the recreational opportunities that just outside your door? Most national forests allow hunting and fishing on their lands as well as ATV trails.

If you are a fly fisherman, there are thousands of miles of private land with trout streams running through them. Imagine what a legacy you will leave behind if three or more generations all grew up fishing the same stream at grandpa’s place.

This just a drop in the bucket of all the different exciting opportunities that exist beyond the sidewalks and streetlights. Happy hunting!

About the Author: Tim Hadley, ALC, is an agent with Keller Williams Realty in Gladstone, MO. He joined the REALTORS® Land Institute in 2017 and is currently a member of their Future Leaders Committee.

 

kasey mock

About the Author: Kasey Mock is the Director of KW LAND Division at Keller Williams Realty International. Mock is a member of the REALTORS® Land Institute now serving on their Future Leaders Committee. Make sure to check out his break out session diving further into this topic at the 2018 National Land Conference in Nashville, TN, in March.

blockchain real estate

Blockchains in Land Real Estate

Blockchain in land real estate has not quite yet been accepted by business leaders. Misconceptions and misinformation have created an environment that is delaying adoption. While no technology is a universal perfect fit, we should look for situations that benefit from blockchain’s best features. We should take the time to understand blockchains in order to maximize their potential as an asset that can have positive impacts on business.

Understanding Blockchain

Think of blockchain technology as a ledger that is distributed to many parties. Just like a published book, the information recorded in the ledger is permanent, cannot be altered, and everyone who needs a copy of the ledger has one. If you want to change the information that has been published, you have to ensure changes are made to every copy of the book. In terms of a blockchain, the information is across the internet on various computers. The difficulty only increases as the number of books in circulation increase. Another point to note here is that high circulation publications are difficult to completely erase from history.

Just like any new technology, there is a vocabulary associated with blockchains. Breaking down the word blockchain, block being a log of stored data and chain referring to how the data links together, is a good place to start. Then you start hearing words like cryptocurrency, token, coins, and smart contracts, all of this can be overwhelming. For now though, the most important technical term to remember is the overall synonym for blockchain: distributed ledger. As a business leader, keep reminding yourself that blockchains are tamper-proof records with many copies.

ledger

Each party operates a copy of the blockchain. The blockchain is simply a reserved part of your computer disk. There are two competing ways information is distributed.

Method 1 – This one is called Byzantine Fault. When you record a new transaction, it is first sent out to all computers to make sure they have a copy that can receive the change. If a majority of the computers agree, your local copy is then changed and all others are alerted to the change.

Method 2 – This one is called Mining. When you record a new transaction, thousands of “miners” are notified. Each one tries to come up with mathematically unique representation of the transaction. The first person to come up with the solution earns part of the fee (every transaction requires a token). This is a tremendously wasteful exercise (from an electricity standpoint) and has been heavily criticized. It has resulted in mining farms operated by folks looking to create revenue.

I have been asked, “If blockchains are a record-keeping mechanism, what is wrong with using databases the way we do today?” My answer is that there is nothing wrong with what we do today. The industry has an enormous investment in documents so any suggestion that we should move millions of them into a blockchain is unrealistic. The effort would be a needless waste of time and storage capacity. However, using the book example, a better approach would be to record the location of a book and then to document any changes that have been made since its publication as new events are added.

The difference between a database and a blockchain is like the difference between a driver’s license and a driving record. Information on your driver’s license is subject to change over time. Your weight, address, and appearance (photo) are best stored in a database because they change over time. Now consider your driving record. It is a series of events that are not subject to change. In a database, the information stored there is subject to change. With a blockchain, the information is a permanent track record of events.

Blockchain in Real Estate

Short, time-based events are easy to record with a blockchain. Asset management activities generate excellent examples of events in commercial and residential real estate. Some of the activities that create events are:

  • inventory
  • maintenance activities
  • tax payments
  • improvements

Using blockchains, builders and developers can quickly identify who supplied materials, where they were used, and how they were handled. This is why many supply chain companies (especially food handlers) are adopting blockchains. Blockchains are good at asset management because they create trustworthy records. They create tamper- proof records and no special software, services, or procedures are needed to recover from catastrophic outages. Damaged computers simply reconnect to the network and recreate the lost information from other copies.

The Real Estate Standards Organization (RESO) has created a workgroup that thinks events are applicable beyond real estate brokerage. Events allow real estate professionals to easily exchange information between lending, public records, and insurance companies. The workgroup is not facilitating the exchange of underlying documents, simply a ledger of events (think of a timeline).

Caution Ahead

We should consider the impact of legislative and regulatory efforts to protect privacy on blockchains since they contain tamper-proof, permanent records. If information written to a blockchain can never be erased, personal information like account numbers, passwords, or contact information should not be recorded. The security community calls this kind of information Personally Identifying Information (PII) which has “the right to be forgotten,” according to GDPR. We can expect to see continued legislative and regulatory efforts to protect privacy, so it is important to keep this in mind when implementing blockchain technology in the industry.

Legislative and regulatory actions intended to help consumers can actually end up hurting adoption. A review of actions at the state level published last year showed that blockchain definitions used in legislative language varied significantly between states. We should think about one of the main points in The High Cost of Good Intentions by John F. Cogan; government strives to act in the best interest of the citizens but ends up stopping innovation that is designed to help them. We should be working with local, state, and federal governments to make sure they understand the impacts of their actions.

blockchain

Still Learning

Earlier this year, I attended the 2019 National Land Conference hosted by the REALTORS® Land Institute (RLI) in Albuquerque, NM, to discuss blockchain technology. One of the challenges I noted was implementing blockchain technology at the county level. The decision-making process at over 3,000 counties slows down adoption significantly since millions of records would have to be transposed.

I was pleasantly surprised to find blockchain uses I had not yet considered. Possible uses for blockchains in land real estate include:

When they were first mentioned, I assumed the issues were similar to those faced in the County Recorder’s office. I came to realize the value of RLI.

We have established that blockchains are good at capturing small events. When a property changes owners, what is purchased can be the result of subdividing or combining tracts. Many county recording systems have difficulty combining properties. Blockchains are good at tracking splits and combinations because they are optimized to record event history.

Recording water rights are more complex because both surface water and groundwater need to be considered. However, as the population increases, simple first-in-time and first-in-right historical surface water rights are being challenged by legislation and regulation. These complexities make recording surface water rights with blockchains an ideal solution.

Groundwater record keeping can be more complex than a simple rule of capture situation. Drilling, natural erosion, and abuse of the aquifer are all conditions that can be detected with periodic testing.

Blockchains can be used to reference test results creating a tamper-proof, time- based record. Indigenous land rights are another area of land transfer that can impact development plans. Blockchain technology is ideally suited to create records that survive multiple transfers and do not need to be routinely researched.

I saved mineral rights for last because they are more complex than the aforementioned items. With water, there are two facets to consider: surface and groundwater. The courts still see disputes over the definition of what constitutes a mineral. Royalty agreements routinely include many parties and need to be researched before the transaction is closed. These complexities can be captured using blockchains.

The effort to record mineral rights with blockchains should avoid capturing old records. Instead, new research should be recorded from this point forward. Many of the records are very old and are needed for historical backup. Scanning and digitizing historical documents do not help the process of documenting mineral rights. Recording mineral rights agreements and interpretations in blockchains create tamper-proof records that many parties can reference electronically.

blockchain bitcoin crytocurrency

Cryptocurrency and Smart Contracts

Due to the well documented volatility of cryptocurrency, it is unlikely that we will see wide scale purchasing of property using cryptocurrency. The banks are not ready to lend this form of currency yet and commissions will probably not be paid this way. The number of cryptocurrency property transactions will never exceed today’s volume of 100% cash transactions.

This is a good time to clarify some blockchain jargon. Cryptocurrency denominations are typically called tokens or coins. Tokens must be purchased before use and are not typically interchangeable between applications. Buying and selling tokens is still a complex process, but the community is trying to simplify it. There have also been improvements to token interoperability between blockchains.

Compensating work is a much better application of cryptocurrency. Instead of closing the entire transaction, you can order just those services you would like to be performed electronically. Services can have conditions such as “do not execute during business hours,” or more complex rules, such as, “on the fourth day, transfer $1,000 to this system.” The logic that controls these kinds of services is called a smart contract. Smart contracts are not the same as legal contracts. A traditional legal contract is the outcome of negotiations and often contains attachments, addenda, and amendments related to the transaction. Smart contracts are not unique to a specific transaction. They can operate on a transaction but are not unique to the transaction. Smart contracts only represent conditional logic.

A good example of a smart contract can be found in fund disbursement. The hard part of designing smart contracts is capturing all of the options within a request. Imagine a vending machine that you can use to order transaction services. If the right number and type of tokens are inserted, you can select an in-stock item. The machine releases the item (i.e., the smart contract is executed). If those conditions are not met, the item (if there is one) is not released. The options you want can affect the number of tokens required to select the item.

Final Thoughts and Application

Do not ignore blockchains. Pretending they will not emerge will not stop them. You do not have to understand them at a technical level. Look for blockchains to emerge within business practices that need improvement, especially in the record-keeping area.

The biggest factor that can stop the widespread adoption of blockchains is resistance to change. Business leaders have a fiduciary duty to manage the risk, which includes being wary of unintended consequences. Until the risks are known and at least partially mitigated, policies do not change. Business leaders still need more education about blockchains before they’ll be comfortable with adoption.

Thinking about how blockchain could benefit your real estate business? Practice looking for applications that need both permanent records and require access by many parties. Blockchains will probably enter the industry through applications in ways that most will not even know they are using them. For now, just stay aware and keep an eye out for potential uses in your business.

This article was originally published in the Summer 2019 Terra Firma magazine.

Mark Lesswing NLC19 speakerAbout the author: Mark Lesswing is a Blockchain Entrepreneur who holds a Bachelor of Science degree in Industrial Engineering from Lehigh University. He started programming robots just out of college and, in 1988, began working with object-oriented programming. Mark has worked for large database vendors such as Sybase (as a startup) and Oracle spending a summer in Europe setting up international operations. In 1992, he launched his own consultancy and was involved in corporate turnarounds. Mark joined the National Association of REALTORS® in 2001 and as the Chief Technology Officer was a tenacious advocate for data standards and innovation. He is a frequent speaker at major trade conferences and is listed in the International Who‘s Who of Information Technology and the National Register of Who’s Who in Executives and Professionals.