Recently inherited land from a Trust, Estate or Family Member?
Have you recently been appointed the Executer of an Estate, or possibly the Trusee of a Trust owning real estate? Or maybe you simply inherited land from a relative. If so, congratulations!! It may be stressful initially, but seeking advice from an experience Real Estate Broker can be the best thing to do. A good broker can assist you with many of the questions you may have and provide guidance from a position of experience and real life examples. As a Broker for over 20 years I have seen almost every scenario possibly, from potential fraud to tenant disagreements and family disputes. These are only a few of the pitfalls commonly associated with an inheritance. However we pride ourselves in working through issues and assisting clients with what their best option is. Here are a few highlights and pointers.
Steps to take. Identify the land.
Seems simple enough right. However many people that are the recipients of an inheritance are not aware that they are going to inherit land and many don’t know what farms they now own or where they are. I can remember many examples of sellers of inherited land understating their ownership or value. Just recently I had a son whom had inherited his parents farms in Missouri reach out to me to do a site valuation and estimation of value to help establish a basis. In his email he had mentioned that he had placed a value of 700,000 on the land. After doing an analysis based on recently sold and on market comparable properties the land valued at $1,095,000. That’s a difference of $395,000. Had this particular client sold the property to the first person interested at the $700,000, they would have certainly left money on the table. How to determine if I inherited land? Another client comes to mind from Kansas. We were engaged by an elderly client whos husband had passed away. The remaining spouse did not know much about the land and had reached out to us for consultation as the farmer was wishing to purchase the farms. The owner was led to believe that she owned 160 acres by her farmer. Turns out she owned 320 acres and the farmer was attempting to purchase all 320 acre at the price point of 160 acres. With friend like that who needs enemies right? Unfortunately for the farmer we researched the arm and determined exactly what she owned. We offered the property at auction and the owner received over a million dollars more than she had anticipated.
Value the Land
This topic is usually high on the list of questions clients have when they first approach us. Should we have an appraisal of the property? Short answer is yes. We encourage appraisals and we also would like the opportunity to do a Broker Price Opinion on the Real Estate ourselves. Two opinions are better than one. If your Real Estate broker ever tries to talk you out of an appraisal: Run. Run fast and far. There is probably an underlying reason they do not want you to know the true value of the farm. How do I value Farmland? The value of an experienced Land Broker. Once you receive your valuations of the property, reach out to an experienced Land Broker. There may be ideas to increase the value of the farm. Typically smaller tracts of land bring more money. Can you reasonably offer the farm in smaller parcels? Can you isolate building sites or timber tracts for recreational use? Is it possible that the land is not being used and you can improve the land? These are a few of the questions that you should be asking. Typically inherited farms are underutilized. With a few simple changes and possibly a small investment, some farms can increase dramatically in value.
Determine the Highest and Best Use for You
This is where the waters get muddy. What is the highest and best use for you and your family. First ask yourself, Do I really want to keep this farm? What are the pros and cons of owning the farm. Are you able to maintain the farm in its current state. Is the farm generating income or is it creating a burden. These are all tough questions that should be asked. A good experienced land agent can assist you with some of these answers and help walk you through some of your options regardless if you keep or sell. If your land agent does not, again Run. A land agent should not pressure you to sell. They should not only advise of the benefits of selling, but also keeping the land. Best use for Inherited Farmland. Another client comes to mind with this segment. I recently had a client whos husband had passed away. They jointly owned a sizable farm in Missouri. The farm was a CRP farm that the husband used for recreational purposes, however the CRP income did provide a revenue source. The remaining owner approached me about the farm as she was considering selling. In our conversations we discussed all of the options. After our meetings we decided that her best option at the time was to re-enroll the farm in CRP (as the rates had went up significantly) and keep the farm. Eventually years later we did sell the farm for significantly more than our first evaluation. So in this case it was beneficial for the owner to keep the farm until she was ready to liquidate the asset.
Manage or not to Manage: That is the Question
One factor in determining whether or not to keep an inherited farm is management. If the farm is in production of agriculture; whether it be Row Crop, Pasture, Cattle, Chicken or Pork Production, the farm can have a myriad of income streams. There may be a tenant on the farm. Or the farm could have been used by the deceased owner. These are all things that need to be taken into account. Many remaining family members are unaware of leases on the farms and the terms of leases. Were any leases on the farm in writing, or were they just a verbal handshake agreement. Did those leases or agreements include a first right of refusal? These are all terms that can make a huge impact on your decision. Again a good land agent can guide you through this process. If there are questions that cannot be answered, your land agent should have a few good Land Attorney resources available to help you determine answers.
Sell or Keep?
For some clients this one is easy, for others it’s more difficult. Many inherited farms are family legacies. So for some there is not a question. The answer is keep and we understand this decision whole heartedly. For others there is a desire for some family members to keep and others to liquidate. If you’re in this group, relax, its very common. Here there are options, such as a buyout of the family members that want to sell. There are other options also such as to sell and do a 1031 tax deferred exchange on your portion to buy a different farm that is solely yours. However it would be a good idea to determine exactly who is in a position of ownership. For example: in Missouri real estate has marital rights. This one trips up a lot of our out of state owners. In Missouri if you own real estate and are married, then your spouse has ownership interest. Specifically when you go to sell, your spouse will need to execute the deed and closing documents unless the farm is in an LLC, Trust or other ownership that gives one specific person authority. This is where an Estate Attorney comes in handy.
How do I sell Farmland?
This is where we excel. We are a United Country Real Esate and Auctions franchise licensed in Missouri, Iowa and Kansas. Having experience through traditional brokerage (listing) and auction method of marketing has allowed us to identify the best method for maximizing return on land. When your seeking advice, it is in your best interest to speak to a professional that both markets land traditionally and offers auction services as well. Not every property is an auction candidate and not every listing is maximized by pricing it and advertising it. We have had properties fetch record prices at auction and have also sold land well above market price to individuals through the traditional method. The difference? Every farm is individual and every farm deserves it own marketing plan.
Have a question? Click the link to get answers: https://www.missourilandsales.com/sellers
Unmatched Expertise
Only United Country offers the level of marketing, professionalism and expertise you need when dealing with land real estate. The hands-on experience of our specialists, coupled with our unique marketing and advertising programs, result in an unmatched winning combination to guide you throughout the real estate process
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