CLHbid.com: The Perfect Fit for Estate Land
The Farmland Exchange, the official podcast of CLHbid. com. Expert insights on buying and selling farmland in Western Canada.
Devon Davidson:Welcome back to the Farmland Exchange podcast. I'm Devon Davidson, your host and digital media strategist for CLHbid. com. Today we're talking about how CLHbid. com is the perfect fit for selling estate land. We're going to dive into the complexities of selling estate land and how CLHbid. com, our unique approach, provides clarity, certainty and maximum value for beneficiaries and executors. And here to have the conversation Roy Carter, ceo of CLHbid. com, and Alle Carter, legal and member of the executive team. How are you guys doing? Great?
Roy Carter:Thanks.
Devon Davidson:Devon.
Alle Carter:Happy to be here.
Devon Davidson:Yeah, thanks for being here. Okay, so lots to talk about here. I think the first topic we wanted to cover was set exit dates for distribution. So, roy, setting a firm exit date for the sale of a state land seems to offer a lot of clarity for beneficiaries. Can you just explain a little bit about how that approach simplifies the distribution process?
Roy Carter:Sure Devon yeah with CLHBed. We're a law firm, we're escalating tender. The sale's one day. We have world-class marketing in advance of that. Everybody's aware of the sale. From our point of view, everything's locked down. Because we're a law firm, we have our own programmers in-house, everybody's in-house. No bidder's names are ever disclosed. But price is flushed out on one day. It allows the estate to plan for distribution of the estate, to make tax planning in advance they know the set date and basically for the executor to deal with beneficiaries and said, basically this is the day we're going to the curb. It relieves the executor of the unknown and ongoing hold of property of getting offers that are conditional, that have so-called outs that fall through and you know an executor, there's an onus on the executor to dispose of the assets for the maximum value on a timely basis and they don't end up in a long hold period hoping for an offer. And you know, maybe the economy goes south or something happens in a world event and that type of deal.
Devon Davidson:Allie. Anything to add to that?
Alle Carter:Just kind of broadly speaking.
Alle Carter:I guess being an executor can feel like quite a cumbersome task.
Alle Carter:You know you have a fiduciary duty that you owe to the beneficiaries to get maximum, you know, fair market value for the asset that you're selling and in this case we're talking about farmland and, as Roy mentioned, in a timely manner. And so that can be. You know, typically the land is sometimes the largest asset that deceased would have had, and so it's something that everyone has an opinion about, whether you're talking to one beneficiary, whether you're talking to 18. And so the executor can be tasked with answering to a lot of different people with a lot of different questions. And if that isn't dealt with in a timely manner, if it's dragged out you know, kind of maybe we'll talk about a little later if it's listed and, as Roy mentioned, with conditional offers, it's then taken off the market for an extended period of time, You're dragging this estate out and these beneficiaries aren't necessarily going to be happy with waiting for their inheritance for sometimes years and then obviously still answering to the beneficiaries at the end of the day.
Alle Carter:And how do you prove to them that that's what you got was fair market value? Right, you know, but I think we'll go into a little bit later on about about list price as well.
Devon Davidson:For sure, yeah, we will. Then there's no conditions, and, roy, we talked about this, you know providing certainty. And so how does that really having a condition? Free sale. What is so valuable about that for executors and for beneficiaries alike?
Roy Carter:again, we're not realtors or auctioneers, we're a law firm with tender. You give your client more control. It's, you know, unreserved auction. It's going down the chute that day list. You let the purchaser drive the bus. They make the offers. They decide what they want to cherry pick out of the farm. You know these. If it's an estate sale, they basically want everything sold. It'll generally sell as a lift all the pieces if sold together. You know you don't want to be left with one rubber boot. So I would say, the biggest deal by legal tender, which we are a legal, escalating tender, we give a lot more control to our client. And our client quite often is a client of another law firm. We sell farms across Western Canada. We like relationships, we respect relationships Canada. We like relationships, we respect relationships. You know, often the estate has a you know virtually 99% of the time they have an estate lawyer and a tax advisor. We work with them to basically, you know, allow the managed letdown and giving the estate, you know, a lot more control. Right.
Devon Davidson:And Alle, from your perspective, are there any legal challenges when there are conditional estate sales and how does that impact the executors?
Alle Carter:Yeah, absolutely Kind of. As I mentioned before, it is kind of a cumbersome onus that is on the executor and then you're potentially accepting one off, or if it has conditions as we mentioned quite thoroughly in our podcast with Henry about how we're different from realtors it's basically an opt-out clause.
Alle Carter:you know, so the purchaser can say, well, my offer is conditional on getting financing, and then the property is taken off the market. For that time, Even if a better offer comes in, the executor can't accept it and like a potentially a cash offer, for example, that is a lot more appealing. And then maybe financing doesn't come through or they are really opt out clauses, so maybe they use their money elsewhere, got scared. Commodity prices are coming down.
Alle Carter:Now you've taken the property off the market and maybe now, as I mentioned, if commodity prices are on the down, you've missed that ideal time to sell. So you're really dragging out the distribution of the estate and potentially selling it at a less than optimal time, which will adversely affect the value of the land. So, just having a set exit date, you know, even with our platform we look at when the best time would be to sell and usually if it's, for example, in the summer, we like July. You know, no one's really, people are usually pretty optimistic about their crops. Still, you know, they think that their bins are going to be quite full. And so we are strategic about when we sell and we always try to maximize value for the client that way.
Devon Davidson:Okay, the next topic we wanted to cover was sort of using the best option for the estate sale, and so I think one comparison you guys made was getting the right doctor for mom right, not the one with the wrong tools. Allie, maybe just explain to us the potential downsides of sticking with a familiar service or agent that may lack those expertise. Like what are some of the downsides of sticking with a familiar service or agent that may lack those expertise? Like what are some of the downsides of that?
Alle Carter:Yeah, we always say that we don't know everything. Know what you don't know is sometimes your biggest strength, and we do know how to maximize value with farmland, but we, as Roy mentioned, also really do value that. The deceased likely had strong relations with their accountant, potentially their existing law firm, and so that's where we don't want to ever take over from those. We will work closely with those advisors, but it's about we've lived this space. It's all we do, and so we know the pitfalls, we know what to look for. You know, has the cost base been bumped on the terminal return, like we'll talk about later? And these are all things that, if you have the right team, you can make sure that the job is done properly. And it's not that you know, we know more. It's just we know this space really well and will bring to light some considerations that can easily get overlooked. Just you know, because maybe they're experts in other areas.
Devon Davidson:For sure, just because maybe they're experts in other areas For sure. Roy, do you have any examples you could share of where they've maybe engaged a family friend to sell an estate sale and things were negatively impacted, and maybe how CLH had helped?
Roy Carter:Yeah, I mean definitely. We've taken property that's been listed and not sold on an estate and sold it for more than it's been listed for. We've taken land that was subject to a one tender in an envelope to a law firm and then sold it, opened up the marketing and maximized value that way, you know, we're sort of talking. When we talk estates we're really talking a couple different events. One is generally mom is around and it seems like on the farm. Even in my own case, my dad passed away long before my mom, so it's the widow often not always, but so it's an estate from that point of view, in that the husband might have died, it might be the other way around, but you know then how to in her situation you know Edith is 84, often a good relationship with a tenant. You know, often the land's been rented out and there's a good relationship there and they just have a hard time. You know the farm is like another person too. Right, they've lost their husband, they've got kids in the city maybe, and they've still got the farm, which is just like another person. That's right. But you know they have a hard time at the table when the tenant says you know, here's what your land's worth. I want to buy it. Right, they have a hard time saying I don't know what it's worth. But you know they're thinking to themselves it's our land and I got to make sure I look after my kids too. And it allows a CLH bid, allows her to say you've been awesome. You know I don't know what it's worth, so I'm going to put it on CLH bid. I hope you get it and you won't overpay, because on CLH bid that tenant only pays one click more. They don't leave money on the table, right?
Roy Carter:Yeah, so that's the one situation. And in that case, often we're dealing with her estate lawyer and you know, from that point of view, like Ellie talked about, we often deal with the estate accountant as well. Just to make sure, on the terminal return dad who passed away, they took advantage of his 1.25 to bump the cost base, the ACB. So that's the one case. And the other case we run into quite a bit is mom and dad are gone. It's the last one has passed away and that's really quite a different animal you end up with. You know, often three or four or four or five kids that have been removed from that farm for decades, right, and you know, one thing we do is one thing about an estate there's often a contract in regards to that land that you don't run into with an active farmer, of course, right.
Roy Carter:So the first thing is we respect, again, relationships. These tenants have huge input costs, you know, and we want to make sure they're respected as well. So the first question asked is you know, is it under lease? And that doesn't matter whether it's oral or written, right, your word needs to be as good as writing, right? So you know, well, often that's the initial question. We've got to respect the existing tenancy. You know, they've obviously based inputs upon a certain term, right, so we'll get. You know, we get there. If we go to the group of kids in the city, you know it's, it's. That's a tough one in that they're really removed and they pretty much aren't in tune with values and they've got old relationships from high school and that some are maybe realtors, whatever, and they all like to respect those relationships some
Roy Carter:are neighboring farmers. But it's almost like you know, and we we did a previous podcast about appraisals and values yeah, appraisals can be. It's a wild guess in the case of farmland because of so many external factors that can affect it. So, you know, maybe they've even got an appraisal for the estate, but that sometimes can give them bad information too. So we work with them there. But I almost, you know, I look at it almost like it's almost like you know, mom and dad pass away and it's it's not like opening up the storage unit and there's x cash and X kind of vehicle to liquidate. It's almost more like art. It's like, oh, yeah, man, they have no idea what it's worth.
Roy Carter:And with art you could either take it down to the corner, you know, antique store, take it to the local auctioneer, you know, or maybe take it to, uh, an art, online art sales place, right, what might get you the more money? Uh, maybe somebody that lives art and does that space, right, does that make sense? Totally yeah. And you know, going back to you and the doctor with mom, it, I guess it would be the same analogy. You know, if the kids are talking to mom, you know she's probably got a good relationship with her doctor, the you know general practitioner or whatever. But if her heart's bad, you know she's probably better off letting him operate the guy that she doesn't really know, but that's what he does. Then you know, joe, that's her GP, probably keep him away from heart surgery, right? So hopefully that makes some sense there.
Roy Carter:You know you need the right team, but you also need the right platform. If you want to discover the true price of that art or land, you know the platform is critical and we've talked about this before. Listing it doesn't work. There's no price discovery, nobody trusts it. They wait for it to drop. You know tendering to a lawyer does not work or we would have never started CLHbid. com. It would have been much cheaper just to do tender. You know we saw the wrecks with tender, the money left on the table, the shopping people tendering $1 over the highest tender. You know I had a fellow tell me one time that you know they buy a lot of land by tender but he never tenders and he was kind of saying you know, you've heard all the tender stories, right? And I said I think so. And he said, well, I got one for you and it was like. So he said, yeah, we buy a lot of land by tender, but we never tender. And I was like, yeah, I never heard that story before.
Roy Carter:And then he proceeded to tell me that, yeah, they'll drop off letters at the law firm advertising the land for sale with $1,000 or $10,000, depends upon the amount. In this case it was 10 grand They'll drop off 10 grand in an envelope if they're invited to the tender opening at that law firm and allowed to cherry pick. Wow, and it's like that's crazy. So I guess you know, if you go down the list we know Alle was talking about you know, if you start accepting offers for part of it, you're going to really kill yourself. If you piecemeal it, you lose the whole assemblage. There's auction. We know unreserved doesn't work on piecemealing, it's way too risky. And you know, should an executor be liquidating property by unreserved sale, you know you're open to collusion, et cetera. I think it think way too risky.
Roy Carter:Sort of jumping around a bit, but definitely, basically we look at the situation, whether it's just mom left or the kids. Mom usually will have a better idea of what's going on in the community and values, because her and her husband have been talking all the time. The kids is a different story. It's like we work with them and and, uh, you know, sort of hopefully show them where the landmines are, and the whole goal again is to maximize value and not take over from their estate lawyer. You know, we do. We definitely get referrals from law firms across Western Canada that say you guys do this. Uh, it makes more sense and tender. You know, take it on, right.
Alle Carter:And I would say, just because each sale and and family dynamic and situation is so unique, it really takes a team to drill down into what their situation is in order to maximize value. And I often have individuals coming up to me, um, at trade shows or you know, and say, what, how much do you charge? And I always think that their question first should be what can you do for me? That's different than everyone else and that's we are just a completely different animal in that we will drill down into things that they they don't even know are concerns, nor would they ever know that those are concerns if there's not a team of experts that bring it to their attention and then guide them into how to manage that. You know we don't just say that all of these are issues and then you're on your own. We walk the entire walk with them. Yeah, you know, from the first uh zoom phone with everyone, the marketing, the land transfers. You know direct depositing money to usually their estate lawyers. You know, trust account.
Devon Davidson:Just to that point, Alle, like what are some of the details that CLH really drills down into to you know? Because as an executor or beneficiary, maybe you're just as you said, you're not in tune with what's going on. So what sort of things does CLH look for in terms of avoiding the landmines and and to making sure that we're maximizing value and that the beneficiaries are retaining one of those proceeds?
Alle Carter:I would say one of the biggest ones that we, you know, first look at is how is the land being held? You know, were kids added on title for estate planning purposes? You know, for estate planning purposes? You know, has the deceased claimed their you know, complete capital gains exemption? How much is left over? All of those are huge aspects and oftentimes, even if the kids are holding some of the land, it's the kind of common idea is that, oh, I can't qualify, I don't have my capital gains exemption because maybe I wasn't actively farming it. Or there's issues where maybe it's transferred kind of sideways and Roy will talk more on this after but transferred sideways from daughter to her sister, and that all changes the dynamic so much, and so there's quite a few tax considerations that we like to really look at at the forefront.
Roy Carter:Yeah, I'll go back to tax. Definitely, when you talk about maximizing, packaging is absolutely huge. Estates used to be sold as eight quarters. You know tom edgar passed away and he had eight quarters and they have a buyer for the eight quarters. Well, again, that's not the way to maximize value. You know, we ask for tenders on halves or quarters and then we have our En Bloc at the end to to maximize values from that point of view.
Roy Carter:Going Going back to all these tax, often the beneficiaries are in different tax positions From that point of view. There might be one living in Norway, one living in the United States. They're not entitled to their capital gains exemption. Other ones are. Often they have sort of coffee talk tax advice.
Roy Carter:It's like you didn't crop share or you've been gone too far from Vermillion, too long from Vermillion, you're not eligible. Most of that is not accurate and they're eligible a lot more often than they think they are. And then, like Alle said, there will be times where you got know, you've got to look at why they're on title. If they were on title which is pretty common these days for estate planning, only you know definitely that's a different category than if they're actually if there's been a disposition and the rollover's been taken into account and they're untitled for that reason. So there's basically it's just sort of going down a know what you don't know, going down the checklist, and we sort of alert them to the issues and then generally they deal with their accountant and lawyer and often we communicate together kind of thing to maximize value for them.
Devon Davidson:Have you seen situations where the collaboration between the estate lawyer and the accountant hasn't gone smoothly or there's not that communication there Like how has that impacted estate sales and negatively impacted, maybe, the beneficiaries?
Roy Carter:I think, good question. I think if we had the approach that we were know-it-alls and this territorial deal where we want these clients, you know it wouldn't go well. But you know, we've grown up in a farm community, rural community. We respect relationships and if we've got something to add, we obviously wouldn't be growing across Western Canada if we didn't have something to add. So we're not trying to usurp the function of the people they have and I think people get that. They're not threatened by us.
Roy Carter:You know we definitely have tax advisors behind us. We're lucky enough our COO, bridget Hanegar, who leads that, probably has got a nicer personality than you and I, or you or I and she, people like her, and whether it be the other accountant or other lawyer, and yeah, they're not threatened by it. You know, and most advisors are genuinely interested in doing what's right for the client. It's not, you know, I want to look like I'm the know-it-all. You know we'll get that sometimes but it's pretty rare where you get the feeling that you know this person doesn't want their client talking to anybody else. Right, I would say that's really rare, yeah.
Alle Carter:I would also say that there are circumstances where, you know, maybe both advisors aren't aware of what the other is doing. But a lot of times too, it might come upon the accountant, for example, as a surprise that oh, the land's being sold next week, type thing that allows for zero planning. At that point it's like, oh, I wish I would have known about this months ago.
Devon Davidson:Have you seen something like that happen?
Alle Carter:this months ago. Have you seen something like that happen? Yeah, quite often. I would say we, well, on our platform, we, we take enough time to really drill down and and so that um doesn't happen, and so that we have all the advisors on board and, can you know, wait to have a sale for a couple of years. Uh, for example, that last one that, uh, we had a couple of months ago, we, we had to wait um so that they could maximize their after-tax dollars. Right.
Roy Carter:Yeah, that was the three-year-old period where, yeah, kids have to hold their interest for three years before they dispose of it, before they actually market it. So, yeah, definitely looking at everything like that.
Alle Carter:That doesn't apply, obviously, if it's you know the executor selling the estate land. That was a different situation, where kids were actually added on to title.
Devon Davidson:Okay, yeah, you mentioned I think both of you mentioned this now that you know the beneficiaries are quite often out of touch, or can be, with what's going on in the local market and with land values. So how do you approach that situation? How do you help them understand the value of their land? Is it just an education thing? I mean, are there resources you turn to?
Roy Carter:How do you approach that? Yeah, I think the biggest one is honesty and, you know, use examples, explain that nobody really knows the value of that land. There's just the assemblage. You know, we've talked on other podcasts about you, podcasts about we've sold land for over double appraised and I probably wouldn't have done a better job on the appraisal than what was done. But we don't over-promise and under-deliver. We don't tell people what their land's worth because it's worth what the market.
Roy Carter:The market's smart. It takes everything into account and most executors, when you talk to them about that, they like that. It takes the pressure off them. They don't have to decide what the price is. They let the market do it. And if they let the market do it, they've done their duty, they've delivered for their beneficiaries, their duty, they've delivered for their beneficiaries.
Roy Carter:So again, you know, as a CLHB, as a law firm, we generally don't deal with the beneficiaries, the group. You know there's maybe the odd exception where they'd want to be involved or something, but we, that's totally the executor's call. Sure, yeah, so we're generally dealing with one executor. And, yeah, generally it's a case of they look at our marketing, talk to past executors. We've got numerous executors if you want to talk to them that have even in some cases, tried selling other ways and it didn't work and they came to us. So if they wanted to, I'd suggest that. But they definitely have to believe in the process, the marketing.
Roy Carter:But most see it. Most see, yeah, I drove from Winnipeg to Brandon the other day. I saw your vans along the highway. I see you guys spend money. You're not regional. You can get buyers from a different province. The world has changed. Right For sure, we've got a lot of investors that'll buy on our site because, again, like we've talked about before, it's like the Chicago Mercantile Exchange. So all of a sudden you've got a solid floor, broad-based buyers, world-class marketing and true price discovery and that executor can. Basically, you know a lot of pressure's off and they can take it easy and say they maximize value.
Alle Carter:I think the biggest thing at the end of the day is that we do alleviate a lot of that pressure off of the executor and that they don't have the beneficiaries coming to them questioning whether they sold at fair market value and what fair market value is, because we will do anything to ensure that that value is maximized by our marketing, absolutely everything, by the packaging, the En Bloc, and you know we provide them that floor with the starting bid, and so at the end of the day, we have engaged all interested parties and so it's pretty hard to argue that that fair market wasn't achieved, whereas if you list it, well, how did you decide what price to list it at? You know you're really capping what you would ever get it.
Devon Davidson:Opens it up for debate with the beneficiaries right.
Alle Carter:Totally, totally and just much more of a headache and a long process for the executor.
Devon Davidson:Okay, Roy, you mentioned this earlier. The cost base hasn't been bumped in the terminal return. I think, Alle, you and I talked about it earlier too. But, Roy, can you maybe just explain the significance of ensuring that the cost base has been bumped properly in the terminal return for estate land and then how that impacts tax liability for the beneficiaries.
Roy Carter:Yeah, I mean every estate has a capital gains exemption to the extent it hasn't been used. You know that should equate to roughly $300,000. It depends upon the inclusion rate. But there's $300,000 in tax saved by just assuming the value of the property might be north of two and a half, where it exceeds mum's exemption as well, or the survivor. So it's big bucks. But there's a tendency on estates just to do the terminal return and sometimes not really drill down. Okay, yeah, that's a big deal.
Alle Carter:And sometimes it's about going back and amending that terminal return, if you still can, and saying you know, hey, let's bump this cost base so that we're paying tax on less of a spread. Um, so kind of explaining, I guess that it's. It's you pay tax on on the spread of what the land was acquired at, maybe you know, 80 years ago, versus what it sold at, and so if you can bump that to something more relevant something totally more relevant, um, relevant on, you know, dad's terminal return.
Alle Carter:Then everyone's paying that tax spread on a lot lesser of an increase. Yeah, if that makes sense, there's a lot to it, but you know for sure those are things that we look at is can we go back and amend this terminal return? What can we do here to make sure that they're receiving the most after-tax dollars?
Devon Davidson:Is that something that gets overlooked quite often? Oh yeah, I would say quite often. We see a lot Quite a bit.
Roy Carter:I'm not really pointing the finger at anybody, it's not really a mistake. It's just that there's something there you could actually do to be beneficial, and that's all we try and do is give people more tools. A lot of it's just knowledge. I had one last week a couple beneficiaries Again, it was mom, the survivor mom had dementia and then passed away. And these just to give you a story, a bit of a story. There I was talking to the son and daughter and they were telling me you know, dementia. So we drove back to the farm and we drove up and down the road and, uh, you know, I think they were thinking back to maybe 20, 30 years ago, when it was hard to lease out. They went into one yard and tried to find, see, somebody leased nobody home, drove down, went in another yard and it was like man, these people really don't know what's going on out there where, you know, know, half of Saskatchewan is leased, right yeah yeah.
Roy Carter:And so, anyway, you know they were going through that and they were like, hey, we found this tenant and he told us he would lease for X, right, and I'm kind of sitting there and I was like, oh okay. And then they had an appraisal for the estate and the appraiser said, well, yeah, your land is not worth what it could be because you signed that lease for a super cheap cash rent. And so they were saying to me and the son or the guy was not the executor, the lady was, there was three or four other siblings and she was just devastated because she signed the lease and she said, you know, I guess I hurt our land sale. And I was like, no, you know, you don't sell land on the income approach. We would not sell that land with that lease in place. You know it's. That's just not true. You know. You know you got to honour, honor the lease, but in the last year that lease we will sell it. And the fact that it's cheap has nothing to do with what you're going to get with it. Right, get for it.
Roy Carter:And it was like, really. And it was like, yeah, no, what? What's in that appraisal? You know that that appraiser's done too many shops in in town or he's appraised on the income approach, which is not realistic. Right, we don't sell land under lease. We'll sell in the last year Generally. I guess there may be exceptions, but in nine years of selling real estate across Western Canada we'll sell during the last term of the lease, which works fine. Buyers like to get on in the fall. Often the buyer is the tenant. There's no spook in the land. So you know, if the lease is up in the fall, we'll maybe sell in July. Respect possessions after the crop's off.
Alle Carter:Yeah, and a lot of times too. You know, we had an estate sale per se where the kids you know inherited the land and approached us to sell. And we go through all the documents with them and ask them, you know, is it being leased out? Yes, how much longer? It was like three more years and we'll work with them to say you know, these are the things that you can do in these three years. We can't sell it, but we're here for the long haul. You know, we're not just here for an event. Um, we'll walk the whole walk with you and and guide you into how best we can approach this in three years, if there's things we can do in the meantime.
Devon Davidson:Yeah, yeah, okay, um right, I guess understanding the history of estate land is like we talk about drilling down, just understanding the history of the land that we're trying to sell here. But how does knowing when and how land was acquired help in crafting the right sales strategy? Does that matter?
Roy Carter:It does for, uh, you know, tax the capital gains rules, um, with the change in the eighties and that type of deal, there is some change there. Um, um, as far as when to exit, you know I guess who knows that story? You know. We do know we don't normally like to sell if we got an option after freeze up, because most buyers think they can get a better crop the next year. If they're on in the fall, they're not drying the land out. They can put anhydrous on or burn off or whatever. If that answers the question there at all. I think so, Allie. Anything to add to that?
Alle Carter:No, we just yeah, there's, like I said, each farm and situation is really unique and that's where we work with them to show them. It's ultimately up to the seller. We're just there to guide them, show them hey, if you wait to sell, these are some potential risks. If you see, if you want to get it sold right now, we can do that. Um, but again, these are, these are the pros, these are the cons, and then ultimately, we act for them.
Roy Carter:So it's up up to them, okay, one uh, one option we do uh allow is sometimes you get a situation where you know the one brother is farming it and the other siblings are removed. Right, and you know that's a bit of a, obviously we respect that. But having said that, often the other siblings want to monetize it too. Right, and you know, work it out. And if they can't work it out and come to us. You know we allow one person to bid, we don't allow the group, you know, to bid back and we obviously monitor that and would block that. But you know they can say to the one brother we don't know what it's worth, you're not going to overpay again. You know hopefully they can work it out and don't need us and he can acquire it. But if they can't, he definitely doesn't overpay, he pays market right. So we do allow one beneficiary, we don't allow the estate to bid back, of course.
Alle Carter:And that kind of goes to that. This is all we do and as lawyers, I think something that maybe shocked me a little bit getting into this profession is we do kind of take on the role of being a counselor, almost, or like a family therapist, and and we're we're quite good at it and we've you know, our own family, for example. It's there. You understand that there, when it comes to selling land, there's huge tension sometimes. Sometimes we have beneficiaries who don't speak. They don't really speak to the executor. It's a really tough situation and we know how to navigate that really well. We know how to make everyone feel included. Everyone's opinion matters.
Alle Carter:We're not going to pick sides but we will help, I guess, guide that dynamic in a way that sometimes people end up talking at the end you know, we've we've had that at the end of a sale, where it's like, oh, you know, these sisters kind of were able to mend their relationship and what a beautiful thing because we were just there to kind of mediate and guide them. Um, because it it is a time when, when tensions are high, especially with a state land, you know it there's, there's emotions usually that are really heightened, and so there's all these factors that we understand and and we'll help help them through that well, that seems like a really nice segue into the next question here, which is maybe clarifying some of the legal complexities when land is held jointly for estate sales.
Devon Davidson:Um, how does that affect the sales process and the process of distribution?
Roy Carter:Joint generally is easier. You know the survivor gets it. So from that point of view joint is often a lot easier process. So that isn't a problem at all. Tenants in common, of course you know if an estate we do get calls in the state alone half an interest in land, we wouldn't sell it. It's like selling one rubber boot. You know you're not going to get half the value for the quarter so we never sell any fractional ownership yeah, so just kind of as a background there.
Devon Davidson:I guess there's two ways I was going to ask if you explain that background there, I guess there's two ways.
Alle Carter:I was going to ask if you could explain that. Yeah, just for our listeners. There's two ways that land can be held. So either joint tenants or tenants in common, or obviously solely yourself. But joint tenants is right of survivorship. So if you and I hold land together, Devon as joint tenants. We own 100% of that land together. If you pass away before me I am the last one on title it really doesn't even flow into your estate, it's completely outside. So it's not included in the executor's duties because it just flows straight to me.
Alle Carter:Tenants in common if you own 50% and I have 50% as tenant in common, you own 50% of that land. I own 50% of that land. I can pass my 50% on to my common. You own 50% of that land. I own 50% of that land. I can pass my 50% onto my kids in my will. It's really messy and and we'll do another podcast on this Cause then I could add my kids and you could be on title with your. These two random kids, for example and and we do, you know, as Roy said get calls on I own a percentage as a tenant in common in this land. Can you sell it? And it's like really you're only other buyers, the other person in that land because, no one's wanting to buy into that situation.
Alle Carter:No, no.
Devon Davidson:Okay, we may have covered this, but respecting past relationships and emotional ties, so we talked a little about that. But, roy, how do you balance the financial aspects of an estate land sale with emotional connections that beneficiaries might have to the property?
Roy Carter:Yeah, I mean, obviously the executor is supposed to park the emotional. They got a duty, fiduciary duty, beneficiaries to maximize. Generally, we get really super good positive feedback from beneficiaries. You know, a big comment is we don't want to prefer. You know, the girl might say well, I was friends with so-and-so that married so-and-so at Vagabill, and my brother, though, was friends with another farmer in school, and they they might get pulled, and then they'll have some cousins involved, and it's like they're pulled between a bunch of people in the community. So they totally like CLH bid and basically they're not picking sides, no preferential. They're giving everybody a chance, because even though they maybe don't see these people once every three, four years or when they go back to their class reunion, they still respect that and they do like the idea that you know, even you know mom and dad would have liked it given everybody a chance, right. So they, they respect relationships and they like the way they're not forced to pick somebody over somebody else.
Alle Carter:I think too, we've had quite a few Zoom calls and they say and you know, I feel more comfortable after this call because it goes hand in hand with our marketing where we value the family farm.
Alle Carter:We are all farmers and we understand what that means, and so sometimes there is a lot of sadness that comes with the sale of especially estate land. You know, it might be the reality that none of the kids wanted or could take it over and now they're having to sell it and that doesn't come easy. You know, we get stories where I used to go coyote hunting in this corner and these are all things that we value, and so in our marketing we tell that story and kind of give it its, you, it its last, I guess, send off. And so we have the script writer go out and write that and we work with everyone involved that like, tell us these stories, tell us your favorite parts of the land, that one day you maybe wanted to build a house overlooking that lake or something, and we really try to capture that for the last time for them as well. We truly care. Yeah, it's really important and we really try to capture that for the last time for them as well. We truly care.
Devon Davidson:Yeah, it's really important and there's lots of great stories that we've had in past podcasts about just that, because in Roy, like you said, it's like losing another person, so there's lots of emotions there. But make sure to check out. I think it's episode three where producer Mike and I get into that with Roy. It's a good one. The next topic here, guys, is qualified farm property rules, just kind of clarifying some of that. So, Alle, maybe you want to talk a little bit about those rules for listener, for our listeners, especially beneficiaries, who may not realize they can benefit without actively farming yeah, it kind of goes to.
Alle Carter:I guess we touched on it a bit earlier. A lot of it's quite common that a lot of individuals don't think that they get their capital gains exemption because they didn't actively farm it and it flows straight down in a linear fashion, and so you know, if your grandparents actively farmed it, you will likely have your capital gains exemption. Obviously there's. Each circumstance is slightly different, but the common misconception is that if I rented the land out, I've lost that capital gains exemption and, as I mentioned earlier, though, it is affected if that chain is broken and, for example, if daughter is on title and then transfers it to her sister because that's going sideways. It has to go straight down, and I don't know if you have anything you want to add to that I think.
Alle Carter:previous podcast Bridget kind of covered it.
Roy Carter:It really is a big factor in estates. What's the net return at the end of the day?
Devon Davidson:Do we want to talk about selling estate land in larger assemblages versus single sales? I think we maybe have covered it a bit on this podcast already. Is there anything else?
Roy Carter:I think the same applies there. The bigger assemblage, people will come further for it. They're not going to come 10 miles for one quarter, 20 miles away. They'll come 20 miles for 15 quarters. And we mentioned the old deal about 5 miles there's 300 quarters within the radius, and 10 miles there's 1,200 quarters. And we mentioned the old deal about you know, five miles there's 300 quarters within the radius, and 10 miles there's 1,200 quarters. You start quadrupling your buyer and buyer group and it's a game changer for value. Right, it's a big, you can get a big lift. So again, that's packaging the more the better. You're going to net, they're all going to get a lift, right.
Alle Carter:And something I've seen too is perhaps dad has passed away, mom is still alive but is looking to sell a lot of the land off, staying on the home quarter, and they want to sell off some quarters and not everything. And while I acknowledge that it's a huge decision and that sometimes they just want to hold a quarter in the hopes of one day or something that really needs to be looked at and it might almost be better to wait until you sell everything, not in one parcel package the way we would with potentially En Bloc, but, just as Roy mentioned, you will get a lot more interested parties traveling for multiple quarters. So you will really adversely affect the value of your land if you start selling off one quarter at a time and try to hang on to some. While I understand the reasoning behind it, it's good to also point out to them that, like I mentioned, you will receive probably a lower price for your land.
Devon Davidson:Allie, how important is it to manage the complexities of different tax rules for each beneficiary, and do you have any examples of where there's tailored strategies and how they've benefited?
Alle Carter:tailored strategies and how they benefited? Um, just the one, you know. That comes to my mind is when you mentioned earlier that some beneficiaries might live in Europe. You know, some are actively farming, some aren't, and so it's looking at each of their, their situations, and figuring out okay, do you get your capital gains exemption? Um, what applies here? Basically, because each situation is so unique.
Roy Carter:Yeah, and I mean I guess you know, definitely because we're not realtors or auctioneers, because we're a law firm, you know there's so many different layers there.
Roy Carter:You know the realtors again haven't totally figured out what we do. But on that question, there, if you're a non-resident there's withholding tax and you know there's hundreds of those minefields out there, right, and so there's a mandatory withholding tax for CRA, for a non-resident, like Ellie talked about, if they're in Europe, and we then as a law firm firm have to hold that money in trust and we sometimes would deal with the estate lawyer or lawyer for that beneficiary. But you know, sometimes of course the beneficiary's own lawyer will be different than the estate lawyer. But it's things like that that again, you just know where, you just have been there and it's like, hey, we've got an amazing team of paralegals lawyers, you know, accountants, mike Reeve, videographer, you know yourself Devon a part of the team. It's a key there is just knowing those pitfalls. It's a key there is just knowing those pitfalls. And it's just as soon as we know there's a non-resident, it's like, hey, make sure, closing It'll go to our paralegals, make sure, closing that withholding tax we deal with for a clearance certificate.
Devon Davidson:So that's just one of many examples that we become a part of the whole process. Alle, maybe you already answered this, but how do you deal with conflicting perceptions about land value amongst the beneficiaries? I know you said you kind of act as like a family therapist in some scenarios there, but the other part of that too I wanted to ask is how does the executor protect themselves in that scenario when there's conflicting perceptions of land value?
Alle Carter:I think our first is, as Roy mentioned, we're honest, we're not out there to tell them what their land is worth, but we will show them it might be different than the appraisal.
Alle Carter:For these reasons, let's start your land here and see where it will go. And at the end of the day, with our world-class marketing drilling down, getting everyone to the table on sale day, our packaging, the beneficiaries really can't go back on the executor and say you didn't get fair market value. That would be a very difficult argument, and so that alleviates the stress off of the executor. And I think, just pointing out, the beneficiaries are often removed from the land and so just don't understand some things about it. And so that's where we're there to walk the walk with them. Show them you know what, we know where we would start at, for what reasons, and really give them peace of mind. You know we'll work with them until they are in agreement with where we should start and you know the reasons behind it. They are in agreement with where we should start and you know the reasons behind it.
Devon Davidson:So we've talked about the importance of marketing and doing that in a way that's, you know, beyond just the regional approach and packaging and parceling and all that. But are there any legal considerations when marketing estate land to out of region or international?
Roy Carter:buyers For sure, british Columbia is the only province and there is exceptions there too for land as close to an urban sector and that, but generally they allow foreign buyers, whereas alberta, saskatchewan, manitoba have restrictions and you'll see that why. You know, up the alaska highway north of fort st john bc, and that you see a lot of german, swiss and that uh, buying ranches and that uh, even even in vanderhoof area, you know uh, but uh for sure, and so it's a factor in where we market um and uh. You know. Basically, you know people, buyers are instructed, they bid our offer, so the executor doesn't have to deal with offers. The executor doesn't have to look at offers and look at terms. We set the terms. So from that point of view they're basically advised to get legal advice. Whether they're on side with foreign ownership, we've given notice. We don't have to drill down, you know, beyond that on the offer type deal.
Roy Carter:But our goal is to protect the estate too, that they don't have to give some back. So you know everything's flushed out. Our paralegals will drill down with the oil companies. On SLR, you know, we just don't say go clean out mom's drawer and kind of see what they were paying. You know, maybe the oil company comes and tells us yeah, no, we give notice, last year we were going to abandon that well. And so we go directly to the oil company. It's direct drive Flush it out. So, yeah, when it's's done, we want them to be able to go spend their money and not get a letter from a law firm from the purchaser a year later as as to some sort of liability right and a lot of times too, it is just educating the beneficiaries on who the potential buyers might be.
Alle Carter:You know, we had a ranch last year that was an estate sale and it was in BC, and so we advise them we can market internationally. You know we're not regional, we will go out and find your buyer. These are the reasons that we'll go in these areas and it's just a lot more tailored marketing to that situation. It's not a one size fits all approach, you know we we tailor absolutely everything to the situation of the individuals and it just maximizes value for them at the end of the day.
Devon Davidson:Would you guys say that traditional estate sales by tender can often attract bottom feeders? Does that? Is that something that is a concern for the executors and for the beneficiaries, and how does CLH's platform sort of avoid that?
Roy Carter:Yeah, totally. It's kind of like foreclosure sale. Often people see them as estate sales.
Devon Davidson:Right.
Roy Carter:Yeah, you know, when you have more common in the US, I think. But they have these estate houses, like basically stores, where it's kind of treated as like a discount and so historically I think there is a misnomer that in an estate sale there's a buy. You know, we don't market our estate sales any different than any other sale. We spend the money on it. Do world-class marketing, price discovery is a big deal.
Roy Carter:I think historically, estate sales did end up selling below market because they were sold over the kitchen table, Right, and it was kind of like, you know, maybe you're dealing with, you know again, the tenant or a friend you knew and you really don't know what the land's worth and don't know what the art's worth because it's not easy to ascertain and you sold the art without putting it through an art auction, right. So, um, I think has there been a lot of probably land sold in the past that less than fair market value? We see it. You know, we search titles and you'll see transactions that, wow, that appears you know a lot less than what we would expect, right.
Alle Carter:But, for example, a lot of times they don't even know, like when Roy was talking about the beneficiaries who come, you know, to the area that their land is in and knock on doors for a tenant.
Alle Carter:If they would have got an offer that day from someone willing to buy it, they might have taken it because they thought the land might be hard to sell when in reality it's in a highly fertile area with a lot of competitive farmers around. But they just don't know, and so that's where you know we really guide them through that. Also, on the topic that you mentioned of tender and I know we've mentioned this in previous podcasts, but again, just no one will trust tender and a lot of individuals don't even go get financing because they see it as just a waste of their time. Or they're a price setter and the executor or beneficiaries already have an idea of who they'll sell to maybe the tenant, for example, in the end. And so why am I going to waste my time at my bank getting my ducks in a row when they've already chosen in the end? So is that true price discovery? Absolutely not. You know, we've had someone say tendering to a law firm is like playing darts, blindfolded with one dart and it really is yeah.
Devon Davidson:Okay, before we wrap up here, just a couple of quick questions. What would you say for both of you, is the biggest challenge facing estate land sales today?
Roy Carter:I would say, you know, manage expectations of everybody. It's diverse and, you know, once they realize that this is the way to sell, maximize. I think they almost become more cohesive as a family unit, like Alle kind of talked about, and it's like, okay, this does work and I'm going to trust the market and the buyer's going to set the price in hand.
Alle Carter:I agree, managing expectations, 100%, managing family dynamics, but it's something that we like to see, at the end of the day, that often it does repair itself because we just eliminate any possibility for conflict and we put that on ourselves. We'll deal with it and you guys, just you know, sit back and we'll help guide the bus, type thing.
Devon Davidson:All right guys. Well, I think that's all I have for you for today. Before we sign off, are there any parting words from either of you? No, that's it. Thanks, Devon. Thanks, roy.
Alle Carter:I would just say we love to talk farmland and if you are in the situation of selling a state land, you're feeling overwhelmed. Give us a call. You're not going to get a bill for the half hour phone call. You know we value those conversations and we genuinely want to help everyone exit in a way that is stress-free and an enjoyable experience at the end of the day absolutely.
Devon Davidson:Yeah, thanks, ali. Okay, well, let's do it for another edition of the farmland exchange. Yeah, thanks, allie. Okay, well, that's going to do it for another edition of the Farmland Exchange podcast. Thanks for tuning in. We appreciate the support. If you haven't already, please take a moment to subscribe on your preferred podcast platform and leave a five-star review. It helps our content get found and other listeners who may benefit from the information will find it year. If you want to get in touch with us, please do. As Alle just mentioned, we love to talk farmland and we want to help more people in similar situations. Send us an email, info at CLHbid. com, or send us or give us a phone call, 866-263-7480. Follow us on social media and that is going to be it for another edition. Thank you for tuning in. I hope it's been a positive exchange for you.
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