Buying or selling rural land involves more than agreeing on a price and choosing a closing date. Financing, taxes, title work, property use and long-term ownership plans can all influence how a transaction should be structured.
That is why one of the best first steps is assembling the right land transaction team. A land broker may guide the real estate process, but lenders, accountants, attorneys and other professionals each provide expertise that can help you make informed decisions.
Starting these conversations early can also help prevent delays and unexpected complications once the property is under contract.
Start Planning Before the Transaction
Some buyers and sellers wait until an offer is accepted to contact their lender, accountant or attorney. By then, important deadlines may already be approaching, and certain options may be more difficult or impossible to pursue.
Before listing or purchasing land, consider:
- How the property is currently used
- How the buyer intends to use it
- How the purchase will be financed
- Whether the property produces income
- How ownership will be held
- Whether the seller intends to purchase another property
- What tax considerations could result from the sale
You do not need to have every answer before speaking with a land broker. However, identifying these questions early helps determine which professionals should be involved and when their guidance will be needed.
The Role of Your Land Broker
A knowledgeable land broker serves as the central point of contact for the real estate transaction. At LandGuys, we help you understand the market, prepare the property for sale, evaluate opportunities and coordinate the steps leading to closing.
For sellers, your LandGuys broker can assist with:
- Evaluating the property’s market value
- Developing a marketing strategy
- Gathering property information
- Reviewing offers and transaction terms
- Coordinating showings, inspections and other due diligence
- Communicating with the buyer’s representatives
- Helping keep the transaction on schedule
For buyers, your LandGuys broker may help with:
- Identifying properties that fit the your goals
- Evaluating access, improvements and property features
- Understanding comparable land sales
- Preparing an offer
- Coordinating inspections and due diligence
- Communicating with the lender, title company and seller’s broker
A broker can also recognize when a question should be directed to another professional. Brokers do not replace the tax, legal or lending professionals on your land transaction team.
The Role of Your Accountant or Tax Professional
An accountant or qualified tax professional can help buyers and sellers understand how a transaction may affect their individual tax situation.
For sellers, this conversation may include:
- The property’s original and adjusted basis
- Potential capital gain
- The effect of inherited or gifted ownership
- Improvements made during the ownership period
- Depreciation previously claimed on buildings or other assets
- Whether an installment sale may be appropriate
- Whether a 1031 exchange should be considered
- Estimated taxes resulting from the sale
For buyers, an accountant may help evaluate:
- How the property should be owned
- How the purchase price should be allocated among assets
- Which records should be retained
- How income from farming, rent, hunting leases or conservation programs may be reported
- Whether certain improvements or assets may qualify for depreciation
- How the purchase fits into the buyer’s broader financial plans
Bring your tax professional into the conversation before the purchase agreement or closing structure is finalized. The details of the transaction can affect the available options.
The Role of Your Lender
Unless the purchase will be completed entirely with available cash, buyers should speak with an agricultural or rural real estate lender before making an offer.
Land financing can differ from financing a traditional residential property. The lender may consider the property’s agricultural income, improvements, access, intended use and appraised value, along with the buyer’s financial position.
Topics to discuss with a lender include:
- Down payment requirements
- Loan term and amortization
- Fixed or adjustable interest rates
- Balloon payments
- Required collateral
- Appraisal requirements
- Farm or rental income documentation
- Financing for buildings or future improvements
- Prepayment penalties
- Estimated closing costs
- The timeline for loan approval
A prequalification or early financial review can help buyers establish a realistic price range. It may also strengthen an offer by showing the seller that financing preparations are underway.
Buyers planning to use proceeds from another property sale should tell the lender as early as possible, especially if the purchase may be part of a 1031 exchange.
The Role of a Real Estate Attorney
A real estate attorney can provide legal guidance concerning the ownership, transfer and use of the property.
Depending on the property and the state where it is located, an attorney may assist with:
- Reviewing or preparing the purchase agreement
- Advising on ownership structures
- Reviewing easements and access rights
- Evaluating leases and existing agreements
- Addressing boundary or title concerns
- Reviewing entity documents
- Explaining legal obligations created by the transaction
- Assisting with estate or succession planning
- Coordinating the closing process
Rural properties may include farm leases, hunting leases, conservation agreements, shared access, mineral rights, timber rights or other interests that deserve careful review. An attorney can explain how these items may affect the buyer or seller.
When a Qualified Intermediary May Be Needed
A seller considering a 1031 exchange should contact a qualified intermediary before the property closes.
A qualified intermediary facilitates the exchange and holds the sale proceeds while the seller identifies and purchases qualifying replacement property. The seller generally cannot receive or control the proceeds and then decide afterward to complete an exchange.
Because 1031 exchanges include strict requirements and deadlines, the seller’s accountant, attorney, broker and qualified intermediary should communicate early in the process.
Documents to Begin Gathering
Organized records allow each professional to provide more useful guidance.
Sellers may want to gather:
- The original purchase and closing documents
- Deeds and title information
- Surveys and legal descriptions
- Records of improvements
- Depreciation records
- Farm, hunting or residential leases
- Conservation program agreements
- Property tax statements
- Loan payoff information
- Documents related to an inheritance or gift
- Income and expense records associated with the property
Buyers may want to prepare:
- Personal or business financial statements
- Recent tax returns
- Proof of available funds
- Loan prequalification documents
- Entity or partnership documents
- Proposed ownership information
- Plans for farming, leasing or improving the property
- Income projections when applicable
Your accountant, lender or attorney may request additional documents based on the property and your circumstances.
Ask the Right Questions Early
Before buying or selling, consider asking:
- Who needs to be involved before we establish the transaction timeline?
- How could the property’s current use affect the sale?
- What records are needed to calculate the seller’s adjusted basis?
- How will the buyer finance the purchase?
- Could the ownership structure affect future decisions?
- Are there leases, easements or agreements that need to be reviewed?
- Is the seller considering another property purchase?
- Could a 1031 exchange be an option?
- What decisions must be made before the property closes?
Not every land transaction requires the same combination of professionals. A straightforward cash purchase may have different needs than the sale of inherited farmland, an income-producing recreational property or a transaction involving multiple owners.
The purpose of building a land transaction team is to make sure the right questions reach the right professionals at the right time.
Preparation Creates a Better Path to Closing
Good planning does not eliminate every challenge, but it can reduce surprises and give buyers and sellers more time to evaluate their options.
Your LandGuy can help coordinate the real estate process, establish a practical timeline and keep communication moving among the parties involved. When your broker, accountant, lender, attorney and other professionals are working from the same information, you can approach the transaction with a clearer understanding of what to expect.
Whether you are considering selling property or preparing to purchase your next piece of land, start the conversations before you need the answers.
This article is provided for general educational purposes and is not intended as tax, legal or financial advice. Tax treatment depends on the property, its use and the owner’s individual circumstances. Consult a qualified tax professional, attorney or lender before making transaction decisions.
