What to do before selling the ranch; prepare records and yourself
So you’re thinking of selling your ranch? There are several things you can do to make your experience smoother and make your property more attractive.
The realtors WLJ talked to about the state of the intermountain market had some good advice for anyone thinking of selling their property.
Though they all recommended the obvious—make the property look nice—most of their suggestions focused on the preparatory process before a buyer is even a glimmer in a realtor’s eye.
Ron Morris, managing broker and co-founder of Ranch Marketing Associates, said that details other than the ranch itself, need to be prettied up too.
“Things need to be in condition, and when I say that I don’t mean just appearances. If they’ve got lease lands, be in good standing. If they’ve got minerals, they know what they’ve got. Same with water rights, so there are no issues of abandonment. That helps greatly on the front-end.”
John Knipe, president of Knipe Land Company, stressed the importance of “cleaning up” a ranch’s title before trying to sell. He said he’s seen sales progress almost to the end, then get disrupted because of title “surprises.”
“Those surprises can be taken care of—and should be taken care of—early. Every ranch has problems on the title report. But those things can be cleaned up if dealt with early.”
A resounding response from land realtors was the importance of knowing what you have and what it’s worth.
“I always think it’s good to have three to five years of historical input expenses and income,” said Morris. “That really helps a property sell when showing that to a prospect.”
Records of things like yield information if you’re growing crops, protein and nutrition content if it’s a grazing property, how many calves weaned if it’s a full operation, and so on, are all good things to collect and get in order before a sale.
After recommending an appraisal, Knipe pointed out that determining the property’s best and highest use is also important. Just because a particular property has been a cattle operation in the past doesn’t mean that is its most profitable use.
Knipe also explained that much of the market for ag land is cash-purchase and many properties are owned free and clear or have very little debt to pay. Getting as much money as large ranches are fetching all at once comes with problems of its own.
“If you are a seller, get a financial planner and good advice well in advance. Selling a multimillion dollar ranch that’s owned free and clear is like winning the lottery,” he said, referring to tax issues that come with large lump sum gains.
“Get good financial i advice, and early in the process.”
Preparation isn’t only about the property. Preparing yourself and your mindset is also important.
Norem advised caution for the immediate future after deciding to sell a ranch.
“Don’t get anxious about where you’re going next, like you’re next 1031 [exchange property], because it could take one to two years to sell a ranch.”
Morris had longer-reaching advice that touched on ranch selling plans. He said ranchers and ag property holders need to have an “exit strategy” as a matter of course.
“The sale is one thing, but the exit strategy relative to taxes and regulations is another,” he said. “They need to think that t through and the sort of implications that can arise.”
He said a lot of big ranches are forced into sales because plans weren’t made in the event of the owner’s death. Seeing a big and/or historical ranch being sold to pay for estate taxes when earlier preparations could have seen it go to the next generation is never a good thing.
If you are thinking of selling a ranch or ag property, you will have fewer headaches and have a smoother sale if you prepare beforehand. Talk to a specialized ag land realtor or broker about more details on good preparation ideas. — Kerry Halladay, WLJ Editor