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Ranch brokerage market update

Rob Pfister,
Pfister Land Company, LLC
Courtesy photos
Rob Pfister |
Buy Photo

How do you sell property in this market, and is it a good time to buy? When are prices going to bottom out, and when will prices recover? This is the debate folks. These are questions I hear everyday, and the answers, although obvious in some people’s minds, may be counterintuitive to others. If you are a buyer, there is vulnerability and opportunity everywhere. If you are a seller, name your price, but be prepared to own your property if you are not ready to pass on some value in this market. The rampant land rush in the west has screeched to a halt, the stock market dropped 8,000 points and subprime lending hit the skids.

So why would anyone invest in land now?

Cash is king again, and creditworthy buyers can secure long-term funding at sub-five percent interest rates. The western real estate markets are always the last to feel the effects of an economic recession, but they are also some of the first to come out of the recession. Why? As soon as buyers recover and regain confidence, they buy out west for long term investment and lifestyle. We are seeing major pricing corrections on older listings and more realistic asking prices on new listings. The banks have been given money that they are now loaning at sub-five percent interest rates on long-term loans to credit-worthy buyers. These interest rates won’t stay low forever so now is the time to take advantage of the farm, ranch, and recreational market.

Every property has a price worth paying, and all sellers are motivated, it simply takes action and ability on behalf of the buyer to close a deal. Create a checklist before beginning your investment search. Know your budget and comfort zone, and become prequalified for this type and size of loan. Determine the area or region, desired land type and acreage.

I have sellers who are beholden to the notion that the market will turn around soon and that they will see the high prices of 2006 and 2007 again. While I believe the market will stabilize, I don’t currently share the opinion that we are going to see an increase in prices any time in the foreseeable future. In my opinion, there are certain markets, mainly recreation and development markets, which may not see those 2007 prices again for more than a decade.

For some sellers, this may not happen in their lifetime. Still, the sellers get to decide whether or not to sell, and at what price. The problem is, sellers really are not in control. The beautiful thing about real estate investing is that you are in control of your investment until you decide to sell it. The ugly thing about owning real estate is taking on the liquidity risk the day it is purchased; you cannot always sell real estate when necessity or desire dictates. Some sellers believe they can still sell high in this market, and also hope to take advantage of buying low at the same time. It is simply not going to happen that way. I believe buyers will pay 2002-2003 prices for quality real estate, but they are not going to pay what was being paid from 2004-2008. All buyers believe the prices they paid from 2004 to date were too high. The truth is, the prices paid in 2002-2004 were still mutually beneficial to both buyers and sellers, and sellers should consider discounting their offerings accordingly.

If you are thinking of selling your farm, ranch, or recreation property, or if you are already attempting to do so, you are going to have to stick to the basics. Price it correctly. This is a two-pronged approach in this market. First, consider what other similar properties are listed for and compare the size, quality and location to yours. Your property must be able to compete and have a rational pricing basis. Secondly, consider having your property appraised by a licensed certified appraiser familiar with your type of property and your market. Rarely, if ever in the past, did a seller appraise their property in order to bolster the listing price. They did not need to, now they do. If I have difficulty listing a property at a reasonable price, I suggest an appraisal. If the seller will not list near the properties appraised value in this market, then the property will not sell and should not be listed. Even if a buyer pays cash, they will want it to appraise for the agreed upon price. If a buyer needs to borrow the funds, then there is no chance of obtaining a loan without the property being appraised, and it must appraise for the purchase price or lower.

It is also important to have a mineral title search performed on your property prior to selling. If you own mineral rights, at least you will know about them and be able to share them with the buyer. Buyers will not purchase your land if they know you have minerals and you are trying to keep them. They will simply walk away. Even if the minerals have not been developed and have never produced in paying quantities, allocate a price to them and sell the minerals with the surface. This will give the buyer some comfort that they will have a seat at the negotiating table if minerals are ever explored and a resource is developed on their surface. With the recent downturn in the coal bed methane gas market, there are plenty of land men who can assist sellers and buyers in a mineral search. Have copies of any oil or gas leases currently affecting the property being sold.

Next, know your water rights. Domestic and stock wells (depths, gallons per minute, size of pump, costs of pumping, servicing issues, permits, etc.), ditches (fees, assessments, repairs and maintenance, flows and priority, irrigation district assessments, bylaws, etc.), adjudicated acreage with maps and acre feet, reservoirs (permitted, repairs and maintenance issues). Have the state engineer perform a water rights search ahead of listing the property. Water has always been valuable, but it has never been quite so, until more recent times and water will be even more valuable in the future.

Most importantly, look to a real estate firm that specializes in selling farm, ranch, and recreational properties. The best broker for you may not be the one in your home town, don’t feel an obligation to list with a local broker, remember they are getting paid to market and sell your property. It is in your best interest to do some research, ask questions, and interview potential firms.

Currently Pfister Land Company, LLC has the three largest contiguous deeded acre ranches listed for sale in Wyoming. The sheer size of these particular offerings is attractive because a buyer can take advantage of certain economies of scale and the mineral, and water resources are the two most material components relative to those three offerings, notwithstanding of course, the grass base and recreational resources offered on them. Pfister Land Company, LLC routinely performs competitive market analysis and professional consulting services for farm, ranch and recreational property owners. It’s better to do the work now, and not have needed to, than to have not, and wish you did. It’s never too late to be proactive. The time is now.

How do you sell property in this market, and is it a good time to buy? When are prices going to bottom out, and when will prices recover? This is the debate folks. These are questions I hear everyday, and the answers, although obvious in some people’s minds, may be counterintuitive to others. If you are a buyer, there is vulnerability and opportunity everywhere. If you are a seller, name your price, but be prepared to own your property if you are not ready to pass on some value in this market. The rampant land rush in the west has screeched to a halt, the stock market dropped 8,000 points and subprime lending hit the skids.

So why would anyone invest in land now?

Cash is king again, and creditworthy buyers can secure long-term funding at sub-five percent interest rates. The western real estate markets are always the last to feel the effects of an economic recession, but they are also some of the first to come out of the recession. Why? As soon as buyers recover and regain confidence, they buy out west for long term investment and lifestyle. We are seeing major pricing corrections on older listings and more realistic asking prices on new listings. The banks have been given money that they are now loaning at sub-five percent interest rates on long-term loans to credit-worthy buyers. These interest rates won’t stay low forever so now is the time to take advantage of the farm, ranch, and recreational market.

Every property has a price worth paying, and all sellers are motivated, it simply takes action and ability on behalf of the buyer to close a deal. Create a checklist before beginning your investment search. Know your budget and comfort zone, and become prequalified for this type and size of loan. Determine the area or region, desired land type and acreage.

I have sellers who are beholden to the notion that the market will turn around soon and that they will see the high prices of 2006 and 2007 again. While I believe the market will stabilize, I don’t currently share the opinion that we are going to see an increase in prices any time in the foreseeable future. In my opinion, there are certain markets, mainly recreation and development markets, which may not see those 2007 prices again for more than a decade.

For some sellers, this may not happen in their lifetime. Still, the sellers get to decide whether or not to sell, and at what price. The problem is, sellers really are not in control. The beautiful thing about real estate investing is that you are in control of your investment until you decide to sell it. The ugly thing about owning real estate is taking on the liquidity risk the day it is purchased; you cannot always sell real estate when necessity or desire dictates. Some sellers believe they can still sell high in this market, and also hope to take advantage of buying low at the same time. It is simply not going to happen that way. I believe buyers will pay 2002-2003 prices for quality real estate, but they are not going to pay what was being paid from 2004-2008. All buyers believe the prices they paid from 2004 to date were too high. The truth is, the prices paid in 2002-2004 were still mutually beneficial to both buyers and sellers, and sellers should consider discounting their offerings accordingly.

If you are thinking of selling your farm, ranch, or recreation property, or if you are already attempting to do so, you are going to have to stick to the basics. Price it correctly. This is a two-pronged approach in this market. First, consider what other similar properties are listed for and compare the size, quality and location to yours. Your property must be able to compete and have a rational pricing basis. Secondly, consider having your property appraised by a licensed certified appraiser familiar with your type of property and your market. Rarely, if ever in the past, did a seller appraise their property in order to bolster the listing price. They did not need to, now they do. If I have difficulty listing a property at a reasonable price, I suggest an appraisal. If the seller will not list near the properties appraised value in this market, then the property will not sell and should not be listed. Even if a buyer pays cash, they will want it to appraise for the agreed upon price. If a buyer needs to borrow the funds, then there is no chance of obtaining a loan without the property being appraised, and it must appraise for the purchase price or lower.

It is also important to have a mineral title search performed on your property prior to selling. If you own mineral rights, at least you will know about them and be able to share them with the buyer. Buyers will not purchase your land if they know you have minerals and you are trying to keep them. They will simply walk away. Even if the minerals have not been developed and have never produced in paying quantities, allocate a price to them and sell the minerals with the surface. This will give the buyer some comfort that they will have a seat at the negotiating table if minerals are ever explored and a resource is developed on their surface. With the recent downturn in the coal bed methane gas market, there are plenty of land men who can assist sellers and buyers in a mineral search. Have copies of any oil or gas leases currently affecting the property being sold.

Next, know your water rights. Domestic and stock wells (depths, gallons per minute, size of pump, costs of pumping, servicing issues, permits, etc.), ditches (fees, assessments, repairs and maintenance, flows and priority, irrigation district assessments, bylaws, etc.), adjudicated acreage with maps and acre feet, reservoirs (permitted, repairs and maintenance issues). Have the state engineer perform a water rights search ahead of listing the property. Water has always been valuable, but it has never been quite so, until more recent times and water will be even more valuable in the future.

Most importantly, look to a real estate firm that specializes in selling farm, ranch, and recreational properties. The best broker for you may not be the one in your home town, don’t feel an obligation to list with a local broker, remember they are getting paid to market and sell your property. It is in your best interest to do some research, ask questions, and interview potential firms.

Currently Pfister Land Company, LLC has the three largest contiguous deeded acre ranches listed for sale in Wyoming. The sheer size of these particular offerings is attractive because a buyer can take advantage of certain economies of scale and the mineral, and water resources are the two most material components relative to those three offerings, notwithstanding of course, the grass base and recreational resources offered on them. Pfister Land Company, LLC routinely performs competitive market analysis and professional consulting services for farm, ranch and recreational property owners. It’s better to do the work now, and not have needed to, than to have not, and wish you did. It’s never too late to be proactive. The time is now.


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