When assisting a client with a land transaction, it’s not only important to be able to answer your client’s questions, but also to be able to ask your client the right questions. Below is a sample scenario of a new client and a few examples of questions a land professional may ask in order to help the client determine the best decision regarding their property.
Your client owns land composed of agricultural land, but which also has some woods and water (and you know the highest and best use is continued use of the land as agricultural land and hunting/recreational ground). Your client is reaching a time in their life to make decisions on how best to handle their land for the future and there are many options in today’s world. Some of these could include:
- selling it for row crop land and the woods/water for hunting/recreation;
- or, once sold, complete a 1031 exchange to purchase another income-producing property or retirement home;
- or, keep the farm via leasing it out so that your client has an income in retirement;
- or, work on a succession plan to keep the land in the family;
- or, enroll the land in an exclusive ag covenant or conservation easement;
- or, use the land to build their retirement home or cabin so they can enjoy their retirement and have a wonderful, memory-filled family retreat to pass on to their heirs.
Questions for your client when considering the above options
- Are you prepared for retirement?
- Do you need an additional income stream into the future besides other retirement funds?
- Do you want to continue to farm yourself?
- Do you have children who want to farm?
- Do you strongly feel you want your land to continue into perpetuity as ag land or recreational land?
- Do you already have a retirement home?
- Do you have funds and time to build and enjoy a family retreat that can be passed on to the next generation?
When the future of your land is in question, an appraisal or broker price opinion will provide an opinion of the worth of the land. This factor alone may assist in helping answer some of the above questions for your client. Your client may decide, based on the number of children they have, the number of acres of land and rent or income from that land, there may not be enough income to divide between the number of children and they will elect to sell the land. Or, on the reverse side, they may decide, depending on the number of children and amount of agricultural land, there would be enough income to warrant keeping the land in the family.
Then, are there children who are interested in farming or not? If yes, succession planning can be handled and there are a number of extension offices, attorneys, etc. who can assist with succession planning. If there are no children interested in farming, a professional farm manager could assist the children in managing the farm.
Should the client decide to enroll the land into an ag covenant or conservation easement? An Accredited Land Consultant (broker/REALTOR®) can assist in locating the appropriate agency/entity.
In deciding whether to add a family retreat to their land, the question again is dependent on their financial situation, age, the number of children/grandchildren they have, and so on.
Your client’s land is probably their largest asset and assisting your client to make an educated decision is the goal, even though it may involve tough questions. If you are interested in working with landowners, you can obtain the education, experience, connections, and expertise you need to better assist your client with the tough questions through the REALTORS® Land Institute.
Terri Jensen, ALC, is a Broker/REALTOR®, Auctioneer, and Appraiser in Minnesota and is currently VP of Real Estate/Appraisal at Upper Midwest Mgmt. Terri served as the 2015 RLI National President of the REALTORS® Land Institute, a commercial affiliate of NAR, and is still an active member of the organization, holding their elite Accredited Land Consultant (ALC) Designation.