1. Bring copies of documentation for your property. A listing agent will need a copy of the deed of record, a plat map, current survey, timber cruises, mineral or hunting leases, tax records, septic system permits, and other assorted documents which provide information about your property. Other items that may be helpful are harvest records of wildlife and pictures of game taken or observed, enlarged aerial maps of the property, timber stand maps, documentation about historical structures or occurrences on the land.

Recently I met with a landowner at his property, and he had already filled out a sheet with all of his contact information, age of the home, number of food plots and shooting houses on the property. He listed the names of all of the utility companies that serviced his land, the bank through which the land was financed, and several other helpful pieces of information. This was a pleasant surprise and has proven to be very helpful at recent showings.

2. Be prepared to show the property to the agent. It is helpful if the owner, who in many cases knows more about the land than anyone, can help the agent identify key areas of interest throughout the property, boundary lines, and information about the age of timber, etc… All of this allows the agent to have a better understanding of your property and will be able to present it well to prospective buyers.

3. Finalize the asking price and terms at which you are offering the land. A good agent will generally not give you a hard listing price over the phone, but may suggest some ranges of what land in your area is selling for. You can decide in advance whether you want to offer owner financing, retain mineral rights, reserve an easement if needed, and other issues such as these. The agent will provide you with an Estimated Net Sheet to provide an estimate of the amount you will walk away with after the completion of the transaction. I generally try to figure a “worst-case scenario” of closing costs on the net sheet to give a more realistic expectation of monies to be retained.

4. Keys to outbuildings, homes, and gates should be given to the agent at this time.

5. Sign the listing agreement. The listing agreement generally gives the brokerage company the exclusive right to sell and market your company. A land agent earns their money by marketing your property and bringing a buyer to suit your needs. The listing agreement gives the agent a reasonable expectation of being able to recoup the money he is going to invest in marketing your tract. The listing contract on land will generally be 6 months to 1 year, as land takes a little longer on average to sell than residential property.

Land brokerage companies will generally charge a commission fee of 4% to 10% depending on the size and sale price of the property. A discount broker may charge you less money, but the marketing of your land may suffer because the agent does not feel like they can afford to outlay much money on it. 10% seems a little steep, but on smaller parcels of rural land an agent may legitimately feel they need that much to make it worth their time. Commissions may be negotiable with the agent, so feel free to ask if they will move on the percentage. All of my personal listings are at the same percentage of commission because in order to provide the best service I cannot skimp on the quality of marketing, so that each property has the best opportunity to attract qualified buyers. Landowners can be sure they are getting my best deal and best effort on each property they list with me.

By preparing for the listing appointment and having helpful information ready for your agent, the land agent will be able to provide you with better service and potentially a quicker, more successful sale.

Typically, the buyer signs the contract and then asks his lawyer to check into the seller’s deed and chain of title, and be present at closing. Other tasks may arise.

Title work is fairly routine and easy, except when it is not. When title problems are serious – lack of a deeded right of way, mismatch between the calls in the deed and the boundaries established on the ground, a break in the title chain, or disputed ownership issues – the buyer needs a competent lawyer.

A quick look at the seller’s deed and title chain prior to placing a contract on the seller’s property can often alert buyer, lawyer and seller to deed and title issues in advance of signing an offer. The issues, when known in advance, can modify the offer and give the seller a heads up.

A routine title check looks into documents that are recorded in the local office where deeds are kept. Most lawyers do not make inquiries into the possible presence of unrecorded encumbrances on the seller’s property, such as an oral life estate or an agreement that allows a third party to hunt the land. I’ve even once had a lawyer who I had to tell to for mineral ownership, which he did not routinely do on his own.

I encourage clients to use their lawyer for other matters, principally advice.

Rather than patch in a lawyer after a contract is signed, I encourage buyers to find — and get comfortable with — a lawyer as one of their first steps in looking for property in a particular county. Here are some ways a lawyer can help a buyer before a contract is signed:

1. Reasonableness of asking price: Don’t expect a lawyer to do a comp analysis or an appraisal. But local lawyers who have been doing real-estate work for a number of years should have an accurate feel for prices, price trends, volatility and current market conditions. Buyers often get a better bead on the reasonableness of a seller’s asking price from their lawyer than from an agent representing the seller who may be their first and only source of local market information.

2. Local insight into seller’s motivations: Lawyers know their communities, and usually know personally, or know of, individual sellers. Buyers are enormously advantaged when they can learn why a buyer is selling and how intense the motivation is.

3. Problems and issues with particular properties: An experienced local lawyer is likely to know first-hand, or have acquaintance with, many properties in a county, particularly those that have been sold during his years of practice. The more years of practice, the more likely it is that he will know about problems and issues that may or may not be of a strictly legal nature.

4. Lenders and vendors. The buyer’s lawyer will also have opinions about local lenders, brokers, agents, title companies, surveyors, excavators, local officials (building inspector, zoning office), appraisers and contractors. If this advice is sound, it’s worth

a small fortune to a buyer who will be directed to the best local options for each service.

It can save a buyer money, time, aggravation and mistakes.

5. Contract terms. Most buyers are shown property by an agent representing the seller and given a standard purchase-offer contract that, in my opinion, is skewed in favor of sellers. A buyer’s lawyer should be asked to go over either the standard agent’s contract or one the lawyer uses well in advance of a buyer having to read and understand contract terms under pressure. Previous columns have discussed many of these boiler-plate terms and their implications.

6. Local idiosyncrasies: The buyer’s lawyer should know something about local politics; local folks and neighborhoods to avoid; and local ground conditions (such as, which areas of the county have dirt that rarely passes a perc test, routinely flood, get lightning strikes, are situated over karst, go dry in August and so on).

I have used the masculine gender to refer to both male and females. I do this because I am old and hate the use of neutral plurals to refer to singular, gender-specific subjects in order to be gender free. I actually prefer working with female lawyers. There, I’ve now offended everybody, including myself.

These six issues can be covered in an hour or two of face time with a lawyer. It is the best money a buyer will spend when buying real estate.

One thing that buyers generally never find out is how the seller set his asking price.

And most buyers never bother to ask.

Occasionally, a smart seller will voluntarily disclose to buyers the path he followed to his asking price. These sellers arm themselves with arguably neutral sources, such as one or more appraisals, tax-assessed value from public records and individual asset valuations. They disclose how much they paid originally and what their tax hit is likely to be at their asking price. They have evidence showing local appreciation rates for properties they think are comparable to theirs.

I’ve found this approach to be very effective in anchoring negotiations around the seller’s asking price, which is why smart sellers do it. Disclosure places the buyer under the burden of showing that the seller’s documentation is wrong.

Far more often, however, a buyer is left to imagine how the seller set his asking price. Where buyers do their research, they may be able to track a seller’s logic. If, for instance, the tax-assessed value is $200,000 and the asking price is $300,000, the buyer can feel reasonably confident that the seller added 50 percent to the tax-assessed value and will probably settle for $250,000, or 25 percent over the tax value.

If, in another example, the buyer pays for an appraisal, the buyer’s appraisal value may come in at the same number as the seller’s. In this case, the seller may have tacked on an additional 25 to 50 percent to see what the market might bring and cover his sale costs. If the buyer’s appraisal is significantly lower than the seller’s, the buyer should ask his appraiser to explain the difference. The buyer’s appraisal may be more recent than the seller’s or use different comps (which may be better or worse). It is also possible that the seller asked his appraiser to hit a high number, which the appraiser did.

Often, a seller uses one recent, nearby sale as the only peg around which to frame the worth of his own property and set its price. In this case, the buyer may have the job of persuading the seller that his one preferred comp is not as good as two or three others. This is a near-hopeless task.  Beliefs in beliefs are very hard to change.

I’ve always found it worthwhile to ask the seller or the agent working with the seller how they arrived at the asking price. This may or may not produce useful, truthful information. The broker might say something to the effect that the asking price was set in terms of current market values. The seller may say something like that he just feels it’s worth the price he put on it. But every once in a while, someone on the seller’s side actually helps a seller by disclosing a thought process that a buyer can reproduce and test.

What should a buyer do when his appraisal and the seller’s agree on current market value? The answer depends totally on whether the appraisal value matches the value of the property to the buyer. If it does, the buyer should offer the consensus number. If the buyer’s valuation is lower than the market valuation, he should offer his price and explain why.

The buyer’s valuation of a property produces a buyer’s price, which is what the property is worth to the buyer.

The distinction between current market value (or appraisal value) and value to the buyer (buyer’s price) is crucial. A property fairly and honestly appraised at $1 million may only be worth $700,000 to a particular buyer, given his plans, resources and assessment of the property’s pluses and minuses.  Appraisals often neglect to properly value certain land assets and don’t inspect improvements for defects in operating systems. Appraisals are good at showing what one property is worth in terms of recent sales of several similar others, but they are not very good at determining the intrinsic net value of a property by researching its individual assets and problems.

So let’s say that the seller has set an asking price of $1.2 million on 500 acres.

My immediate intuitive response is that this seller wants $2,000/acre, or $1 million, gross. Any time I see an “orphan uptick” on an asking price, I adjust down to the nearest big round number as a chainsaw method of cutting to where I think the seller probably wants to wind up. By this way of thinking, $79,000, gets cut to $75,000; $750,000 goes to $700,000, $7.5 million to, maybe, $6 or $6.5 million. This approach tells me nothing about what the property is worth to me, only what might be the seller’s settle price. And it should be obvious that my intuition may be dead wrong. The only way to know for sure is to ask the seller after finding out as much as possible about the property and the seller’s motives and ways of thinking.

When “crafty” sellers price property like gasoline per-gallon — $159,900 — I always helpfully refer to the asking price as $160,000. By framing the asking price at what it really amounts to, it feels easier to bargain it down. The bump up to $160,000 makes it obvious to both of us that the price — $159,900 — is too high. Exaggerating it makes that point—at least that’s how I see it. The higher number — $160,000 — allows the seller to feel that he is giving a big concession to make the deal. A $20,000 concession sounds a whole lot bigger than $19,900.

But all speculation that a buyer might do about what a seller wants from a sale is beside the point—the buyer’s price.

Buyers should pay the price that’s right for them in light of the property’s assets and problems, their resources, needs and plans. Buyers should understand that in almost every instance alternative properties are available that will satisfy most, if not all, of their needs. If a seller rejects a buyer’s offering price without opening negotiations, the buyer should move on rather than negotiate himself down to a lower offering price.

So I approach finding an offering price by researching the property and figuring out what it’s worth to me—my buyer’s price. I will look at tax-assessed value and appraisals, but only for context. Those numbers are not particularly relevant to the valuation exercise that I am going through.

A buyer who offers somewhere around his buyer’s price should be prepared for rejection, because it’s often substantially lower than the asking price. Nothing is wrong with that.

I also spend time figuring out what the seller has in the property, what his after-tax net is likely to be under various price scenarios and what his motivation is for selling. Determining the intensity of seller of motivation is the key that can unlock a seller to a buyer’s price. A not-very-motivated seller won’t turn that key.

I also try to figure out what kind of negotiator is on the other side. Is he afraid to negotiate, evidence for which is that he announces that his asking price is take-it-or-leave-it?  Is he experienced in give-and-take bargaining? Is he likely to stick with what he says or slide around?

A buyer, having determined his buyer’s price, can low-ball it a bit in order to come up, or walk the seller through his reasoning as a way of justifying a take-it-or-leave-it offer. My buying strategy is almost always to get negotiations going. The more that process develops the more invested in its success each side becomes…and the more likely a deal will be struck.

With ridiculously inflated asking prices, I offer a defensible low-ball price—often more than half off. It does a buyer no good to meet an inflated asking price half way, because you will end up overpaying.

Here’s an illustration. Let’s say the seller has put $1.2 million on his 500 acres and my research shows that the property is fairly appraised at $450,000 but it’s only worth $325,000 to me, I might offer $300,000 to get things started and include a letter explaining my offer. The seller may reject me out of hand, but if he’s carried his property for a while, needs to sell and knows that he’s way overpriced, he might come back with something that moves in my direction. I look for terms that help him. If the seller doesn’t get close to $325,000, it’s not a good deal for me no matter how much he comes down from $1.2 million. In this example, I keep in mind that the seller should have started at maybe $500,000, not $1.2 million.

The buyer-determined buyer’s price provides a rational, defensible anchor for negotiating. It may not get to a deal, but it will protect a buyer from making a foolishly overpriced purchase.

I’ve never discovered a simple, quick-and-dirty formula for coming up with an offer. If you apply a fixed rule — offer 25 percent less than the asking price and settle for 15 to 20 percent less — you’re playing the seller’s game.

Each property is different. So buyers need to trust their research and their method for determining the right price for them. Never buy property without determining a buyer’s price.

A few FSBO sellers frame this question differently. They ask: Am I more advantaged in the current market by setting an asking price or by saying to all buyers, “Make me an offer.”?

Conventional negotiating wisdom argues that whichever side first proposes a price consigns itself to the weaker position. With property listed with a broker, sellers always set a listing (asking) price and terms. If conventional wisdom is true, this means that buyers are always advantaged by having the seller declare a proposed gross sales price.

I have seen non-real-estate negotiations where the conventional wisdom held true…and others where it didn’t.

Parties often negotiate over the value of a service or a one-time purchase of a right, like an easement. Whichever party most values what is at issue between them might be better off letting the other side to mention price first, but not always.

Two easement negotiations come to mind. In the first, I needed an underground easement to cross a neighbor’s property to hook up a development’s water and sewerage lines with the closest town lines. My alternative to a negotiated agreement with the neighbor was to connect at more distant points and install a sewage pump in the project. I valued the easement highly.

The neighbor following conventional wisdom refused to name his price. So I offered $1,000, which he doubled. I “reluctantly” agreed. My alternative would have cost $15,000 to $20,000, and not been as good. In that instance, I, the buyer, was advantaged by naming the first price, which was set very low in comparison to what it was worth.

In another example, a partner and I had just bought a timber-heavy but landlocked parcel. A logging road accessed the property and had been used before, but it was not a deeded right of way. I told my partner to visit the neighbor over whose land the road crossed and spread five new $100 bills out on the kitchen table. We wanted a one-time use of the road and were prepared to put it back to its original condition after we were done. To this seller, we were offering a $500 windfall. We were, of course, prepared to pay more. Again, we were the first to propose price in an instance where we valued the object of negotiation highly.

With the pipe easement, I deliberately offered a low-ball price, because I knew how the seller’s mind worked. With the logging road, we offered a more-than-fair price, which we felt the seller would also understand as more than fair. Different circumstances require different tactics. In both cases, the first to offer a price — in each case, the buyer — got what was wanted at an acceptable price.

With real-estate sales, I have rarely found that sellers who set an asking price are disadvantaged in bargaining over the sale of their property. If the conventional negotiating wisdom had proved itself in the field over time, why would brokers have sellers list properties with asking prices?

A small twist that is not uncommon is for a seller — either broker or FSBO — to advertise a property with the exhortation, “Call for a price.” I find this annoying and discourages my interest. I can’t remember the last time I called for a price. I assume such properties are overpriced, but I may be totally mistaken. Of course, some buyers do call for prices, otherwise why would sellers continue to use this tactic?

Large tracts of land are often put up for sale on the basis of “Make me an offer.”

Sometimes this is simply a way for a seller to get a good-faith buyer to give him an idea of current market value without going to the trouble of listing the property or getting it appraised.

The seller places the burden and expense of determining current value squarely on the buyer. From my perspective, that is exactly the right location for this burden…because it ultimately protects the buyer to do this research.

Sellers also use this approach as a way of getting a snapshot of reality in a rapidly appreciating or depreciating market where comps-based appraisals won’t be current.

The buyer’s unaccepted offer may be the floor price a seller is looking for on which he builds a higher asking price shortly thereafter.

I think legitimate able-and-willing buyers are often discouraged by a large-tract seller who won’t price what he’s selling. These buyers face time, effort and expense with no guarantee that the offer they produce is in the right ball park.

On the other hand, a buyer can take this opportunity to price the property properly– on the basis of what it’s worth to him, given the property’s liabilities and assets and in light of his own resources and plans. The offering price can then be thoroughly

supported, and the documentation shown to the seller as a way to center negotiations on the buyer’s valuation.

In a market that’s moving down fast, a seller should pay careful attention to a “low” offer from a buyer who’s done his due diligence. While the offer may be less than the seller paid at the top of the now-vanished bubble, it has credibility to the extent that the buyer has done his homework and is absolutely transparent about his research. In such circumstances, a buyer putting the first number on the table can work it to his advantage, since he’s established the pivot price for negotiations. The buyer says to this seller: “I know you paid more for this property and want more than I’m offering, but this is what your property is worth today.” The buyer has facts on his side; the seller has hopes.

A buyer in this situation should determine what the seller paid for the property, tax-assessed value and the motive for the seller’s need to sell in an unfavorable market. He can present his “low” offer as a take-it-or-leave-it proposition, based on the fact that his research has now established the true value of the property, which the seller had declined to do.

The better way to proceed may be to propose a “low” price with some flexibility in terms and package it with bargaining chips that are intended to be conceded.

The downside of “playing” with a large-tract, “Make-me-an-offer” seller is that a buyer may spend the time and money to work up a price proposal that is not in the seller’s ballpark. Still, all buyers who offer what a property is worth to them assume this risk. It’s only the buyers who anchor their offering price in terms of the seller’s listing price that free themselves of this risk…by assuming the much greater risk of overpaying.

When I’ve faced a “Make-me-an-offer” seller, I’ve looked at it as an opportunity. The seller, I feel, doesn’t know what the market price is of his property in a changing market. He’s unwilling to put an asking price on it and he’s also unwilling to say something like, “Best offer over $x.”

I’ve been willing to work up a preliminary idea of its value to me and then run the idea of price in general terms by the seller. That limits my investment in due-diligence, and I’m transparent about the level of analysis I’ve used to suggest a price. Maybe I could go up if additional evidence suggests additional value, but it might also work the other way, I say to the seller.

In a market where price is softening rapidly, sellers tend to price either too low because they are fatalists or too high because they are desperate.

I feel that it’s always up to the buyer to set the first price regardless of whether the seller has come up with an asking price. The buyer’s price must always be based on research that will convince an unbiased observer. If it doesn’t convince the biased seller to negotiate, the buyer needs to tell the seller that he is moving on to the next opportunity…and then do so.

Part of the seller’s answer will be determined by what he needs to net out of the sale after-tax. This net number factors in all deductions from sale income—transaction costs, taxes (local, state and federal) commissions, fees and expenses.

Another part of the answer is shaped by the seller’s judgment of current market conditions. Where a lot of buyers are chasing a relatively few number of properties, the market will bear a higher price. When few buyers are tire-kicking a lot of sale properties, or not tire-kicking at all, the market price can drift below the true value of the seller’s real estate.

A third factor is the intensity of the seller’s motivation. Desperate sellers may set a too-high asking price to cover their needs even though they doubt that a buyer will come close to it. This is the psychology of hope. It’s why we buy lottery tickets, despite the odds. It doesn’t work very often. Desperate sellers usually do best by setting an asking price that will attract buyer interest in a buyer’s market.

A fourth factor is holding power. The price a seller can exact from the market is directly related to his ability to hold the property as long as it takes to get that price.

Desperate sellers cannot hold for very long, so they have to price lower than they would like.

With these four factors — net requirement, current market, seller motivation and holding power — in mind, the seller works up five types of prices for his property when he puts it up for sale.

1.  Valuation price, which he determines through intuition, group-think, tax-assessed value, appraisals and opinion—alone or in combination. This is the price that he thinks his property is actually worth in the current market.

2.  Initial Asking price, which is where the seller starts the sales process.

3.  Wants-to-get price, which is where he hopes he ends up, which is usually lower than the initial asking price.

4.  Needs-to-get price, which is what the seller must net to come out acceptably. A needs-to-get price is a sober, realistic value, stripped of hope.

5.  Rock-bottom price, below which he will not sell because it nets too little to make the sale worthwhile.

Some sellers work up very precise numbers for each of these five prices, and others wing one or more of them.

With the initial asking price, the seller faces four tactical choices.

First, he could set a very high asking price and indicate a willingness to come down. The seller might include in his advertisement, “Negotiable.”  This tactic forces a seller to come off the initial price a lot as part of his negotiating strategy, but not below a dollar point that satisfies whatever needs the seller must meet. The seller’s strategy is to give a buyer large concessions on initial price as a way of faking the buyer into ending up paying more than he might otherwise.

The downside to this strategy is that some number of able-and-willing buyers won’t even look at seriously overpriced properties. This seller, however, is not looking for a knowledgeable buyer and negotiating partner; he’s looking for a chump who thinks negotiating a concession of 30 percent off an asking price that’s set 50 percent above where it should be gives him a good deal and proves how shrewd he is.

Second, he could set an asking price that’s, say, 20 percent above his need-to-get price.  Twenty percent gives this seller room to bargain with a buyer and cover the costs of the sale.

My guess is that most sellers use some variation of this method, and most buyers intuitively play along by trying to end up with a 10 to 20 percent discount off the initial asking price.

I have seen sellers hurt by this lazy-boy way of pricing property when they didn’t net out their expenses precisely or neglected the tax consequences of a sale.

The downside is that these negotiations are almost always limited to fighting over dollars, that is, where within the 0-to-20 percent overcharge everyone will land. Terms — which are the great wedge of flexibility in negotiations  — are elbowed off the table.  If a buyer is unwilling to pay the seller’s need-to-get price, then the process stops.

Third, the seller could set an asking price as a take-it-or-leave-it proposition. This type of seller must have holding power and a willingness to wait until his price is met.

A buyer should, in my opinion, pay a no-budge price only when it is at, or below, what the buyer believes is the value of the property to the buyer. I generally avoid even looking at properties whose prices are advertised as “firm,” unless I know that the firm asking price is at or below its value to me.

Finally, the seller could set an asking price that will net what he needs from a sale and be entirely transparent about how he got to that price. Let transparency be the path that your buyer walks into understanding your needs.

In a sense, this is a variation of take-it-or leave-it. But the difference is the seller shows the buyer that he’s done all the negotiating on price he can afford. This is accomplished by showing the buyer honest numbers, honestly arrived at.

This was the Saturn marketing model as opposed to the horse-trading that is the auto industry’s norm, which most buyers hate and at which we’re no good.

Most buyers cue off asking price, however a seller sets it. I don’t. I offer what I think a property is worth to me, given its assets and liabilities and my resources at the time.

In today’s market, I think sellers should consider the “transparency approach” to setting an asking price. It distinguishes the seller who does and lends virtue to the seller’s stated need.

For most buyers, their thoughts on offering price are anchored in the seller’s asking number.

That’s not the right place for the buyer to be most of the time.

I’ve come to the conclusion over the years that most buyers do not need to buy most properties at which they make a purchase run. A buyer may need to buy some property at a particular time, but not necessarily a particular property. A buyer’s level of need always depends on his BATTP—Best Alternative To This Purchase. The better a buyer’s BATTP, the more negotiating power he’s likely to have.

Buyers can choose among properties, particularly in a buyer’s market.

If, as I believe, most property purchases are essentially discretionary and voluntarily from the buyer’s point of view, it follows that buyers should have a formula for determining a property’s right price from their perspective.

The formula that I’ve concocted is something like this: The right price for the buyer is based on his pre-offer research into the total net value of the property’s disaggregated assets, together with an analysis of the buyer’s resources available for purchase and his plans for the property.

The buyer must approach each property as a bundle of assets, some of which can be severed and sold, leased or used to generate income. These assets have value in the market that can be determined, but more important, the buyer assigns each asset a value to him.

When the total net value of the disaggregated assets falls short of the asking price, that number is the buyer’s offering-price anchor. Or, it may be a signal to walk way…fast.

Here are several ways of looking at asking price and offering price.

A seller owns 500 acres that he’s priced at $7,000 per acre, or $3.5 million. It has a main house, barn complex and a tenant’s house in a far corner set back from the road. Two hundred acres are cropland, 100 acres are pasture and 200 are woods. The farm will convey with all mineral rights, and natural gas is a likely lease possibility in the future. The farm has various conservation-easement values, depending on what restrictions are imposed. It generates $30,000 a year in farm income.

Scenario 1: The seller hands the buyer an appraisal showing $3.5 million. The buyer commissions his own appraisal, which comes back at $3.5 million. The buyer makes the deal at $3.5 million.

Scenario 2: The seller hands the buyer an appraisal showing $3.5 million. The buyer immediately offers 20 percent less, or $2.8 million. They haggle. They settle for $3.25 million, which is $200,000 more than the seller had hoped for.

Scenario 3: The buyer investigates the property’s assets before making an offer. He hires consultants to establish the discrete value of 150 acres of cropland, 50 acres of cropland plus main house and barn, 100 acres of pasture, merchantable timber on 200 acres of woods, future value of gas rights and conservation-easement values. He comes up with a total of $5 million. The buyer makes the deal for $3.5 million and sells $1.5 million in discrete assets for $2 million. The buyer is left with 350 acres, the main house and barn for $1.5 million. But he’s in for some post-purchase surprises.

Scenario 4: The buyer investigates the property assets and liabilities before making an offer. Assets are valued at $5 million, but there are deductions for liabilities. A neighbor has fenced in 40 acres of pasture that is the seller’s by deed. Other boundaries are disputed. The buyer faces a $25,000 survey cost, which does not guarantee resolution. Lack of resolution means he can’t divide the property and sell the pieces he doesn’t want.

The merchantable timber worth $3,000 per acre can’t be logged because it’s sited on habitat for the federally endangered blue-eyed nosepicker, which also means no development. The cropland harbors an invasive species that the appraiser didn’t know about which limits its value. The appraiser also didn’t know about the noxious weed infestation in the pasture that reduces livestock gain by 25 percent. And 150 acres of open land are in a 50-year floodplain. Netted out the adjusted value is $2.1 million. The buyer submits all of his material to the seller, with the words that such matters need to be disclosed to all buyers who come after him. They settle at $2.35 million.

Scenario 5: The buyer is interested in the main house and only 300 acres. Assets are valued at $5 million with a discounted value at $2.1 million. The buyer pays $2.35 million and sells 200 acres, which includes the tenant’s house and most of the floodplain. He treats the cropland and pastureland curing them of their afflictions. He sells the woods for $800,000 to a conservation group who promises to protect the nosepicker for ever. He leases the gas rights under 500 acres for $25,000 with a 12.5% royalty of net on future production. His lease includes a No-Surface Occupancy provision.

His sales are: 100 acres of woods, $800,000; tenant’s house and 20 acres, $300,000; four 20-acre lots, $100,000 each, for $400,000. Net cost to buyer of purchasing main house and 300 acres, $2.35 million less gross sale proceeds of $1.5 million = $850,000, or $2,833 per acre including main house and barn complex.

I have seen each of these scenarios play out in what one of my college professors used to call “real life.” It’s useful to remember the words of Steven Cohen, head of The Negotiation Skills Company and author of Negotiation Skills for Managers: Price is what you pay; value is what you receive.

A buyer must understand through pre-offer research what value he will receive, which then determines the price he’s willing to pay and not pay.

Pre-offer research provides a buyer with the net value (gross value less discount costs for liabilities) of each asset. That approach and level of analysis helps the buyer develop a post-purchase plan. The combination of determining the net value of all the discrete assets on a particular property and developing a post-purchase plan leads a buyer to an offering price.

Once the buyer establishes the net value price of the property to him, he can then determine the intensity of his interest in a purchase and set an offering price that makes sense. It’s not that hard to do, but most of us don’t bother.

I spent several hours this weekend looking at rural listings around the country. Thousands are advertised, with many of each type in the same place at about the same price.

Few sellers appear to have come off their original asking prices during the last six months. In most areas, sales seem slow. Suburban sellers have cut their prices by 25 percent or more. So why aren’t rural land sellers doing the same?

First, rural sellers may not have as urgent a need to sell. Turnover in rural property is lower than in suburbs where homeowners are subject to job transfers and financial volatility. Rural sellers are often able to wait longer.

Second, sellers in a weakening market are inclined to imprison their asking prices with backward-looking expectations. Since prices and sales were strong a year or two ago, therefore, seller reasoning goes, they should be strong now (even if they’re not).

I’ve never had much luck in hoping better times into existence. My experience is that markets produce prices, not wish-fulfillment.

Third, sellers cling to forward-looking inflation dreams. Prices, they hope, will go higher. Hold tight, they tell themselves, prices go up…eventually. Which is generally true…eventually.

Fourth, sellers hold to high asking prices in a falling market to avert loss. MIT economist David Genesove and Columbia University economist Christopher Mayer found that Boston condo owners faced with a real loss (not just less profit) stuck with higher asking prices. This produced a little more in sales price, but involved the costs of holding the property longer.

Dan Ariely, author of Predictably Irrational and James B. Duke Professor of Behavioral Economics at Duke University, explains sellers pricing above market in two other ways. Once we own something, he told me, we “endow” it with more value than it’s worth. And when we “customize” real estate we think it’s better than similar properties, and should, therefore, be priced higher. These behaviors are understandable, but not rational, he said. (www.predictablyirrational.com) .

All of these factors encourage sellers to stick on unrealistic asking prices that won’t move their properties. And once anchored into that price, sellers feel they’re losing money with each reduction. In truth, they’re not losing anything. It isn’t there to be lost.

A seller usually sets an asking price by pegging it to recent sale prices of comparable properties. But a comp analysis can cement a seller’s asking price into an outdated, overpriced market. It will estimate past worth, not present value. It’s a rationale for not selling.

When a seller prices his property at $250,000 based on comps in a weakening market, a buyer won’t look at it because it’s anchored above the $150,000 he perceives to be its current worth. The buyer reasons that it’s not even worth making an offer. The buyer is wrong. Low offers educate sellers. Three no-budge offers at $150,000 are a shriek of reality, not a subtle signal.

This buyer also sees properties listed at $150,000 as overpriced. So nothing happens.

Buyers in a buyer’s market buy the properties re-priced at the new wholesale, not the old retail. When a dozen identical lots are each priced at $50,000, the first seller to drop to $40,000 will be the first to sell.

In today’s market, a must-sell-soon seller should use a comp-based appraisal value as a top line from which he drops to a get-it-sold asking price. If you need to sell today, you need to price below your comps-based “market” value.

Buyer expectations — not appraisal values — determine sale price in an overvalued market.

Prices are too high in many rural markets—especially for timberland, farmland and money-gobbling hobby farms.

Over the long term, all have appreciated steadily. That will continue because of population growth if nothing else. But this genuine, long-term rise in values was shot up with growth hormone for the last four or five years. Today’s asking prices are inflated beyond what many of these properties are worth today.

Much of this has to do with sellers pricing timberland and cropland at second-home value. Many rural sellers also seem to assume that hunters are rich idiots.

Many rural prices today are about what they were a year or two ago. They should be lower by 20 to 30 percent if a seller wants to sell. If a seller doesn’t need to sell, I’d advise pulling the property off the market for a while.

A seller has to set an asking price in a buyer’s market based, first, on what he needs to net from a sale.

Figure the amount you need to pay off your loan, closing costs and taxes (transaction taxes and income tax, both state and federal). Then figure the cash you have in the property—down payment and repaid principal, plus capital improvements. Then determine a reasonable profit on your cash. Price it there if you need to sell.

Or price it a little higher if you can seller-finance, which is a big help to a buyer and a cheaper alternative than institutional lenders.

If your calculations show that you’re going to lose money on a price-discounted sale, you have to guess whether you’re better off losing a known amount soon or holding in hope of a higher price at some unknown future point. It’s often true in down markets that the costs of holding outweigh the net gain from the hoped-for, higher future selling price.

To hold for a higher price, or to sell now at a lower price—that’s the seller’s question. Try this exercise. Assume a cut in asking price produces a sale that’s 30 percent less. Then project your costs of holding for 18 months at the current asking price and a sale for only five percent less. Which nets you the most dollars? Which produces the least amount of heartache?

Bad news rarely gets better by not reading the paper.

If it doesn’t pay to hold, then don’t. Cut the price. Get it over with. And move along.

Some are sold, but most are donated. They are usually sold or donated in perpetuity, though some have limited terms. Most easements are set up to preserve open space, restrict/eliminate development or keep farmland in agricultural use.

At the time of the donation, its value is calculated. The donor uses the value to receive, federal, state, local (property tax) and estate tax benefits. These are substantial.

The question I have is how should a buyer calculate the discounted value of a for-sale property burdened with a conservation easement?

Many sellers seem to think that a CE is a selling point and don’t like to discount their asking prices.

It’s often hard to find comps to use in a conventional appraisal.

I’ve been involved in several situations of this sort. It’s hard to agree on a valuation methodology.

What are your thoughts?

They often seek an answer in three ways.

One approach is to assume that the buyer’s right money is roughly 15 percent less than the seller’s asking price.

Deduct five to six percent from the asking price for commission and five to 12 percent more for “negotiating.”  Whatever’s left, the buyer thinks, is the right price.

This method often produces a purchase, because the buyer has accepted the seller’s asking-price framework.  The buyer derives his offer based on a fictitious number that the seller has proclaimed to be the property’s value to him and the buyer.

Asking price has nothing to do with the value of the property to the buyer.

A second approach is for a buyer to hire an appraiser to do a comparables analysis.  This establishes a Fair Market Value (FMV) for the seller’s property by judging its features against the selling prices of at least three nearby, recently sold properties (comps) with similar qualities. The appraiser tweaks the FMV to account for differences between each comp and the seller’s property.

A typical appraisal will not value assets like minerals, wind rights and land quality individually.

Rural appraisers often use generic values for timberland, pasture and cropland without determining the actual in-the-field value of the seller’s timberland, pasture and cropland.

An acre of generic timberland may be appraised at $1,500 across the board, but a buyer needs to know whether the 100 acres of timberland on the seller’s property contains merchantable timber worth $300 an acre…or $3,000.

FMV has nothing to do with the value of the seller’s property to the buyer. It has to do with the value of the seller’s property in relation to other sales.

The third approach is for the buyer to ask the seller’s real-estate agent who’s driving him around: “What do you think the seller will take for it?”

Seller and agent often anticipate this question and agree on an answer before the buyer asks it. A seller usually figures out his “will-take” price first, then steps it up to an asking price.

An agent representing the seller should not give information to a buyer that harms the interests of his client, the individual whose funds will pay the agent’s commission.

A seller’s “will-take” price has nothing to do with the value of his property to the buyer.

So how does a buyer figure out what he should pay for rural property?

The right purchase money is the value of the seller’s property in light of the buyer’s capabilities, the property’s capabilities and his plans.

The buyer’s individual capabilities reflect the resources he can bring to bear on the property, before and after purchase. These include his time, knowledge, money and commitment. The less a buyer has of each of these, the lower his offer should be.

The property’s capability to generate income (sale of products or service; income from rent and royalty; federal subsidies) and tax benefits (deductions, depreciation, capital-gains rate, estate sheltering, conservation easement, 1031 exchange potential) is a major factor in determining what a buyer should pay.

Other property capabilities a buyer should evaluate are its long-term appreciation potential; ability to pay down the mortgage through the sale of severable assets like an unwanted house or land; and, finally, its potential to be sold, in whole or part, for a Higher and Better Use (HBU), which means a higher price per acre than the one the buyer just paid.

The buyer’s plan for the property also determines its value to him. A plan can range from land used exclusively for personal recreation to a divide-and-flip business deal.

Any plan that builds a property’s value and generates significant income increases the buyer’s ability to pay the seller a high price.

When a buyer’s capabilities are low, the right money for personal-use property should also be low. In other words, he who stretches to buy something he doesn’t need has put himself on a rack of his own making.

The right money—value to the buyer–is what the buyer should pay, never more and less if possible.

The right money to the buyer may be the seller’s asking price, or more, or far less.

Of course, if you have money to burn, buy whatever you want and forget about the cost.

Every seller dreams of a buyer with a ton of cash and a lighted match.