McClelland Minute - October 25, 2009

Five Different Ways to Sell Farmland

About this time every fall the phone starts to ring with calls from rural folks inquiring about the value of their land, how the market is doing, and what choices they have in order to sell it.  For the next 3 months or so, odds are I will spend a fair amount of time in NE Alberta and NW Saskatchewan drinking coffee in farm kitchens.  It is not unusual to find up to 3 generations at the table participating in these discussions.

There is very little in life harder for a farmer or rancher to do than to make the decision to sell land. The reasons are as varied as life itself – relationship breakdown, retirement, downsizing, off farm opportunities, economic distress, death of a partner or parent, etc.  Often the property has been under the stewardship of family members for decades.  One farm wife told me she felt that their land was a more seductive mistress to her husband than she was.  An older gentleman quietly stated that farming had always been his life, and without the daily purpose it gave him, he wouldn’t know what to do.  This can mean there are times when emotions may cloud logic. 

However, once the decision is made to liquidate, the land owner should determine its fair market value either with the assistance of an appraiser or Realtor experienced in rural properties.  If the owner is going to manage the sale process themselves, it is more appropriate to call the appraiser.  Should they also want assistance in marketing and negotiations; then bring in the Realtor.  Better yet, hire both and get the benefit of two opinions.

The next step is to determine which method will work the best in your particular situation. There are several options: Multiple Listing Service, exclusive brokerage, tender, or auction. Some owners will “chum the waters” in the community coffee shop, teasing prospective buyers that certain lands may or may not be coming available.  Frankly, I think they just get a kick out of seeing who will come for a visit and what treasure they will bring with them!

For those who want to exercise some control over who gets their property, and yet give an equal chance to all prospects, the tender process is quite popular.  All bids are opened in secrecy, and unless the owner speaks out, no one will ever know exactly how many parties were interested or the details of the bids.   Long term tenants may even be awarded the land for their loyalty if they come reasonably close to the highest offer.

Auctioning of land in conjunction with a dispersal sale of equipment or livestock also has its place, however it may be too open a process for some vendors plus it requires an immediate response.  In my experience, live auction can be good or bad.  Sometimes two or more neighbours will duel it out in front of the crowd driving up the price.  Other times, the seller receives less than fair market value because not all prospects have been reached by this method or are comfortable exposing their interest in such a public forum.

Personally I like to go over all the options with the vendor and help them choose the one that best meets their needs.  If that approach is unsuccessful then we can always go to “Plan B” in order the get the job done.  Next week, I will talk about MLS, exclusive brokerage plus the importance of preparing and delivering a good marketing plan in support of which ever method is used.

Vern McClelland is associate broker with RE/MAX of Lloydminster.  If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the McClelland Group website www.mcclelland.ca

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