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General

Putting a wrap on 2019!

By General

As we wind down the calendar year, I wanted to take a moment to say THANK YOU to all of our clients who helped make 2019 a phenomenal year for our business! We’ll end the year having contracted almost $20M in land in Cass County, ND alone, and for that we very thankful! We are truly blessed to be able to serve so many great clients in the southern Red River Valley. We thank each of you for your trust and your business, and we hope we can continue to be a resource for you and your family in the future. We wish you all a VERY Merry Christmas and a blessed New Year!

From our family to yours,

Andy Westby & the team at Goldmark Commercial Real Estate, Inc.

How to settle the tax bill when selling farm land

By General, Owning & Selling Farm Land

Every now and again, I find clients who are uncertain or upset about how taxes should be paid/split when selling farm land. While many terms of a land deal can be unique, we generally see a common theme for how to handle taxes when selling farm land. The general rule of thumb goes like this…the one who gets the benefit from the land for the current tax year (either in income or the crop) pays the tax. Let me give you a couple of examples:

  • Land sold by an owner (family/investor) that is NOT farming the land – To determine who pays the taxes in this situation, ask this key question:
    • Has the seller received the rent income for the year?
      • Yes: Seller pays the full taxes (this assumes the seller keeps the rent check).
      • No: Buyer pays the full taxes (this assumes the buyer gets the rent check).
      • Partially: It isn’t uncommon for farm rents to be paid 50/50 in the spring and fall. If the seller has received half the income, then they usually would pay half the taxes. This again assumes the seller is keeping the check for half of the rent.
  • Land sold by an owner who is also farming the land – This one is more simple generally…just ask this:
    • Is the seller going to be planting & harvesting the crop on the land during the year the land is sold?
      • Yes: Seller pays the taxes (this assumes buyer takes possession after the crop year ends)
      • No: Buyer pays the taxes (this assumes buyer takes possession before the crop year starts)

Of course this point can be negotiated, but usually the above standards are applied by buyers and sellers of farm land in our area of North Dakota and Minnesota. If you have seen other methods used successfully or have questions, feel free to contact us to share.

Until next time!

Andy

 

2019 Market Update

By Ag Land Values, General

We are overdue to give you a market update on land sales in the Southern Red River Valley, so here goes!

  • Value wise, we are seeing an increase in farm land values in 2019 compared to 2018, specifically on the ND side in Cass and Richland counties. Cass County especially has had a strong year in terms of price/acre results!
  • Volume of land sold so far is lower than in 2018, however there will be more land sales in Q4 of 2019 that may end up pushing us above the 2018 volume.
  • Overall we are seeing some better land being sold in 2019 compared to 2018. This is one reason we are seeing higher values overall, but demand in general has been strong as well.
  • There are more buyers than sellers in the farm land market right now, and we expect that trend to continue for awhile.

We’ll share some specific stats in early 2020 once all the 2019 sales have been recorded. Until then, if you want specifics or are curious about land values in your immediate area, please contact us any time and we would be happy to share.

Until next time!

Andy Westby

How can I find recent sale prices for farm land?

By Ag Land Values, General

As a Realtor & Auctioneer, I often get asked by friends and family how much a specific piece of land sold for recently. It’s human nature for people to be curious about area land prices, either because they maybe own similar land or want to buy land like it in the future, or perhaps they are just being nosy! Regardless, I think having current, accurate data about the market is important for many people. Here are a few ways you can research land prices if/when the need arises.

  • You can visit or call your county recorder’s office and ask for a list of recent ag land transactions or deeds to review. In North Dakota for example, most recorded deeds in the county will likely include the sale price right on them, unless they are between family members or title is exchanged via a Quit Claim deed (prices are exempted on those).  Some counties maintain a monthly or yearly spreadsheet of ag land sales that they may provide to you for free or for a small fee (Clay County, MN has one for $20 for example where Cass County, ND will send you one for free).
  • In North Dakota, you can subscribe to a service called NDRIN (North Dakota recorder’s information network @ http://ndrin.com/). This website aggregates digital copies of ALL recorded documents across the state so you can search by things like Grantor (seller), Grantee (buyer), or even section-township-range. It costs money each month to subscribe but for people who need regular access to sales data it is a great tool. Minnesota has an online tool as well at https://www.mndor.state.mn.us/ecrv_search/app/openCustomSearch to research sales history but I haven’t found it as current or helpful as NDRIN on the North Dakota side.
  • Call your local agent/auctioneer! Most people “in the business” should be up to speed on the local market. If they really have it together they can provide you with a wealth of recent transactions, even the ones they weren’t a part of. Worst case they may be willing to share details on the deals they were involved in, since once they have been recorded they are a matter of public record usually anyways.

If you are curious about recent land prices in the Southern Red River Valley, do not hesitate to contact us as we have a wealth of sales data we would be happy to help share should it be helpful to you!

Until next time,

Andy Westby

What is a Private Sale?

By General, Owning & Selling Farm Land

As you likely know, there are MANY ways in which farm land can be sold. Most people tend to think of auction sales, sealed bid sales, or traditional listings. However, another VERY common method used in selling farm land is what we call the “Private Sale” method. No, this isn’t some Black Friday or Cyber Monday gimmick used by retailers. It is a very legitimate sales strategy we can employ to help Clients achieve their goals.

What is a private sale?

If you take a look at the recent land sales we have handled, you may notice a good number of these parcels show the method of sale was “Private Sale.” In those cases, the Client did not want us to publicly list and advertise their land. Because of that, we did not list it in the local newspaper or hang posters at all the area elevators and cafes. For various and valid reasons, these Clients wanted to maintain a level of privacy and confidentiality through the process of selling their land. The private sale method allows us to do just that.

How does a private sale work?

While this method of sale clearly limits the marketing strategies we can employ (sorry Agweek, no advertising budget for you!), it does not limit our ability to find buyers and achieve great results for our Clients. In these circumstances, first we work with Clients to build a targeted list of potential buyers. Then, we execute a strategy of quietly reaching out to let them know of the confidential opportunity to buy the land. We do this through phone calls, emails, direct mailings, and in-person meetings. As a result, we are usually able to get multiple parties interested in the land through these tactics. In the end, we are able to negotiate a good price without doing so in the public eye.

Perhaps you own land but do not want to tell the neighbor or family you are selling. Or maybe you just do not like your personal business aired on the line for all to see. Whatever your reason, we can help you discreetly and successfully sell your land should a Private Sale be your preferred method. Contact us today to learn more if you would like!

Until next time!

Andy

A 101 for a 1031 Exchanges

By General

If you have ever bought and sold land or commercial real estate before, you likely have heard of (or maybe even executed) a 1031 exchange. I have found many clients know a thing or two about them, while others are experts having done numerous 1031’s in the past. However, many clients I work with are unfamiliar with the rules or entirely new to the concept. So let’s dive into the topic of 1031’s and arm you with more information on this incredibly powerful tax-saving, wealth-building tool!

PS: Remember, we aren’t lawyers and we aren’t accountants…so ALWAYS consult with them to make sure you follow all the right rules and regulations!

What is a 1031?

In its simplest form, a 1031 Exchange is the process provided for by the IRS to defer capital gains taxes from the sale of one property by using the funds from that sale to buy another “like-kind” property. For example, if you are selling a $1M property and you have capital gains of $500k, rather than paying taxes on that gain (which could easily be 25% or more), you can purchase a replacement property with those funds and defer your capital gain (i.e. no tax is due after your sale). Pretty powerful stuff!

It is called a 1031 Exchange because it is defined in Section 1031 of the IRS tax code. The IRS has had a process for deferring capital gains on property dating all the way back to 1921 actually, and over the years it has taken on different rules and changes to become a VERY common process among real estate owners and investors. There are a number of rules you must follow around the type of replacement property you can buy (“like-kind”) and when you must finish the process in order to qualify. Let’s cover the big ones rules…

Note: If you plan to do a 1031 when selling a property, just tell your Realtor and/or closing company that you intend to do one. They will help guide you from there and make sure that a “Qualified Intermediary” is ready to handle the process and paperwork for you. There are even multiple types of 1031 exchanges and some other things to note…here is a good resource with more details direct from the IRS.

What does “like-kind” mean?

To qualify for a 1031 Exchange, the IRS says you must purchase a “like-kind” property (which becomes your replacement property) to replace the one you sold (which is called the relinquished property). Thankfully the definition of “like-kind” is quite broad. If you own real estate for your business, trade or for investment, you can purchase any type of real estate that meets that criteria. So if you are selling farm land, you can buy more farm land OR you can buy an apartment building, warehouse, or piece of development land. All would be considered investment property, and therefore “like-kind” to what you sold. One important thing to note here is you cannot buy replacement properties outside of the United States to qualify for a 1031 Exchange.

What are the time limits to do a 1031 Exchange?

There are two big dates to know about when doing a 1031 Exchange. The first is the identification period. From the date of closing on your relinquished property, you have 45 days to identify one or more replacement properties. This is a HARD date, meaning if 45 days go by and you have not yet identified replacement properties, you WILL pay the tax on the gain of your relinquished property. There are numerous methods for identifying the replacement property, but the most common is the “rule of 3” where you list up to 3 properties that you may purchase (you don’t have to buy them all, but you can if you have enough funds).

The second important date to know is that from the date you sold your relinquished property, you have 180 days to actually purchase and close on the replacement property (or properties). Here again, if you get to the 181st day and haven’t closed, then you will be paying that tax bill.

How long is the tax deferred?

That depends. If you sell your replacement property and do NOT do another 1031 Exchange, then the capital gains due on your original relinquished property AND your recently sold replacement property will be due. The great thing about 1031’s however is that you can keep doing them over and over! So if you sell your replacement property, you can do another 1031 Exchange to buy a new replacement property. Some clients even plan to use the “defer, defer, die” strategy…which sounds a bit morbid but it essentially means if you keep deferring capital gains through 1031’s until you die, when your property is passed to your heirs they will receive a stepped-up basis in the property (up to a limit) and the tax obligation goes away! Again, always consult your accountant and/or lawyer with matters such as this.

Why do I need a “Qualified Intermediary” to do a 1031 Exchange?

One last important rule to point out is that to do a 1031 Exchange, you MUST use a Qualified Intermediary (“QI” for short). This is a neutral third-party that acts on your behalf to accept and hold the funds from the sale of your relinquished property, and then they use those funds to help you purchase the replacement property. It is critical you never directly receive the funds from the sale of your relinquished property. They must go directly to the QI. They will handle the funds and the paperwork to make sure you follow the rules and properly defer your taxes per the Section 1031 code. Most title/closing companies can serve as a QI, but if you ever need a list of organizations that can help just let us know.

What is a 1033 Exchange?

Normally I wouldn’t bother explaining a 1033, but here in the Southern Red River Valley (specifically Cass County, ND), we have had numerous clients qualify under the rules of the 1033 Exchange.  This is the IRS Code for an “involuntary conversion”…i.e. a forced sale such as the land acquisitions being done for the Fargo-Moorhead Diversion. The 1033 functions in much the same way in that it helps sellers defer capital gains, however the time limits are MUCH longer and more flexible than on the 1031 Exchange rules. For example, under a 1033 Exchange the seller has up to 2 years to find and acquire their replacement property. They can also accept the funds from their sale instead of holding them with a QI as required by a 1031.

Here in the southern Red River Valley we have helped dozens of clients perform 1031 transactions, saving hundreds of thousands of dollars in taxes for them. They are a fantastic tool for accumulating and preserving wealth. If you are thinking about selling Red River Valley farm land and want to explore your 1031 or 1033 Exchange options, please contact us and we would be happy to show you how we have helped other people do the same thing!

Until next time,

Andy

 

 

What is a Sale Leaseback?

By General, Owning & Selling Farm Land

There are many reasons why ag land is sold, and there are many different methods it can be sold by. A rising trend among farm land sales in the recent past has been something commonly referred to as a Sale Leaseback. You may have heard the term before, but I still find some people aren’t all that familiar with how they work. Here is a good example of what they are and how they work:

  • For various reasons, fictional owner “Valley Dirt Farms” needs to sell some land but does not want to give up farming the acres.
  • For many years they have owned and farmed a quarter of land that is a solid producing parcel that they would prefer to keep farming, and they could justify paying a strong rent to do so.
  • They decide to sell this quarter but only on the condition they are able to lease it back from the new buyer (hence the “leaseback” portion of the sale). Valley Dirt Farms is willing to offer a multi-year rental agreement at a good cash rent price.
  • The land is marketed with this condition and a focus on the returns that a potential buyer could achieve. Naturally, this marketing focuses on the Investor category of buyers, not the owner/operators who still tend to dominate the land buying market.
  • Once a buyer/investor steps forward and final terms are negotiated, a long-term lease is usually signed at or near closing that provides A) the seller with the opportunity to continue to farm the land, and B) the buyer with the income and return they were interested in. Win-win!

We have handled multiple Sale Leasebacks here and have found great success in marketing to this category of buyers with our deep network of regional and national investors. If you have interest in exploring your own Sale Leaseback (on the buy OR sell side), please do not hesitate to contact us!

Until next time!

Andy

 

What is a BPO?

By Ag Land Values, General

The question of “how much is my land worth” is common for landowners who may not be in touch with the current market activity or those who perhaps live out of state and therefore get out of touch with what’s going on locally. Nearly everyone is familiar with using an appraisal to get an independent, expert opinion on the value of a property. However, most people are NOT as familiar with another method commonly referred to as a BPO, or “Broker’s Price Opinion.”

BPO’s have been around for a long time and banks have routinely used them for different purposes depending on the project or loan size, but yet many landowners I talk with are not familiar with them or the benefits they offer. So let me explain what a BPO is in general terms:

  • A BPO is usually a formal report that any qualified real estate agent or broker can do for you.
  • A good ag land BPO should provide a description and overview of the subject property, with things such as soil maps, aerial maps, and “boots on the ground” pictures.
  • The BPO should also identify a number of recent sales in close proximity and/or in similar characteristic to the subject property.
  • Based on these recent sales and the author’s experience in the market, the report should give you a strong opinion on the value (or value range) of the subject property.
  • They are generally much shorter than a full appraisal, which means two important things: 1) they can be completed within 1-2 weeks typically, and B) they are much less costly than a full appraisal.

BPO’s have been used in the past to help buyer’s and seller’s arrive at a fair price, to help families make an informed decision if now is a good time to sell or to hold, to help establish a basis for inheritance purposes, and much more. If you are interested in learning more about this or want a BPO done for your land in the Southern Red River Valley, please do not hesitate to contact us!

Until next time!

Andy

 

How Farmer’s Can Pencil High Priced Land

By Ag Land Values, General

In the past couple of years, it has been a question I have heard routinely from people not connected directly to Ag but who are familiar enough with what has happened in the farm economy the last few years. The question goes something like this: How in the WORLD are farmer’s still paying that kind of money for farmland! I always enjoy this question as it’s a great opportunity to educate people and dispel some myths about ag land and the farm economy. Well the good people over at www.agriculture.com recently posted a new article that tackles this same question. Have a read yourself here: https://www.agriculture.com/farm-management/farm-land/how-are-farmers-affording-high-land-prices

While this area of the Southern Red River Valley doesn’t see the same prices mentioned in the article from places like Iowa, we still see strong prices for good land that make some people scratch their head. To summarize the article, here are the key reasons we continue to see good prices for strong farm land:

  1. For many, buying farmland is hard to pencil they day you buy it, but buyers are typically buying it for multiple generations. Over time, land investments have usually paid off and been a huge source of a farmer’s net-worth and future income when the time comes to stop farming it and start renting it.
  2. Farmers can often-times dollar-cost-average their investment in new land. Many farmers have owned land that was purchased decades ago for a few hundred dollars an acre. Paying a strong price today is easier when you can dollar-cost-average your total land investments across low-basis land with higher-value land.
  3. We are seeing more investors interested in ag land with prices having fallen since the highs of 2012/2013. Investors can tend to push the market a bit which can lead to rising prices.
  4. I will add one more item the article didn’t address. While the farm economy has struggled along the past few years, the top 20% of producers out there are still incredibly well positioned to capitalize on the land market when the right parcels come up for sale. Strong land will always bring strong prices, and there are still excellent operators out there with dry powder just waiting for the right opportunities.

Until next time!

Andy

Welcome!

By General

Hello and WELCOME to our new website focused on helping buyers and sellers of southern Red River Valley farmland! We hope you will find this site informative and helpful, and maybe even a bit entertaining from time to time! It is exciting to launch this website as yet another excellent tool to help our clients near and far achieve their goals when it comes to selling, buying, or managing their ag land. Following are a few things you can expect to find here in the future:

  • Information on farm land that is currently available for sale.
  • Helpful information about recent land sales in the Southern Red River Valley of North Dakota and Minnesota.
  • Informative articles about numerous topics related to farm land ownership, management, and sales.
  • As always, superior service and marketing from your ag land experts at Goldmark Commercial Real Estate!

You are welcome to sign up for our newsletter at the bottom of our homepage to stay up-to-date, or contact us anytime if you have questions or needs we can help you with. Thank you for stopping by…we hope you will come again!

Until next time,

Andy Westby

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