Here’s why buying low, selling high may not work with land purchases

The price of farmland will generally seem high when you have the opportunity to buy it, suggested Mark Stock, president, co-founder and co-owner of BigIron Realty and BigIron Auctions.

“If you don’t take the opportunity when land comes up for sale, you’ll keep passing up every piece of land that comes up for sale,” Stock said in a recent phone interview.

Stock has been an auctioneer since 1984 and is licensed to sell real estate in Nebraska, Kansas and Iowa.

BigIron Realty was the first Nebraska auction company to offer online bidding and now conducts online real estate auctions every week across the country at bigironrealty.com. In addition to real estate, BigIron Auctions conducts online, unreserved equipment auctions for the construction, agriculture and transportation industries.

Stock often hears potential buyers say they can’t find a way to make farmland purchases pencil out. He encourages established buyers to work land purchases into the value of the entire farming operation. First-time land buyers may be able to take advantage of beginner farm programs to make purchases.

Land values usually climb higher, but buyers need to be aware there are farmland price corrections that happen from time to time.

“You’ve got to work through that correction when it happens by making principal payments or having a good lender that works with you as you’re waiting for things to recover,” he said.

The best time to buy a farm, he said, is when it’s for sale close to your current operation or home. There’s often only one opportunity to purchase a specific field over the course of a lifetime. It’s difficult for a young person who doesn’t have any help from parents or grandparents to get started, but if they work hard and start slowly by purchasing a smaller tract of land, it’s possible to make things work.

Stock also knows of people who have saved money throughout their non-farm career to come back to farming. They sometimes purchase land to farm in their golden years.

A buyer may experience success if they recognize a seller is motivated to sell – but it takes a lot of forward thinking and planning. Stock said this type of buyer needs to be putting money aside to buy a farm or ranch when it comes up for sale “tomorrow or the next year or the year after that.” They have a savings plan established and a goal in mind.

Buyers have to do their due diligence ahead of buying farmland. Stock mentioned the need to assess soil types and availability of water. Buyers look at climate restrictions as well as risk of hail. Hail insurance and crop insurance rates are higher in some areas than others. Buyers and sellers need to work with legal teams, banks, lending agencies, assessors and government agencies to correctly accomplish farm transactions.

Nearby urban development may or may not be a good thing for farmland buyers. Property taxes may go up, but the value of the real estate generally goes up, too, he said.

Buyer beware, though, when it comes to property taxes on farmland. Taxes keep going up.

“So taxes, in certain parts of the country, different states, they treat things and work things differently,” he said. “It’s very important that if you’re buying some real estate – if you’re not familiar with that area – you need to do your due diligence. You need to go to the courthouse and ask the assessors how it all works.”