The decision to sell a family farm is not always an easy one. Sometimes economics drive the decision, but often it is based on complex family dynamics or other real challenges such as a lack of interest or aging family members not being able to handle the physical work of running a farm operation. Whatever the circumstances, finding an experienced farm broker – one who is skilled in negotiation and in the handling of all the pertinent legal and financial issues particular to the sale of farmland – will be imperative in selling.
How can a professional help?
The use of a competent and experienced broker is critical in helping sellers understand the financial considerations and legal processes involved in a farm sale, and in advising the family as to issues that typically affect the sale of a farm. Legacy Farms and Ranches of North Carolina will be able to facilitate a smooth transaction and provide valuable guidance to the family in a variety of areas.
- Legacy Farms will be able to determine the value not only of any farms for sale in NC, but of the farm’s assets as well – farm machinery, livestock and buildings – and will be able to discuss options as to handling the sale of those assets.
- We will be able to explain the effect of water rights, environmental issues, easements and other factors on the value and sales price of the property.
- We will consider the varying interests of all family members concerned and will be able to put together a marketing plan based on those interests.
- We will be able to discuss tax implications with you that are unique to the sale of farmland.
As with any financial transaction, the risks involved in being unaware of the complex tax implications of a farm sale can be disastrous for a family. Before the For Sale sign is even posted on the property, proper planning should take place so that the family understands all tax-related implications and in the end receives maximum value from the sale.
I.R.S. Section 1031 allows some sellers to defer paying federal and state capital gains taxes by exchanging a property for a “like kind” property. This type of transaction is called a 1031 exchange, like-kind exchange, or “Starker Loophole.” In order to qualify, the farm (or business, or rental property) in question must be an investment property, and the family must immediately turn around and purchase another investment property once it is sold. Farms that are used as a family’s primary residence – for personal use – would not apply. A valid 1031 exchange requires that a replacement property be determined within a month and a half of the sale of the farm, and the closing on the new property must take place within 130 days of that date.
Tips for Success
Most potential buyers want to see proof of how successful the farm operation has been over the past year or years. Sellers who are prepared to present data showing the success of the farm will help the overall process run more smoothly, and both buyer and seller will know right away if the property might be a good match for both. Legacy Farms and Ranches of North Carolina will facilitate this process.
As with the sale of any piece of property, appearance is everything. Keep in mind that within the first few minutes of a potential buyer’s visit, they’ve already formed an impression that will likely be very hard to shift if it is indeed a negative impression. A farm that is organized, clean, in good repair and actually looks like the images posted in its property listing – as appealing as possible, in other words – will show very favorably and more often compared to a property that is obviously neglected or run down.
It’s also important for sellers to be prepared for the emotional toll of selling the farm, and for the possibility that the process may turn out to be more complex than anticipated.
Finally, the process of doing due diligence, even before the decision is made to sell, is everything. What are the statistics – acreage, pumping capacity, value of any timber, etc. – of the property? Is ownership of the farm clear? – who is listed on the Deed to the property? Is the family able to legally sell the property? And, finally, whether the family farm is located in Rolesville, Wake Forest, Louisburg or Raleigh, are there any other farms for sale in the area? How long have they been on the market?
Contact Legacy Farms to find out more about selling your North Carolina farm. We welcome the opportunity to help with your real estate needs!
For tips on North Carolina Land Sales, NC Land and Farms for Sale in Central North Carolina, NC Farms and Land for Sale, or Financing for NC Land, please contact the professionals at Legacy Farms and Ranches of North Carolina.
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