McClelland Minute - November 1, 2009

Selling Farmland – Part Two

Last week we talked about some of the methods that farmers and ranchers may use if selling farmland.  Today we will discuss the preparation that should go on before actively marketing a property.

The most important step is pulling a copy of the title and the companion parcel map.  As a Realtor, my first concern is to determine who the legal owner is, the number of acres actually available, and to review what, if any, interests are registered against the property.  These may range from utility corridors or surface leases to mortgages and pending litigation for child support.  Some, like mortgages, may be satisfied and removed at time of sale, but others, like oil leases and pipeline easements, may restrict a future owner’s ability to fully “enjoy” the property.

My next step is to determine what properties comparable to the subject property sold within the last 18 to 24 months.  In Alberta, you will likely need to either enlist the cooperation of the county’s assessment agency or search the newly registered titles to see what value was assigned to it.  Saskatchewan makes this process very simple with an online service available through the Farmland Security Board www.farmland.gov.sk.ca .

The Saskatchewan Assessment Management Agency (SAMA) recently introduced an online service at http://samaview.sama.sk.ca/sama which details all assessed taxable activities on rural properties.  It is a quick and easy source of information relevant not only to the subject property but also those the evaluator may be comparing it to.  It is important to stress here that the evaluator needs to be completely objective, comparing “apples to apples”.  Access, fences, buildings, dugouts, oil leases, and weed control all have an impact on the buyer’s perception of value.

Every piece of land is unique with soil characteristics that can be described including type, variations, the number of acres that have been cultivated, and those that have been left in bush or wetlands.  Both Alberta and Saskatchewan have field assessment profiles available.  In Saskatchewan, these can be seen at the office of the Rural Municipality or ordered through SAMA.  In Alberta, similar information is available through the County or Municipal District.  Potential buyers of cropland usually want to know what was planted the previous two seasons and the yield.  Ranchers will rely more on their observation of the condition of the forage or pasture to determine how many grazing days they can expect.  It is this last point that probably counts the most, as the buyer’s on site visit will likely tell them more than any paper work we can come up with, but it is this documentation that will help them achieve financing.

If a quarter assessed at $56,000 for taxation purposes subsequently sold for $95,000 then it achieved a premium of 1.7 in the market.  The average of four or five similar sales will provide an “assessment to sales” ratio. Personally, I prefer to only use ratios as a benchmark, a sort of second opinion; but recognize it is often the one which the farm community uses in discussion at the coffee shop.  At the end of the day, it still comes down to economic conditions, willing buyer / willing seller, the motivation of both, and the availability of capital. 

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