A common question when it comes to valuing a real estate asset is what type of value do I need? It is a common misconception that a certified appraisal and a broker price opinion, also known as a market analysis, are the same thing. These terms are sometimes used interchangeably, and while they do have a lot of similarities, they are both very different.
Broker Price Opinion (aka Market Analysis)
Preparer: Real Estate Broker
Common Uses: Estimate value on a real estate asset for the purpose of a real estate sale or setting a listing price on a property.
Characteristics: Some characteristics of a Broker Price Opinion is that a range of value is concluded, normally only a simplified sales comparison approach is used, and the report is normally only a few pages.
Pros: There are many pros to this form of opinion of value. Normally a market analysis is cheaper than a certified appraisal because of the extent of research involved in the market analysis. Another pro is that it is very simple to understand and normally the report is only a few pages long. There are also more qualified brokers to complete a broker price opinion unlike a certified appraisal that requires a board-certified appraiser.
Cons: One of the biggest cons to the broker price opinion or market analysis is that the depth of forming an opinion of value uses less analysis than a certified appraisal. A simplified sales comparison approach is used to form an opinion of value unlike a certified appraisal that uses three different approaches to value. Normally this simplified method is enough to get an accurate opinion of value for establishing a sale or listing price for a sale of real estate assets. Another con is that a market analysis is not certified and is normally not suitable for more advanced jobs such as establishing collateral for banks or values for government entities.
Certified Appraisal
Preparer: State Board Certified Appraiser
Common Uses: Estimate value for collateral, litigation purposes, government entities, and IRS uses.
Characteristics: Three approaches to value are used: Cost Approach, Sales Comparison Approach, and Income Approach. Other characteristics would include very in depth analysis of the asset and comparables being used and appraised.
Pros: Like a broker price opinion, there are many pros for certified appraisals. One pro is that a certified appraisal is completed by a board certified appraiser and their findings hold weight with banks, government entities, and in a court of law. Because appraisals use three approaches to value, a value is estimated with cost approach breaking down certain components of improvements and land uses, sales comparison approach comparing the subject property to comparables and adjusting up and down for similarities, and finally the income approach were a value is estimated using the income of the asset.
Cons: Certified appraisals are normally more expensive than broker price opinions. The timeline to have a certified appraisal completed can normally be longer due to the demand and pool of appraisers qualified to complete the project.
In conclusion, you can see that both broker price opinions and certified appraisals have their place in the real estate world. It is always a good idea to speak with the professionals and decide what route is best for you and your situation.
NextAg Appraisal & Realty is both a licensed real estate brokerage and certified appraiser. We would be more than happy to consult with you and see what product best fits your situation.
An online real estate auction is a great tool to utilize in the growing world of technology that we live in today. As we all know, mostly everyone today has a cell phone in their hand 24/7 and we have access to unlimited information and applications. Online auctions allow us to market and sell your property to buyers anywhere in the world in the palm of their hands.
Consumers have been buying things online for a while now. Websites like eBay and Amazon allow us to buy things with a click of a button. Why can’t we do that with real estate properties? Well, we can! Here at NextAg Appraisal & Realty we provide the services of selling your real estate property online where buyers can purchase the property with a click of mouse or a button on their cell phone.
What are the advantages of an Online Real Estate Auction?
There are some great advantages to using our Online Auction platform. For example, buyers can remain completely anonymous taking out any potential biases that an in-person auction might create. Another reason, like we talked about earlier, is that people can buy your property anywhere in the world if they have internet access. There is no longer the hinderance of remembering the auction location & time, or sitting for hours waiting for the sale of the property.
I know you’re probably thinking: But I still have to know when the auction starts and wait until the conclusion of the auction. This is not exactly the case! With our mobile app and internet platform, you can sign up for email and cell phone notifications. This will then alert you of when the auction starts, when outbids happen, and the conclusion of the auction.
But I still have to sit on my computer or phone and bid each time, so I know I’ve bought the property, correct? Also, not the case! The online bidding platform allows you to enter a maximum bid, so you don’t have to sit through the whole auction process. The platform will bid on your behalf up to your maximum bid until another party has surpassed you. A notification will then come in when you have been outbid. In turn, you will just log on to our website or your phone and bid again or set another max bid.
Conclusion
Overall, this is a great tool when selling your property because it allows you to have a larger pool of bidders, anonymity for those bidders, and an efficient and professional platform to get the most for your property.
If you are thinking about possibly selling your property, feel free to reach out to me and I can provide a no-obligation consultation of the online auction process and quick market analysis of your property.
It is hard to believe but we have reached about halfway through the growing season for our crops here in the Midwest. The corn is starting to tassle, and the soybeans are starting to fill out. Wheat harvest is in full swing, and everyone is hoping for rain but with those Midwest thunderstorms comes the all too well-known wind and hail. With all the nice weather and summer activities going on the last thing on people’s minds is harvest, end of the year decisions, and definitely not next year’s crop.
But time moves fast and there are decisions that we need to be making now as landowners that will affect next year’s outcome.
For example, if you are on an ORAL lease and thinking about making a tenant change or are thinking about selling your property this fall or next spring, you are required to give notice to your tenant in writing by September 1st of this year. In Nebraska the oral lease period runs from March 1st to February 28th of the next year. Per Nebraska statute, you must give 6 months notice to your farm tenant to terminate a lease (September 1st) otherwise the tenant has the right to farm the next cropping season.
Even if there is a possibility that you want to sell your property or make a change in tenant on an oral lease it is a safe practice to give notice in writing. This does not mean that your tenant can’t farm your property next year. It may be a good point to switch to a written lease at that point if you don’t decide to change tenants or sell.
On the other hand, if you are on a written lease, please review it and make sure that it is up to date and has a definite start and end date. If you were previously on a written lease, for example, in 2022 but forgot to rewrite and sign a new lease in 2023. You are now on a carryover oral lease and fall into the situation above.
Here at NextAg we will only rent land via a written lease, and we review that lease with our landowner clients and tenants each year. We meet in person with the tenant to sign the lease each year to gather their thoughts and perspective as stewards of the land to pass on to the absentee landowner.
If you need a consultation of your lease, management of your land, or are looking to sell this fall or spring don’t hesitate to give us a call or send us an email and we will be more than happy to help.
This is a simple question with a complicated answer. What kind of auction format should I use? Are the market conditions right for an auction? Who should I have conduct the auction? These are all questions that are raised when considering selling your land via auction. At NextAg we guide you through this decision process and custom tailor our approach to you and your property’s needs.
What kind of auction format should I use?
There are many ways to conduct an auction from a traditional auction setting to a more modern approach with Online Only Auctions. Let’s highlight a few options that we offer at NextAg and how they could pertain to your situation.
Simulcast Auction/Live Auction – A modern twist on the traditional auction setting, the simulcast/live auction method combines the traditional in-person auction with the online-only approach. The simulcast allows you to have an in-person auction where patrons can come in-person and bid while also allowing your bidders the chance to bid anonymously via our online bidding platform.
Online-Only Auction – A simple, effective auction format that allows total anonymity for the bidders through our online bidding software. This auction method allows anyone from anywhere in the world with internet access to bid on your property. This method is usually timed and ends after all bidding has ceased for a set amount of time.
Sealed Bid Auction – The sealed bid auction can be a very useful tool in the right situation. This method is a slower paced auction environment where bidders submit their bids on a standard bid sheet to us, here at NextAg. There is usually a deadline to submit bids and then we sit down with the sellers and either select a winning bid or we can invite back the top bidders to perform a small exclusive mini-auction of the top sealed bids. This method allows the sellers a comfortable, slower timeline to make their decision.
Are the market conditions right for an auction?
Market conditions for agricultural land right now are strong. Higher commodity prices and unstable stock market conditions have driven up farmland prices in the Midwest. The ability to buy land in an instant via online auctions, etc. has also played a part in higher land sales. Auctions in the current market conditions allow for fast, efficient sale times resulting in top market values.
Who should I have conduct my auction?
The NextAg advantage, when it comes to selling your property, is that we know how important this transaction is because we are landowners, as well. We are a family-owned and operated business with the owner himself raised on a multi-generational Nebraska farm where hard work and doing the right thing is the standard. Your farm and the generations of hard work and sacrifice do not go unnoticed when we are working with you and your family during this process. Our goal is to be honest, transparent, and strive to get you the best results for the sale of your farm.
How do we get the best results?
Instant contact with thousands of landowners around your property with up-to-date mailing lists
State of the art bidding software
Efficient and effective marketing techniques
Local knowledge of the area
Still have more questions or maybe you are ready to get started? Please reach out today! We are happy to answer any questions you may have and discuss your specific needs. You can also visit our website at, https://nextagrealestate.com/ or call us at, 402-540-0053.
As we have begun the negotiating season for land leases before next year it is always good to review these steps to make sure you have everything in place as a landowner for a successful crop season. As a normal practice, NextAg Appraisal & Realty, review these things each year for every client prior to drafting a new lease before each cropping season. The biggest thing to keep in mind as a landowner is transparency with your tenant and to make sure everyone is on the same page and understands the term and expectations of your farm lease.
1. Determine Your Lease Termination Date
Here in the Midwest the normal lease term runs from March 1st to February 28th of the next year. Having a March 1st starting date allows the farmer and landowner the opportunity to change any information at the farm service agency and with their crop insurance prior to the deadline of March 15th for those entities.
It is always a good practice to start any negotiations of changes to the lease after the first of the year to allow for some time before the March 1st suggested start date of the new lease.
2. Check Your Land’s Fair Market Rental Value
There are many resources out there to determine a fair market value rental rate. The University of Nebraska Land Survey is always a good resource to find a range of rental rates for your region of the state.
Having a tenant with good farming and fertility practices allows you to obtain fair market rents year in and year out, knowing your land is at top production.
3. Have a Written Lease Agreement
As a land manager I always require a written farm lease that renews each year. A written farm lease allows for transparency of expectations to the tenant as well as the landowner. A written farm lease allows for termination without notice in Nebraska at the end of the lease term. Details to be include in the written lease are: lease term, rental rate and/or share terms, who maintains common areas, and who pays for certain expenses.
A disadvantage of an oral lease is no hard expectations, room for discrepancy, and the requirement in Nebraska to give 6 months notice prior to changes or termination of the oral lease.
4. Confirm Crop Insurance and Farm Program Signup
The deadline for any changes to crop insurance or farm program signup is March 15th of the current crop year. Changes include: name changes, address changes, lease changes, etc. Always contact your crop insurance agent and the farm service agency to make sure everything is correct for the coming crop year.
5. Think About Hiring an Expert
A farm manager is not for everyone but sometimes people don’t realize that they could benefit from the service. My goal as a farm manager is to get the full potential from a piece of property while working with the tenant to be efficient. Transparency between parties is also important when discussing the expectations of the landlord and tenant. Having someone that can speak the language while advocating on the landowners behalf can be very beneficial.
Duties and Responsibilities of a Farm Manager
Negotiate leases
Collect income and pay expenses
Maintain compliance with crop insurance, FSA farm programs, and CRP contracts (if applicable)
Visit the property periodically and provide written reports
Accounting reports to the owner of income and expenses
Certified General Appraisals – certified in Nebraska, Iowa, Kansas, and surrounding states. Specializing in agricultural property both vacant and improved.
Real Estate and Auctions –brokerage services are available in Nebraska and Iowa to sell your agricultural asset. NextAg has the most up-to-date online auction services, marketing services, and mailing lists to get the most for your property.
What do I need an appraisal for? Who can I get to do an appraisal? Will it complete within my deadline? These are only a few questions that come to mind when trying to figure out the burning question: Do I need an appraisal?
My name is Ethan Sorensen and I’m a Certified General Appraiser in Nebraska, Iowa, and Kansas. I specialize in agricultural appraisals, both vacant land and ag commercial properties, in addition to utility towers and rural residential.
The real estate market, post-COVID, has been unpredictable and very favorable to sellers. Interest rates have increased as of late but in the Ag world, we are not seeing a slowdown yet in farmland values or purchasing power here in the Midwest. Many investors and local landowners are taking advantage of good commodity prices and excess cash available to them. These factors make it hard for landowners to value their property, especially if they are contemplating a sale of their property or trying to gift/succession plan to the next generation.
These increases in the market also makes it difficult for professionals such as lawyers, bankers, and accountants to get a real time picture of what that asset and the market as a whole is doing at any given time.
So, do I need an appraisal?
Most commonly in my industry there are for common reasons to consider getting an appraisal:
Financing: Most lending institutions require an appraisal of assets over a certain value, especially loans that are going to the secondary market.
Estate Valuation/Tax Planning/Gifting: Many estates need an appraisal to determine a new tax basis. The date of death value is needed to calculate capital gain tax at a later date, if the beneficiaries were to sell the property in the future. Estates may also be subject to state or federal tax depending on the value of the estate’s assets.
Divorce: The division of assets in a divorce situation may need to be based on the current fair market value of the asset.
Potential Sale: Landowners may want to know what their property is worth in the current market before they decide to sell. A lot of landowners sell their properties privately or to current tenants and therefore need an appraisal to determine the price between the two parties.
In conclusion, the answer to the main question is that it depends on what you need the appraisal for. Every situation and asset is different, and therefore speaking to a professional is sometimes the best first step in determining if you need an appraisal.
According to a 2020 study done by Iowa State University, about half of all farmland in the Midwest is rented through short term leases (1-2 years).
“Farmland rental arrangements where tenants may not reap the benefits of conservation investments are a commonly cited barrier to conservation practice adoption in agriculture and may result in lower adoption rates on rented land than on owner-operated fields,”. (Wilde, 2022) . Due to conservation practices being multiyear projects that may not immediately show results, tenants with short term leases are discouraged from investing in conservation as they may not provide a return within the time of their lease.
The study encourages farmers to sign up for leases 3 years and above to invoke confidence in the return of investment for conservational farming practices and methods. It is vital that proper leasing agreements are done for conservational efforts to be implemented. If no lease documentation is in place, farmers are less encouraged to have important conversations about land care or using cost share resources for conservational practices.
It is recommended farmers and tenants discuss goals, rental rates, future adjustments to the agreement, conservational objectives and any concerns that may be preventing farmers from leasing for a longer time before agreeing to the lease. Foundations such as the Chesapeake Bay Foundation (CBF) and Natural Resources Conservation Service (NRCS) may help farmers to implement consevational strategies on their land such as using science-based approaches to prevent pollution in natural occurring bodies of water.
In conclusion, a long term lease on agricultural property is necessary for conservational efforts to provide a worthwhile return on investment due to its multiyear process. Farmers who sign on for short term leases may not be able to obtain high returns as their is an adjustment period where harvest may decrease at first, however it will stabilize over time.
Reference:Wilde, M. (2022, June 12). New lease on conservation. DTN Progressive Farmer. Retrieved September 19, 2022, from https://www.dtnpf.com/agriculture/web/ag/magazine/your-land/article/2022/06/12/new-lease-conservation
About only an estimated 50% of farmers and ranchers actually have an up-to-date estate or succession plan, or any estate plan at all. This may be due to a number of reasons including failure to create a retirement plan, wanting total control lof their land, or just lack of awareness. However, it is important for the prolongation of the estate’s success that a proper succession plan is put into place.
Here are some steps towards getting your succession plan in the works:
List your Assets
Be sure to keep a detailed inventory of the assets currently owned, how they are owned, any outstanding debt that may need to be settled and how much your assets are worth currently. Within the document, be sure to include any family and personal details that may bw relevant in the event of succession, a will if there is one ready, documents for trust or entities that may be in place, total assets and businesses in detail, inventory of grain and livestock, automobiles with current value stated, and any other loans or obligations you may have.
Have a Family Meeting
Gather everyone who may be a potential successor to your assets and discuss an agreeable way to divide all assets including inheritance, properties or any personal memorabilia that may hold sentimental value. After a settlement is agreed upon, the current asset holder may reach a decision alone and proceed to document the final agreement.
Seek an Attorney
Once the list of assets as well as the list of successors have been finalized an attorney may provide you more guidance on how to execute the succession process so that it may be successful. This may include deciding which tool to use in the event of succession i.e: a will, LLC, a trust or a combination of these things. An attorney’s advice here is crucial as they may know the ramifications of each route.
After the succession plan is writted and signed, immediate family may be informed. As your assets change overtime, there may come a time where the succession plan will need to be amended, however the process will not be as strenuous as there is already a foundation to work off of.
For an investor to benefit from the asset’s total appreciation, good farmland management is essential. Nowadays, farming involves more than just growing crops; landowners and farmers also need to take care of issues like profitability, fertility, conservation, and taxes, to name a few. To maximize the growth and revenue of investment farms, a qualified and experienced farm manager is crucial.
A tailored farm management plan and oversight will align the interests of the farmer and landowner to maximize their return on investment because not all farms are made equally (ROI). To run a farm effectively, one must concentrate on the following things:
Profitability
Production
Conservation
Capital Improvements
Communication
Leasing
Fertility
Insurance
Taxes
The degeneration of agriculture or a severe loss in ROI can result from neglecting even one of these essential responsibilities. Although the economic growth hasn’t always gone back to the landowners, farming has emerged during the past ten years as one of the most lucrative industries. We predict that, nationwide, landowners only receive, on average, 50% of their prospective rental income. This implies that American farmers are passing up $25 billion in rental money. Professional farm management services will enable investors to maximize their return on investment and to own a long-lasting asset.
Profitability
Producing food for an expanding population and giving its owner sporadic revenue flow with a stable appreciation upside make productive cropland valuable on numerous levels. According to the USDA, U.S. cropland has given investors a 10.6% annual return over the past 14 years through appreciation and rental agreements. U.S. farmland is well-positioned to continue appreciating, yielding annual rental rates of over 5% of the land’s value due to worldwide demand for commodities such as corn, soybeans, and wheat. Every investor’s portfolio that is properly diversified should include farmland.
Farm management is crucial in maximizing annual ROI. Every farm should develop in value over time and generate revenue for its owners annually. With modern farm management, landowners may anticipate considerably more profitability.
Production
Monitoring crop conditions are especially crucial in specific leases, such as flex and custom farming, where the landlord has upside potential for the property’s production. Farmers and farm managers collaborate to ensure that climate-appropriate seeds were planted for the future growing season and that planting was successful.
Farm managers stay in touch with operators during the planting season to learn how the crops are doing; this will assist create a solid historical dossier for the property. Future buyers prefer properties with regular yields, farmland with proven yields of 200 bushels of corn will be worth more than one with fluctuating production history and identical soil quality.
Farm managers will record yield information from the harvest for the property’s historical records. The farm manager will frequently receive a yield map from the operator, which shows where the field’s highest yielding spots are and other characteristics like compaction or poor drainage. Locating the poorly drained sections of the property is sometimes. A manager will then investigate where extra drainage relief is required.
Conservation
Perhaps the most crucial resource for maintaining life in a populated world is farmland. Farmland maintenance and conservation are vital if we are to feed the world’s expanding population. The Natural Resource Conservation Service was created by the USDA to protect our resources (NRCS). The NRCS assists landowners with decreasing soil erosion, promoting wildlife habitat, improving water quality, expanding water supplies, and lessening flood and other natural disaster damage.
Farmland owners have access to several programs; the ones they use most frequently include the Conservation Reserve Program (CRP), Grassland Reserve Program (GRP), Water Bank Program (WBP), Wetland Reserve Program (WRP), and Emergency Watershed Program (EWP). The landowner receives yearly payments, and the contracts typically run for 10 to 15 years. However, the management must demonstrate excellence and dedication to qualify for these programs.
Capital Upgrades
The farm manager and owner should aim for optimal farmability, which includes capital improvement projects, to maximize appreciation. Farm managers can provide projects that can accommodate any landowner’s budget using various capital improvement strategies. Access, erosive processes, and drainage are all common capital upgrades. These upgrades include investing in drain tiles, adding retaining walls, and extreme measures like installing waterways, ditches, terraces, and more.
Communication
Clear communication is essential to ensuring smooth client-manager relations. Each management task has a purpose, covered in detail in the paragraphs above. Communicating why duties are necessary will keep all parties on the same page.
Usually, the farm manager will provide a written annual report, highlighting the previous farming season, the outlook for the coming season, and potential capital improvement projects. This helps the client to document the farming operation and better understand their investment.
Leasing
The farm manager’s interactions with the tenant operator are an important aspect of their work. The operator you choose can make or break your investment in agriculture. The operator will assist in assessing a property’s fertility, productivity, conservation, and aesthetics in the short- and long-term. An unmanaged year of farming may do a lot of harm to a piece of property.
Managers will speak with qualified farmers and carry out an in-depth investigation of the tenant’s business to ensure they choose the best renter. Background checks are crucial since lenders and local contacts can provide more light on a farmer’s creditworthiness.
There should be a sizable pool of candidates competing for a particular rental property, according to the manager. Landlords will receive the highest rent feasible if there is competition among operators for leasing a facility. A smart manager will be aware of the local market rent and start bargaining from there.
A decent farm manager is distinguished from a great farm manager by choosing the appropriate sort of lease. Each lease has a unique cash flow and risk profile. The owner and management must be on the same page, at ease with the selected lease, and aware of the extent of the landlord’s risk exposure.
Four lease types are frequently employed:
Cash Rent Lease
Flex Lease
Crop-Share Lease
Custom Farm Lease
Though each lease is unique, they all share two crucial characteristics: cost and duration.
Fertility
Farm managers collaborate with farmers to assess the property’s fertility using soil samples once harvest is over. Then, farmers start planning their input purchases for the upcoming year. To ensure that the right amount of fertilizer is used to produce the best yields, farmers analyze the soil fertility using soil samples at least every other year.
Farmers should not apply more fertilizer than their soil’s Cation-Exchange Capability (CEC) can tolerate because that would result in waste. The quantity of nutrients soil can effectively absorb at a particular pH level is known as soil CEC. Overfertilization can result in fertilizer runoff and waste if the soil has a low CEC.
Insurance
A good farm manager will go above and beyond to ensure that a customer has liability insurance. Due to the yearly usage of heavy equipment on a specific land, farming can have numerous occupational hazards. Accidents might occur, so it’s crucial to ensure that a customer is shielded from liability. Although a farm manager won’t often administer insurance, it is their responsibility to guide the client through the procedure and offer assistance.
Taxes
Annual property taxes must be settled by the due dates, which change from state to state. To ensure that their client complies, a manager must be aware of each state’s deadlines since some clients may own properties in numerous states. The education of a customer regarding property taxes is crucial to a manager’s responsibilities because failure to pay property taxes could result in fines on the property.
