Preparing to Sell Farm Land

Welcome And Why Preparation Matters

Devon Davidson 0:00

The Farmland Exchange, the official podcast of CLHBid.com.

Speaker 2 0:06

Expert insights on buying and selling farmland in Western Canada.

Devon Davidson 0:13

Welcome back to the Farmland Exchange, the official podcast of CLHBid.com, where we provide you with expert insights into the process of buying and selling farmland here in Western Canada. I'm Devon Davidson, your host and digital media strategist for CLHBid.com. If you haven't already, please take a moment to like, rate, and review the podcast on your preferred platform of choice. It helps us out and we would really appreciate it. On today's episode, we're going to be talking about getting ready to sell. Selling farmland isn't just about timing the market, it's about preparation. And today we're going to talk about some of the things that sellers should be looking at months or even years before they do sell. And to help me in that conversation, we've got Roy Carter, CEO of CLHbid.com. Roy, thanks for being here. Thanks. Morning, Devon. Yeah, good to see you. And then also Bridget, our CFO. Good to see you as well. How are you doing? Hi, Devon. I'm great. Good. Good to see you again. Okay,

How Long A Sale Really Takes

Devon Davidson 1:03

so for this conversation, I think just for introduction and context, Roy, I wanted to ask, what's the typical turnaround time between first contact with a potential seller and the time that they actually do sell?

Roy Carter 1:15

Yeah, good question, Devon. I don't know if there, I would say there's not a typical time. You know, after a decade in this space, um, I can tell you the range. Um, you know, the longest would have been would probably be six, seven years ago. We first, you know, talked to somebody and uh we're now selling for them. We definitely recall the shortest one, uh, at least I do. The shortest one was 16 days, uh, where we were contacted by a couple on a Friday. Uh I was away, called them back on Saturday, and they wanted to sell. It was over a hundred-year-old uh farm. Wow. And uh I said, when do you want to sell? And they said, two weeks a Monday, and it was like, What? Uh but you know, we wouldn't do anything that didn't make sense. Uh the whole deal is listen to the people and give them what they want. We don't have a template and say, we're gonna do this for you. Um, I mean, design a product that works for them. And in that case, it was like two weeks a Monday, like why? Yeah. And it was like, because there's a foreclosure sale in the afternoon of a bunch of land, we want to go ahead. We also have health issues and we want to get to town, and they had they had the right reasons. We know nowadays with our marketing and that you can get it out there instantly. Right. In that case, you know, Monday morning, you know, the Peterbilt driver and the vans were going and the marketing people, videographers, yeah. Uh Mike Reeve was out there, um, and the sale went rock star in 14 days. We don't recommend that for anybody, but uh, you know, probably on average, maybe uh an answer probably two to three to four months uh is more than ample, and that's probably a pretty common number. Keep people contact us and want to go three, four months out, kind of thing.

Devon Davidson 3:07

So any any challenges with you know such a short fuse like that? I know I've been a part of a couple of those sales where it's like, okay, we're we're selling not I don't know if I was involved in the two-week one, but I think there were some that were quite short. Um obviously the sale went well, Roy, but uh it just seems like a very short time frame to get moving. But I guess that is part of the the benefit too of CLH is that the seller gets to set the exit date.

Bridget Hennigar 3:29

Some of it uh depends upon the cycle where you're at in the crop cycle. So you know, yeah, if you want to sell that land before the new crop and you're calling yeah March 1st, you know the time is going to be shorter. You gotta go.

Roy Carter 3:44

Yeah, for sure, um Bridget. Uh you know, and but if they call you in uh in April and want to go with 15 quarters, I mean you you better talk to them. And you know, that's problematic. Do buyers have that much seed, that much fertilizer?

Devon Davidson 4:00

Right.

Roy Carter 4:01

Uh that's quite different than pushing one or two quarters into the market.

Speaker 3 4:04

Yeah.

Roy Carter 4:05

So we also look at what what is the event, how big it is, and we really try and assess whether or not it makes sense or not. Um, you know, we do one thing about after a decade, you know, our database is huge. It's all we do. So people follow us for land.

Devon Davidson 4:23

Right.

Roy Carter 4:24

And so we can push it out there, whether it be Twitter, thanks to you, uh, you know, Facebook, Instagram. Yeah, it gets out quick. The world has totally changed there. It has. And uh, so yeah, um, again, in that case, you know, 16 days worked. Um, I would say probably the norm is uh is a few months. And uh you get um, you know, I had one yesterday, Ryan uh Lang and I were on a call, and this is pretty typical too. You know, the guy called and he was in Indio, California, big ranch in Saskatchewan, and uh said, okay, we're talking here, we're gonna start the process, but I don't want to sell before my manager retires. I want to respect him. And it looks like he's gonna go to the curb in the fall of 2027. So can we start the process? Maybe drone it this summer, get some good footage. Um, you know, those are those are nice too. So they're a couple years out, you start the process, and um, you know, it gives everybody some um breathing space, right? Yeah.

Devon Davidson 5:29

Have you encountered many of those, Roy, where uh or Bridget, where someone does have 15 quarters or 20 quarters and and they want a short fuse like that? Or is that pretty rare?

Roy Carter 5:38

I would say it's rare um on a short fuse. Most people know that. Uh, you know, be careful about that, especially if you want to go on block and somebody take it all. You know, because they don't know until sale day whether they got it all or none, so they can't really plan for seed or fertilizer. Right. Um, I don't recall of any that large with that short a fuse. And definitely we would uh try and talk them out of it and say, look, why don't we push this into a sale in July and possession subject to the crop coming off for the existing person?

Devon Davidson 6:12

And I wanted to go just back to what you'd said about um on the on the other end of that spectrum where

Crop Timing And Sale Feasibility

Devon Davidson 6:17

someone was waiting six or seven years. So was it just a comfort thing in that scenario where you know if they're waiting years to sell, or is it um just life planning, estate planning? Like what's going on where they had they're waiting that that time frame.

Bridget Hennigar 6:30

Well, in one case that I can recall, uh, it was about being uh eligible for the capital gains exemption. So they had to be active farmers for a couple years, and uh it made sense to wait.

Devon Davidson 6:43

And that's something you would advise them on, I'm I'm assuming.

Bridget Hennigar 6:45

Yeah. Okay.

Roy Carter 6:46

Yeah. And Bridget, the accountants are always uh, you know, um slow it up. Um another case that Bridget and I were involved in, there's a hold period for uh children to take an interest. And uh the whole idea behind it is you can't just add a bunch of kids to your title to multiply your capital gains exemption. Right. So it's a three-year plus hold. You can't even market within that. So it basically becomes three to four years. And you know, definitely we've had those where you know they come and they maybe want to go right away, but it's like, yeah, we got the kids added, uh, you know, we're good to go. And it's like, yeah, no, you can't do that, right? Yeah. So again, we're not just there to have an event. Yeah, we want to make sure that event works for them down the road. And uh definitely we had one of those recently where it's like, you know, you guys really shouldn't even be talking to us about marketing. Yeah. Uh so go away, come back after this date. And uh they did come back after that date, and and we sold it, and it's all great. But uh, and then there's other people that you know call and are thinking about it. Um I had one guy in um in Saskatchewan, I recall he called me and you know it his name was Tom, and it was like, I think I want to go, Roy. And I was talking to him for quite a while, and it was like, Well, you still having fun? And I was like, Yeah, and it's like don't call me, right? If you're having fun, you're good. Yeah, uh, because that's that's the problem, right? Yeah, um if you're doing something in life that's fun, I'd say stick with it for sure. Because we definitely see these farmers that you know go to town and they go to the ANW every morning, and that's not necessarily fun. No, so I in that case, I just looked at my notes the other day on that one, because we are selling for him now, and then I had to go back and look to the notes a few years earlier, and uh then he called me back and it was like, Yeah, remember our call? Did you remember me? And I was like, Yeah. And he said, Not having fun anymore, Roy. And uh, so um, you know, that deal too, where it's gotta be right for him, right? Yeah, that's right.

Bridget Hennigar 9:00

And some people, it just takes some time to process and they're long-term planners, yeah, and that works too.

Devon Davidson 9:07

And it's an emotional decision, right? We've talked about that lots. It's it's not something that they take lately. Okay, so Bridget, the accountant, I wanted to ask you, in your opinion, what are the main areas of focus when preparing to sell? What's gonna provide the best ROI to maximize value?

Bridget Hennigar 9:20

You know, location, location, location, that's what I think. Um demand drives a lot of the value. And so that's what we do is look at what um appeals to buyers this particular land. Is it is it the location, uh, is it the soil? Is it, you know, how it's configured? Um, all of those factors come into play. And uh that will help us to get the maximum number of people interested in that property.

Devon Davidson 9:52

Okay. Uh we're gonna switch it up a little bit and start talking about leases and how those could potentially complicate a sale. So, Roy, I just wanted to ask you how do existing leases affect the marketability or complicate the sale in general?

Roy Carter 10:04

You bet. Uh, maybe just uh first of all, I'll jump back to Bridget's uh the last question there. Um, you know, the the ROI and location and that, um, totally, they're those they're all there. Some of that's set. You know, the market is kind of set. We also look then at what we can do. How can we take a given market and do better for these people? And that comes down to packaging, price discovery, marketing. And that's a bunch of things that are unique to us. That's right. That that you need to be world-class marketing, you can't be regional. Uh, packaging, you better get it right. Because if you you put them all together, you're gonna you know feed it to a big guy. Yeah, and if you fractionalize it, there's no lift for the assemblage, uh, that type of deal. So we we uh always look to what we can add to what uh the given market is to try and take that to a different level. Sorry there to jump around. No, that's great, right? I appreciate that. That's just to dig into the leaper. Your lease um question. So there can be uh, you know, it's way different than selling a house in town, of course. A house in town is uh again like a chattel, yeah, a house in town. You know, farmland, there's often numerous leases at different levels. You know, the first one comes to mind is you know, a renter crop crop deal, and I think over half the land, you know, like now in Saskatchewan is leased out. Yeah, but there's also you know, you'll get um um government leases, grazing leases, farm development leases, and they all have uh a bunch of different rules and they vary from province to province, and they're just getting more and more owners. Right. But there's hold periods. Um one in Alberta, for example, if you get a grazing lease, you can't flip it for three years. Okay. Uh so we you gotta drill down on all that, you know, and then other leases like what we call SLR, you know, you start looking at surface leases, you know, are they in default? Uh is the orphan well fund involved, you know, and then you even get you know turbine leases that are tied to the price of electricity. Right. So there's a whole bunch of level of leases there that you basically need to understand them and uh and how to deal with them, right?

Speaker 3 12:20

Yeah.

Roy Carter 12:20

You know, it if we just deal with a crop lease, um yeah, I mean generally farmers don't want to buy land that's leased out to somebody else if

Planning Around Taxes And Exemptions

Roy Carter 12:30

they want to be an end user. Right. So we generally just take land in the year of the uh the lease is gonna expire. So we would sell it in July, and then the the new buyer would take subject to that lease, uh, and uh, you know, the new new buyer gets on subject to the tenant getting his crop off.

Devon Davidson 12:49

Can leases sort of negatively impact the value or or reduce the competitiveness of the sale? Like I'm just thinking, you know, I always thought SLR was sort of a bit of a positive, like you know you've got this annual income, but sometimes it can hinder access, or sometimes it can um reduce the productivity of the land. Like there's there are are there aspects like that, right?

Roy Carter 13:06

Is that is that oh yeah, I mean SLR, there's a payment, an annual payment for inconvenience and loss of use. If that payment is accurate, it should be net. Your adverse effect should equal the cash. Okay, so it shouldn't be negative on the land, but it shouldn't be a plus.

Devon Davidson 13:22

Right.

Roy Carter 13:23

Uh you know, and that's where you know you'll see these appraisals sometimes. They use net present value, and they it's just crazy what they do. I think they use AI and uh they sort of say, what's this income stream? And it gives them this stupid number. And uh and you try and talk those people down to come to you and they say, Well, my two wells are worth a quarter million. It's like no. And uh in fact, if the payment is accurate, it shouldn't affect the value at all because that's what it does. The payments to make them whole, even. So um definitely um, you know, a farm credit does a multiple, I think around four or five. Um, different people use different numbers. Um, investors, they like SLR, they like a different story, you know. They get crop rent plus they get the industrial rent. Right, yeah. Definitely, you know, crop leases affect value. If you if you had a five-year lease with land, uh, right, Bridget? I mean, um the buyer is the existing tenant, and you're gonna probably feed it to that tenant at a discount. Because uh the way farmers think, you know, they think I'm gonna pay for a big chunk of it next year with the crop. You know, canola's going back to 22 and I'm gonna get 70 bushels. They're optimists. Yeah, they don't want to get 90 bucks cash rent. And it there's also issues with financing if it's rental property or if it's end use and you can crop it. Um so definitely, you know, selling land under a long-term crop lease, um, that's problematic, right? So, they're definitely that's why we recommend, you know, be careful about long-term leases, be careful about options, you know, treat your tenant properly. But having said that, if life changes or health changes, you want to have the ability to maybe monetize it. And that might mean a break fee in the lease that you can give them a year's notice after a couple years, or or you know, maybe they get free rent in the last year or something. Um, that type of deal.

Devon Davidson 15:31

Okay, and and Bridget, I know you had some thoughts too on how lease income affects valuation for a sale.

Bridget Hennigar 15:37

Absolutely. Um you know, in terms of the lease rate you're speaking of.

Devon Davidson 15:42

Yeah, yeah.

Bridget Hennigar 15:44

Lease rates they can vary significantly uh in an area. It uh may depend on who is farming it. It might be a family member, might be a good neighbor discount. Yep. Uh it might

What Actually Drives Farmland Value

Bridget Hennigar 15:57

be that the tenant is a very good negotiator. So, you know, always you can't rely on the lease rate to determine the value of the land. And the next door neighbor, he'll know what uh that land can produce. And so um he's very aware he doesn't need to know the lease rate. Investors, um, people who like to uh invest in dirt, they want to uh know that lease rate. And um, you know, we would give them what lease rate is commonly or is um for that particular piece of property they're interested in. Right. But always letting them know that they should do their due diligence. Because it can it can vary greatly.

Devon Davidson 16:40

Yeah, I've had those conversations with a few friends too. Yep. All right.

Roy Carter 16:45

I think it's important there. You know, very, very different than again commercial leases in town, where the lease rate is the cap rate and it determines value. Uh not the case at all on farmland. You know, the the return on farmland is often one and a half or two percent on the lease. These guys buy, investors buy on the appreciation. You know, they they like the seven or seven or eight or nine percent appreciation every year that it's kind of averaged. Right. And the lease is almost secondary. Uh even from a tax point of view, they're better off with capital gain, that type of deal. Okay. So it's very, very different than uh looking at people investing in commercial properties or shops or something.

Devon Davidson 17:30

Okay. Uh Bridget, what sort of documentation should sellers have ready when they're getting ready to sell their farmland?

Bridget Hennigar 17:36

So, as Roy says, you know, we do want to see the lease agreement. We want to see any agreements they have with uh the oil companies, what SLR payments they're getting. Um wind and solar are more common as time goes on. And those leases um may have hidden clauses in there that um, you know, the infrastructure isn't in place, but the company has an option to put that infrastructure in at a later date. So all of those things need to be understood and um be part of the package. Um one of the things we look at is land titles. So we have access to land titles, we make sure about uh the current ownership, caveats that might affect the sale, all of those things as well. You know, if they have uh soil testing reports, those are good to have. You know, it may uh really uh uh help to drive again the value of the land.

Devon Davidson 18:36

So and crop rotation records, just that documentation as well, is that important?

Bridget Hennigar 18:41

Crop rotation is good, and you know, if they just um are finished with the one and canola is going to go in next year, that's a very good thing. So because they're going back to 22, as you said, Rice still.

Roy Carter 18:53

Yeah, I mean chemical herbicides, all that are records of that, it says a few things. If somebody has really good records going back 20 years on all the herbicides and the residue issues and rotations and that, you kind of know it's good, clean land, and they've been they're a good farmer.

Devon Davidson 19:11

Yep.

Roy Carter 19:12

There's a correlation between that and and then if if somebody says, Yeah, I have no idea and I kind of forget what was seeded last year. That's a bad indication right away. Probably not it's yeah, so it kind of talks, it speaks to the land.

Devon Davidson 19:26

For sure. Uh going back to the leases and agreements, Bridget. Um, is it if they're under negotiation, is it better to negotiate those in advance of a sale, such as pipelines or solar or wind projects, or to let the buyer negotiate those types of deals?

Bridget Hennigar 19:39

You know, we uh always recommend that the buyer would uh negotiate those because we don't uh know what that end user might uh want or need. Um SLR is a good example.

Leases That Help Or Hurt A Sale

Bridget Hennigar 19:52

You mentioned about um where is that uh infrastructure gonna be placed on their property, right? Pipelines, um, you know, so it's all very important. It would uh the adverse effects may outweigh what uh our narrative could actually I was just gonna ask and you answer my question.

Devon Davidson 20:11

Okay, so thank you.

Roy Carter 20:12

Yeah, I mean we've seen cases where the buyer has yellow iron and wants to put in the well site, so it's a term then when he negotiates. Okay. And we had one case where the buyer wanted to do frackwater and uh wanted to enter into the agreement ahead of time and expand a pond. And uh the guy just kept bidding and bidding on the land. So he was sort of buying himself a contract as well as buying land. Okay. And had the prior owner entered into that contract, uh, that doesn't happen, of course, right?

unknown 20:45

Yeah.

Devon Davidson 20:46

Okay. Uh we're gonna move on to cleanup now. So things like materials, grain bins, equipment, the yard site itself, and just how that can impact uh the perception of the the property and and maybe how it sells. So um Roy, does yard presentation really impact bids?

Roy Carter 21:03

Uh you know, yeah, it probably presentation is always good. Uh, but in the end, these guys see through that. You know, they they most of them have equipment and they can change that yard in um two or three days. Sure. Um, you know, it's big business now. So uh, you know, it's you always get weird looks at the kitchen table if you say, you know, they'll ask you. And it was like, yeah, don't spend you know two months cleaning stuff up. And it's like what? Because they take it quite personal. And they, you know, I was in a house the other day, and the lady should said, should I bring in cleaners? And it looked like amazing already, right? But uh, you know, and when you tell them no, it really doesn't matter if it's dirty or clean, it's your they want your land. Yeah, you know, you probably offend them. But um no, be careful there. Whatever you do, you're not gonna get it right. Okay, uh some just look at it. Mm-hmm they don't tell the seller, but they're thinking of a hole in a pit. Right. And they get rid of some stuff and uh yeah.

Devon Davidson 22:07

Uh how are leftover materials viewed? Things like scrap metal or gravel? Bridget, what do you think? How how are they viewed? Are they viewed as like uh is that additional value for them? If okay, I can send some scrap metal in for cash or I can I've got some gravel left over, or is that just sort of uh more of a hindrance, something they have to deal with later?

Bridget Hennigar 22:25

Again, you know, each one will deal with that um independently. So um best that the buyer can deal with the scrap metal, you know, with the prices during COVID there.

Roy Carter 22:38

That was people were kind of doing the math on pounds, and they would just call in these guys that would come and pick it up themselves. Sure. It's it's interesting. We had one sale where they had rented it out for five years and they had two uh butler shops 40 by 60 full of equipment. But it was older, like 4520 John Deere's 8820 combine, stuff like that. But they didn't want to bother with it. And it was a brother and a sister that had lived together and never married ever. And uh they were like, they were just sweating, like, how do we deal with that? Uh, we don't want to deal with that. What do we do? And I was like, if you want, we can just solo those two shops full. And we'll just sell the land and the buyers will figure that out. Just let a buyer walk in there and they'll do the math, whether it's scrap metal or whatever.

unknown 23:28

Yeah.

Roy Carter 23:29

And it was you could just see they were both relieved, right? I was like, really? Let's do it that way. And uh yeah, sale went great. And uh, you know, I don't know where the equipment ended up, but obviously that buyer, I know the buyer was a big player, it wasn't used by the buyer, but they do the math on where it where it can get sold or monetized, right?

Devon Davidson 23:50

Okay, so when in doubt, just leave it to the buyer. Okay, um, I wanted to play a bit of a game just to have some fun with you guys this morning. So we're gonna talk about improvements here. It's a bit of a rapid fire segment, but I'll get both of your opinions on each one. You can just tell me yes, no, or maybe it depends, and then you can elaborate on that. So, Bridget, we'll start with you. If I'm a seller, should I be looking at replacing shingles, windows, or doors? No. Okay, Roy? Um, I would say no. Okay.

Bridget Hennigar 24:18

You know, they're expensive. I've been checking out doors and windows myself. And uh, you know, you just don't get that um payback that quickly.

Devon Davidson 24:27

Okay, fair enough. Uh grain storage, handling, and drying systems.

Bridget Hennigar 24:32

With yes or no?

Devon Davidson 24:33

Is that yeah, yeah, is that something you invest in before sale? No. Okay.

Roy Carter 24:37

Uh there, I would uh if they can be moved, you know, if they're smaller hoppers than that, quite often a buyer doesn't want them, they're too small, but somebody does. So uh I I would um probably disagree with Bridget there. I would say, you know, maybe sell them, especially if you if there's a you know couple big operators around there with big setups. I would say probably, you know, maybe you should sell those bins and that that are on hoppers and easy moved and a dryer separately and uh don't leave it because you probably got a different buyer for that than you do that land.

Bridget Hennigar 25:12

Okay, I thought the question was. Oh, you don't get enough.

Roy Carter 25:17

You're done. Uh next one are uh Devon, let's go.

unknown 25:20

Okay.

Devon Davidson 25:21

I was gonna say too. Um you know, if if the land was bought as part of an assemblage though, Roy, like they may look at that and say, I don't need I've got my own grain drawing and handling system. Like, so so maybe in some cases it's not a real benefit. Is that correct?

Roy Carter 25:35

Oh, totally. Yeah, you don't want to force it on them neither. You want to be careful, but that's not kind of the cleaning up the shingles. And Bridget being an accountant would be looking for the cheapest contractor for sure. And it might blow off before the sale. Uh, but um yeah, I'm definitely with if there's stuff that can be peeled off there that's not affixed, look at that. Because the whole goal, again, is maximizing value for these people, right? Right.

Devon Davidson 26:02

All right, Bridget, redemption coming in. All right. Um, natural gas, like services. So natural gas, power, new water well, is that something you invest in?

Bridget Hennigar 26:10

Again, you know, the cost of that. Although I will say that it's really important for the um seller to know if uh the uh what the gas or the power is coming right up to their property. Because again, that will be something that we'd like to tell potential buyers.

Devon Davidson 26:29

Yes, they can deal with it after it's it's here, it's readily available. Okay, Roy, same answer. No, I agree. Okay. Uh corral systems and livestock handling systems. Don't invest in uh further. Okay.

Bridget Hennigar 26:42

In fact, you know, uh we have had sales where we have put out options that you could sell that uh later to the successful buyer. Right. So something to consider can we actually enhance uh the value of the code.

Devon Davidson 26:58

And that's a good point because I've seen sales, Roy, where um it is movable and they said that's not involved, that's not included in the sale, right? They're gonna take that somewhere else.

Roy Carter 27:05

So yeah, exactly. Good point, Bridget. You know, we'll do a especially ranches, we'll sell, and then uh we won't um put out for tender the cattle or you know, bales or uh whatever, but we may do a list and have option prices on it, especially if it's in quite a remote area where it's maybe hard to get stuff back

Lease Income Versus True Land Value

Roy Carter 27:24

in. Yeah, and then at least give the high bidder the option, but then if they don't want to take it, the guy's free to sell it. Yeah, you don't end up pushing it to somebody that doesn't want it and won't really pay for it, right?

Devon Davidson 27:36

Okay, yeah. Uh we're gonna go back to you on this one, fencing. So perimeter and cross fencing, is that something you'd invest in prior to a sale?

Roy Carter 27:42

No, I would say not. You know, you'll get it wrong. Everybody's got a different idea. What's the proper best fencing?

Devon Davidson 27:49

Sure.

Roy Carter 27:49

Uh, that type of deal. You know, it definitely affects, especially grazing leases at the price cost nowadays to fence, uh, it has a big effect. So it'll be factored in on the price. But if you went and fixed all your fence on your grazing lease, you're probably still gonna be underwater as far as getting it back. So let them do it.

Bridget Hennigar 28:10

You know, my only depends part of that uh answer would be you know, is it really that um costly to simply fix that barbed wire fence? That's all I just your time, I guess.

Roy Carter 28:24

That's probably easy, even just for uh so you're saying send a wife out and do that kind of stuff.

Devon Davidson 28:30

Maybe not a bad idea. Someone's gonna do it, hey, right? Yeah, yeah. Uh okay, Bridget, painting. So barns and or outbuildings, would you spend some time painting those things up?

Bridget Hennigar 28:40

Again, uh that's a big project, you know. A barn is a huge endeavor. Um some people like heritage uh barns, they like the barn wood. It's priceless, actually. Yeah, um, but you know, if there's a door frame uh that's the paint is peeling again from my point of view, yeah. I think you should paint it.

Devon Davidson 29:03

Well, I would think it just maybe goes back to the stewardship, Roy. Maybe like you know, it's it if I'm a buyer, I think some of those things that little details would would be a positive indication to me. I maybe I'm not willing to pay more for it, but I probably feel better about it.

Roy Carter 29:15

I wouldn't do it. Um you know, painting a D7 um that's going to auction in Edmonton, yeah, paint it all day long, they look good.

Speaker 3 29:24

Yeah.

Roy Carter 29:24

Because you're selling the D7, but let's not forget what we're selling here. We're selling land, not the old. And uh, you know, if if you've got five kids that lost their parents listening to this podcast and you're saying paint, they're all gonna be have a disagreement because one of them is gonna be doing most of the work at the farm, drive in three hours. Yep. And uh they're not gonna get that value back. Okay, uh it is what it is, and uh you know, depending on who buys buys it, there may be no yard there in a year or two, right? Right, yeah. Uh so uh I would paint equipment all day long going to town, but when you're selling land with improvements, I wouldn't Okay.

Devon Davidson 30:08

That's why we're having this conversation. Yeah. Uh grading and gravel, something you'd invest in, Bridget?

Bridget Hennigar 30:15

The um, you know, filling in holes, if you have the time, the equipment, the knowledge, I think that's a good idea because you're gonna increase your cultivated acres. But you know, if you don't have the equipment, if you don't have the time, then maybe that actually is a perceived value to the buyer, and maybe he'll pay more because he knows that he has some opportunity there. Right. Gravel, it's magic in my mind. It always disappears quickly. So uh no to gravel.

Roy Carter 30:46

Okay, Roy? I probably wouldn't. Again, a lot of our buyers are not the farmers, they're the you know, the farmer uh a couple have held it and then passed away, and it's the kids. You know, they don't often know even where to source the gravel and all that, um, or where the soft spot is in the yard and all that. Yeah. I wouldn't do it. All right. Uh landscaping. Is that something you look at?

Bridget Hennigar 31:11

No, it just takes too long to get results.

Devon Davidson 31:14

Okay. Same thing, right? We finally agree. Yeah. Okay, what about drainage improvements? I think that's the last one here. Oh, I got a couple more.

Bridget Hennigar 31:24

Drainage improvements is a big endeavor. If you had five years, I guess, or you know, a long span. But again, you need equipment, you need knowledge. Uh, you're asking me if you're doing it, if you were planning to do it, you probably would have done it already.

Documents Buyers And Lenders Expect

Bridget Hennigar 31:40

Right. So again, I think it's part of the story that we can build in with our scripts to say that this is a real potential. Okay. And sorry, Ray, go ahead.

Roy Carter 31:50

Yeah, they're, you know, if you had LIDAR or something showing some data that helped with a plan, that would add value. You know, people can see uh exactly what where that water could be managed, and they they'll do it. But I don't think it hurts to show them where your plan was and what's workable. If you sort of had some LIDAR to back it up, uh they'd use shot elevations or whatever.

Devon Davidson 32:14

Okay. And I think you may have alluded to this already, Roy, but home renovations, you said don't bother cleaning if it's already clean. Would you spend any money renovating the home before you sold it?

Roy Carter 32:22

No, not at all. You're you know, that uh in town, I think you don't get it back quite often out in the on the farm. I don't think there's a chance of getting it back. Bridget?

Bridget Hennigar 32:35

Totally agree. You know, the white cabinets versus the wood cabinets, you just can't get it right. It's all preference, right?

Devon Davidson 32:42

Yeah, exactly. Okay, what about uh removing old bins or collapsing structures? Is that something you'd look at?

Bridget Hennigar 32:48

You know, if you had the ability, um collapsing structures, I don't think it does anything for your sale. But um old bins, you know, you don't know what value um uh a buyer might attribute to that. They might have some particular use for it. Okay.

Roy Carter 33:08

Yeah, again, uh, you know, just thinking here in the last month, a widow, and it's funny, you know, we're we're all like that, I guess. But her big focus, and it's it's I mean, it's everything to them, right? It's like another person in their yard. But she'd lost her husband unexpectedly, and her her big fear was a bin that was half full of some um heated grain and what she was gonna do with that. And it's like, man, don't worry about that, right? Uh, you know, we gotta disclose that. Yeah uh but let these buyers figure that out. Like you you need not worry about that as a a new widow, and uh, you know, just take that off their plate. That's sort of even aside from would she get value by cleaning it out, but also give her a life, right? Um, and and let her you know focus on moving ahead as opposed to that kind of stuff.

Devon Davidson 34:01

Okay. So again, just when in doubt, let the buyers deal with it. Yeah. Uh Bridget, I got a tough one for you. Are sellers better served to disclose sort of any sort of defects or just repair them? What what route should a seller take?

Bridget Hennigar 34:13

You know, just as we talked about before, uh, I think that you know, the buyer can deal with anything that comes up and deal with it in the way that they want to.

Devon Davidson 34:24

Okay. Um, and then of course, I want to talk a little bit about uh going back to structural issues and deteriorating buildings. Is that something that scares lenders? Like if I'm getting an appraisal for lending purposes, do they look at that and is that a concern for them?

Bridget Hennigar 34:37

Well, first of all, I think um, you know, we're in the business of selling farmland, and the improvements are always a secondary part of the whole uh property package. Um basically our offer to purchase says that uh the buyer is going to um, you know, for if he is the high bidder, he is going to be obligated to complete the sales transaction. If he wants to get uh an appraisal or an inspection report, that's his um choice, and we can arrange that. Um but you know, we say that um when you have an open, transparent market and you bring everybody together on that same day, that is the fair market value. Yes. And so, you know, lenders seem to uh be um they they see that and they recognize that it does have the value.

unknown 35:35

Okay.

Bridget Hennigar 35:36

Anything to add right?

Roy Carter 35:37

I would say lenders will be spooked by environmental, but yeah, not by the condition of the uh buildings. Um you know, they if there was some environmental issue, it would have to be disclosed. And we've had cases where there's a prior dump on the land or whatever, uh, that has to be disclosed. Um but I think the environmental would be the only issue. Uh the other one, the landers just factor that into value. All right.

Devon Davidson 36:05

And I I we're gonna shift a little bit and just talk about the house itself. Obviously, there's a lot of emotion tied to the home. Um, we've talked about improvements, but just generally speaking, does a house add value or does it narrow the buyer pool?

Roy Carter 36:21

Um we look there, we look at you know how proximity to a city, uh workforce. Should they look at subdividing it? Yeah is there two different buyers for that home quarter.

Devon Davidson 36:34

That was my next question.

Roy Carter 36:35

Uh, you know, who's around there? Is it sort of the big heavy hitters expanding with raw land? And then, you know, what's the cost of uh you know subdividing? On the drive out here this morning, I had just had a call with a fellow in northern Alberta where that was his plan. His um they were a Danish family that came from Denmark, and uh um his parents were older and their house burnt. I always a problem, and they had to rebuild. And the mom was like 90, and they rebuilt, of course, too much of a house on the land, and the son's on another quarter. And it was like, then how do I monetize this, right? But then he went to subdivide it, and he I was talking to him in on my Bluetooth in the truck, and it's like, man, I want to talk to the surveyors, and it's gonna cost me 60,000 bucks for a different septic system because of course the RMs in county, your grandfather didn't tell you go to subdivide. Right. So his decision was I'm not gonna subdivide because they're gonna tag me for all this. I'll let the buyer maybe figure out if they want it, or if they don't, they can pay the cost.

Speaker 3 37:41

Okay.

Roy Carter 37:41

Um, or maybe they can figure out how to bore the new system in cheaper or whatever. So I don't know if that answers the question, but we definitely look at how do we get value for that house. Uh, sometimes if it's modular, sometimes it's moved.

Speaker 3 37:57

Yeah.

Roy Carter 37:57

Um, so definitely, you know, selling uh across Western Canada, houses are a problem on farms because of course the acres are increasing and more and more people are living in town.

Devon Davidson 38:09

So you sort of how you would deal with it is looked at it on a case-by-case basis, right? And and sometimes um this has happened too, where the the seller wants to stay in their home for an extended period of time, right? So how does that dealt with, Bridget? Let's, you know, do they do they give you a time frame? Maybe it's another year, and then and then how do you look at that?

Bridget Hennigar 38:25

We've had uh situations where we couldn't have uh possession take place of the home at a later date. Um, but you know, generally the um sellers they want to get on with their life too, right? And so this is all part of the process. Okay.

Devon Davidson 38:42

Uh the next thing we want to talk about is is value added for things like future aggregate potential or possible irrigation. Um Roy, have you ever encountered a situation where a seller would say, My grandfather uh said I could take the gravel from the back 40? Like, is there, you know, if someone comes back for materials years later, is that ever uh a problem after land is sold?

Roy Carter 39:01

Uh you know, we've had people show up that we claim some of their equipment or something on and back in the bush was theirs. Um never had an issue with uh aggregate like that. Definitely you get my grandfather was digging a dugout back there with a rubber-tired hoe and he hit gravel. How do we can we say there's gravel here or what do we do? You know, in those cases, we generally recommend some sort of testing or at least alert the buyers that they're welcome to test as long as we have the information. Okay. Um, that type of deal. So you you don't ignore it. Um, you know, on the on the irrigation potential, you know, that's a crapshoot, whether it be in southern Alberta now or you know, out in Saskatchewan where the talk of it is, um, what that value is. You know, as lots of people say, some sometimes the story is better than or the re story is better than reality. Uh the idea of irrigation, um, you know, you want those guys to think it'll happen and they bid accordingly, but sometimes it may not be reality. Yeah. Uh so we put that out there. Uh, but it's really hard to value. That's where you'd never get that right with the list. The market, market will take it into account.

Speaker 3 40:16

Yeah.

Roy Carter 40:17

And if there's a 20% lift there because of it, the market's gonna bring it. Okay.

Bridget Hennigar 40:22

Yes, for example, Saskatchewan, um, you know, it started out with um 500,000 acres of irrigation near Lake Defenbaker. Right, yes. And now they're talking about, well, maybe 90,000 acres is the first phase. And also when is that first phase going to be completed? Yeah. And um, there's also talk that, you know, the farmers and the people who will have the opportunity to get the water rights, they're gonna have to pay a portion of that infrastructure. So there are a lot of variables to take place and does

Cleanup Myths And Leaving It Behind

Bridget Hennigar 40:55

make it more difficult.

Devon Davidson 40:56

Interesting. Um do you see the benefits in discussing the possibility of adding more land to the sale by bringing in other farmers at the same time? I know we just had a sale recently that dealt with something like that, but um, how common is that and and how do you approach that situation?

Bridget Hennigar 41:13

You know, it um we have had a number of sales with that. Um initially, what happens is that someone um comes to us, wants to sell their land, um, you know, we uh start the process, and then a neighbor may hear about it. You know, we always um want to make sure that that first seller, uh that it's not going to have any adverse effect on him, and that he would actually approve it. So, you know, he's the first one here. We want to make sure that his sale is the best that it can be. But we've found that by adding acres, you actually draw more uh people to the sale, and there's actually a lift for both of them.

Roy Carter 41:58

So yeah, good point, and good point, Bridget, about them, the neighbors hearing about it. Because we're a law firm, you know, there's solicitor client privilege. Um, so all dealings go no place, so the neighbors don't hear about it from our office. People like that because they can plan because if it gets out, that's a problem. You know, the driveway gets full, they get all kinds of calls, the tenant might be upset. Uh, you know, they need to be able to uh plan, you know, with their advisors. We deal with our advisors, we don't overtake those advisors, right? So that's critical there. So, you know, often then they will sign with us, but we have a duty to, you know, if we see something that can help them, and it's like, do you know, you know, your neighbor there? It it looks like, or we've heard that they're maybe going to town. Um, once we're signed, if you want to talk to them or you want us to talk to them, um, that definitely happens. And like Bridget talked about, we had one recently um of irrigated land where we had signed up a guy and the sale wasn't that far out, probably four weeks. And then a neighbor called and said, I want to go too. And then, of course, our answer is you know, we can only go if our existing client agrees to it, and they agree to the terms. And no, you can't go an hour ahead or a day ahead. Uh, because our existing client, we have a duty to them first, and they they got to be comfortable with this whole scenario. And um, in that case they were, and it worked uh again, rock star.

unknown 43:35

Yeah.

Devon Davidson 43:36

Okay. Uh the last thing I wanted to cover today was fixing issues that can affect value. So, Roy, would you ever look at preparing um or when when preparing for sale, fixing things like access, or is that just something that you would again leave to the buyers?

Roy Carter 43:49

Oh no, yeah, I mean, if access is a problem, we've laid easements and uh and that down quarter lines and that to give access to a helicopter, what we call them helicopter packs. Where you can't access it. And of course, there's a difference between legal and physical access. Right. You know, that's where you know I've seen time and time again, you know, definitely lots of realtors get it, but some don't because they they're urban. But it's like, oh yeah, that place has access. And it's like, well, is it physical or is it legal? Right. And it's like, well, I don't understand the difference. Uh so it definitely, if we see added value, we will legally overlay an easement over another piece to get to that piece, that type of thing. Uh, so yeah, definitely that's something we drill down on. Access means money in most cases.

Devon Davidson 44:40

Okay. And the last one here, Bridget, um, other issues like joint well use or joint hydro use, is that something you would address?

Bridget Hennigar 44:49

Well, that probably is your area.

Roy Carter 44:51

Oh, yeah, no, it's uh it's good um good questions. Uh, we just had a joint hydro one where I was we were selling pivots, and of course, these guys, when they're doing it, they don't think about ever selling. So the one guy just made a deal with Herb to pull power from him, and they would just square up at the curling rink in the winter for the power. And uh, so we were drilling down on it as a team, and it's like, where's that center pivot powered from? And it's all across the road at Herb's, okay. And it's like, yeah, that ain't gonna work for a buyer, right? Uh, so of course, then in advance of the sale, they dealt with the power company, got that all organized. It was all disclosed. Okay. Uh, similar to uh a joint well agreement and that type of deal. It just needs to be disclosed, and uh there's you know, generally try and get rid of the hair on them for sure.

Devon Davidson 45:46

All right. Well, um, with that, I think that that's kind of the end of the episode here. But just as some parting words, is there one piece of advice you'd like to offer, what one takeaway for retiring farmers, executors, or investors that that you would want them to take away from this episode?

Bridget Hennigar 46:02

You know, I think the um I would like them to take away to um plan ahead. It's um always difficult um to know exactly when you want to exit, but you can think about how that would look like, and then talk to your advisors. Talk to us it you know, well in advance, just as Roy has said, there's many uh times when we've been able to provide some advice and that would make this um transition much easier.

Devon Davidson 46:32

Okay, perfect.

Roy Carter 46:33

Roy? Yeah, it's quite similar. I would say, you know, you can talk to us knowing that goes no place, which is critical. Uh, because once that word gets out, it's usually not fun. And probably secondly, is life short, don't spend a summer, you know, if you're four or five uh kids cleaning up the place you grew up with 80 miles away or or 200 miles away. Yeah, go boating, take your kids someplace, and that the market will figure out uh the difference in value there from clean up or not, and it'd be it'd shock you. It's not very much.

Devon Davidson 47:06

Okay. Well, thanks. Thank you both. That was uh that was a great episode. I appreciate your time. Thank you, Devon. Thank you. Okay, well, that's gonna do it for another episode of the Farmland Exchange. Thank you very much for tuning in. We appreciate your

Rapid Fire Improvements Worth Skipping

Devon Davidson 47:17

support. Uh, if you haven't already, like I said at the top of the show, please leave a five-star review on your preferred podcast platform. Uh it helps us out, and we do really appreciate it. Uh, if there's any topics you want us to cover, or if you are interested in selling farmland yourself, please contact us. Um, our email address is infoclhbid.com or send us or give us uh a call at 866 263 7480. That's gonna do it for now. Thank you for tuning in. I hope this was a positive exchange for you. Take care.