Think Twice Before Selling the Farm

By Tom Howard

So, the time has come, has it...that point when difficult decisions must be made as you consider the disposition of the farm? Whoa Back! Take your time, seek advice from knowledgeable professionals relative to your alternatives, and think twice before making your final commitment to sell out.

Farm land can be very attractive for subdivision and development due to favorable site conditio...the same conditions that made it a logical place to farm! And so, an initial offer from a development standpoint may look to be the most lucrative alternative for cashing out. Unfortunately, once the land is "built out", the farm aspects will never be retrieved. A best place exists for everything and we all need to carefully consider the preservation of our productive farm lands as farm lands. To boot, a closer look at conservation transactions may offer a path with similar or better long range financial outcomes for you and your family.

Real estate consists of a large bundle of property rights. The rights to develop land for residential or commercial use are well-recognized components of the bundle. Equally important to your decision-making process are the rights to conserve the land for forest and agricultural production, water resource protection, recreation, open space, scenic views, wildlife habitat, and scientific, educational and cultural values. This set of property rights has its own economic worth and a market may well exist to allow you to sell appropriate resource conservation protections.

An important element to consider during your creative thinking is the fact that all of the rights within the bundle do not necessarily need to be transferred all in one transaction. Therefore, separation and protection of the conservation values of the land, including its potential to grow crops and livestock, could well be part of your solution. A land conservation transaction may offer financial, tax and estate planning benefits that prove to be more beneficial to a landowner in the long run than an outright sale of the farm. An added bonus for the owner is the satisfaction of keeping the farm values protected for the future owners, neighborhood and community.

Additionally, the conservation versus development decision does not have to be an "either/or" situation. A limited development scenario may offer the best of both worlds, protecting the valuable farm components while offering opportunities for building family or farm-help housing.

One option the landowner has following a conservation transaction is to retain ownership of the farm and continue to enjoy it. But should the time come to move on, you still own a marketable commodity. Because you have extracted a portion of the land’s value through sale or donation of the conservation protections, the remainder value will be more affordable, making it more likely that a new owner will continue farming the land.

To fully flesh out the potential alternative scenarios for disposition of the land and to properly weigh the resulting outcomes of each, a landowner should solicit advice and counsel from those with expertise in the financial, legal, tax and real estate ramifications of each possible transaction. How a potential sale figures into your overall financial and estate planning is critically important and these professionals can help you design and structure a sale that is most beneficial to you.

Each and every ownership situation is unique. That fact alone means that the slate is open for you to create a disposition of property that satisfies your financial goals as well as your hopes for the future of the land. Plenty of thought, planning and perseverance will help you to avoid any unpleasant surprises or unexpected outcomes following your big decision. Look at options, seek advice, and make the right decision for you.

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Tom Howard is the principal broker of NH Conservation Real Estate, a realty company that offers brokerage and consulting services targeted to facilitate conservation transactions throughout New Hampshire. Tom can be reached at 603-253-4999 or via the company website at www.NHConservationRealEstate.com. Copyright 2010.