A few weeks ago I posted the first two parts of this article. (Part I and Part II) Then things got busy and I didn’t have time to post the much anticipated third and final installment, until today. Now the dramatic conclusion of, “Choosing the Best Farm and Ranch Broker.”
Okay, maybe choosing the right broker is not all that dramatic. But pick the wrong one and you are potentially inviting all kinds of unwanted drama into your life. So pay attention and keep in mind these last four things when choosing the professional to help you sell your land: (1) technology; (2) negotiation skills and experience; (3) knowledge of legal and tax issues; and (4) knowledge and experience with 1031exchanges.
1. Technology. The farm, ranch and recreational real estate market has undergone massive technological changes in the past several years. Today, almost all buyers start their search for property by looking on the internet. Your broker has to make sure your property can be found by those buyers. Just having a website is not enough. You need to choose a broker that understands search engine optimization, uses social media effectively and is able to get your property found among the tens of thousands of other listings out there. The brokers that understand and use today’s technology are able to obtain the highest sales prices by ensuring the highest number of qualified buyers sees your property for sale.
2. Negotiation Skills and Experience. Agricultural properties are increasingly considered to be high-quality investments attracting wealthy individual and institutional investors. Being able to deal effectively with these types of buyers is just as important as being able to make a personal connection with that neighbor down the road thinking about expanding his operation next year. Your broker needs to be able to talk the talk regardless of whom he is negotiating with. He needs to be just as comfortable talking about capitalization rates with bankers as he is talking about last year’s yield and the weather with your neighbor. A broker with strong negotiation skills will be able to address any potential buyer’s concerns, deflect bogus criticisms and close the deal while making sure you don’t leave any money on the table.
3. Legal and Tax Issues. Every real estate transaction has its fair share of legal issues and tax consequences. Your broker needs to be able to identify as many as possible ahead of time and be able to deal with unforeseen problems as they arise. Whether you need to resolve an encroachment or lien on the property, or understand complex estate tax issues, your broker should be able to identify the issue and provide you some assistance. This is not to say that your broker needs to be an attorney. In fact, since most brokers are not attorneys, it is probably more important to choose a broker that doesn’t think he is one. As I said in Part I, a good broker should have a trusted network of experienced attorneys and accountants he can recommend (as needed) to help guide you through any estate planning, legal or tax issues that may arise.
4. 1031 Tax Deferred Exchanges. The government do take a bite, but that doesn’t mean you have to feed it today. 1031 Exchanges can defer the payment of the taxes due on the sale of your property, if done correctly. Your broker must understand the requirements and timing involved in a successful 1031 exchange if your are thinking about doing one. He needs to understand what qualifies as a replacement property (it’s not just land anymore) and be able to help you identify one or more eligible properties within the 45-day time limit for doing so. He should be able to help you retain a qualified intermediary to conduct the transaction and get the deal closed within the required time limits (in most cases 180 days from the closing of the sale on your property). There plenty of articles out there about the complex nature of 1031 exchanges. At the very minimum, be sure your broker has read a few. Failure to get it right can get ugly.
Your land is likely your most valuable asset. Your broker has a duty to help you obtain the highest value possible for it. Choosing the right farm or ranch broker will not only help you obtain a top price for your property but will facilitate a smooth transaction. Keep in mind the seven points discussed in this series of articles and you will be well on your way to choosing the right broker for the job.
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