Are Conservation Programs Good or Bad When Selling a Property?

As a Wisconsin REALTOR specializing in rural properties, landowners often ask me about how government programs will affect their property sale. The question is usually something like, “I’m thinking of enrolling my property in a program; will that affect the market value when I sell?” Most often, the programs they’re referring to are the Conservation Reserve Program (CRP) and the Managed Forest Law (MFL) program. There are other programs that rural properties are enrolled in but those usually have a similar effect on land value.

crp-programs-post-image

Let me first say that I’m not against these programs in general as they can provide benefits when implemented with some forethought. The problems that I see are usually the result of landowners simply not understanding the full implications of enrollment. The result is that they commit themselves and future owners of the property to contract terms that may be less than ideal yet last up to 50 years or in some cases may even be permanent.

The following tips are based on my experiences as a land broker for over a decade. As pros and cons of these common programs are presented, it is my goal that the information will help landowners make choices for their property that will benefit them and future owners*.

Managed Forest Law (MFL)

In the Managed Forest Law program, the landowner receives a significant tax break on wooded land in exchange for following a timber management program. While the benefits of this program are obvious, I’ve often met with an owner that wants to sell a property which is entirely enrolled in the MFL program. This may have sounded good at the time they enrolled it since they wanted to use the land for hunting only. The problem arises when it’s time to sell. Enrolled acreage is not buildable and any time a property isn’t buildable or is cost prohibitive to build on, the sale price will usually be lower. While recent changes in the MFL rules have made it easier to take a building site out of the program, it can be costly. Added costs mean buyers will likely offer a lower price. This loss of value could have been avoided by making a few simple changes at the time of enrollment.

MFL tips

1) 25 Year contracts are usually more desirable than 50 year: MFL contacts run 25 or 50 years in length. Even buyers that are in favor of MFL programs often don’t like 50 year programs especially if the contract is early in the term. Buyers often view a 50-year contract as something that may outlive them and shy away from encumbering a property for that length of time. A 25-year program will usually seem more reasonable to them.

2) Property with ‘Closed’ MFL Contracts are usually an easier sell: MFL contracts can be designated as ‘open’ or ‘closed’. ‘Open’ MFL is open to public access for hunting while ‘closed’ MFL is not available to the public. As one may expect, it is usually easier to sell ‘closed’ MFL land than it is to sell ‘open’ MFL land. Buyers (especially hunting buyers) often see little sense in investing in land if everyone else gets to use it too. Current MFL regulations allow a buyer to change the contract from ‘open’ to ‘closed’ after they purchase it, but the change doesn’t take effect until the following calendar year. This means a new owner closing an MFL property will have one hunting season where it is still designated as ‘open’ to public access.

3) Consider excluding a building site: A building site that is excluded from the MFL program is appealing to most buyers. When choosing a site, consider (among other things) the distance from a public road, access to power, how steep a driveway will be, a likely site for a septic system, and the view from the building site.

Conservation Reserve Program (CRP)

In the Conservation Reserve Program, the federal government pays a land owner to take tillable ground out of production for a set period of time. While it provides many benefits, the program may also provide some challenges when it’s time to sell. Buildings cannot be built on land that is enrolled in the program and any building site must be removed (at a cost) from the program. In addition, traditional farming practices cannot be carried out so a new owner cannot pasture or crop the land which can lower the desirability and number of potential buyers.

CRP tips

1) Projected rent trends may want to be considered before enrollment: Grain commodity prices and crop ground rent prices often affect CRP desirability. In most cases, buyers are more willing to invest in CRP enrolled land when commodity prices and crop ground lease prices are going down. They are less excited about the program when lease and commodity prices are going up. The reason for this is that the price paid by the government on CRP ground is affected by the crop ground rental market at the time of enrollment. If ground rental prices are dropping, the CRP payment will often be higher than what the owner could get from a farmer. If the land rental prices are rising, the CRP payment may be locked into a rate that is lower than the owner could get by renting to a farmer.

2) CRP enrollment may limit active farmer buyers: Farmers often don’t want to buy CRP enrolled land as they usually make more money by planting a crop than taking a CRP payment. If the property has a lot of tillable acres, farmers are the most likely buyers for a parcel. One exception is if the program is expiring soon. In that case, farmers could still be interested but it may not be at top price.

3) Consider excluding a building site: Just as with MFL, leaving a building site out of the program is a good idea if there is any chance that the owner may sell in the next 10 years.

Acreage enrolled in multiple programs

All too frequently I see a property that the owner has enrolled in both MFL and CRP. This is possible since the MFL program rules allow for up to 20% of the total acres to be un-forested.  The problem arises when a potential buyer wants to use an old field for a pasture or a large garden. Since that portion of the property is enrolled in two programs, the removal cost is often doubled.  I have on multiple occasions, seen buyers walk away from a property because it didn’t fit their needs as it was and buying out of two programs was just too expensive. In some of these ‘double dipping’ cases the landowner didn’t even know what they were agreeing to when they enrolled it. They had two parties advising them and each party didn’t know what the other was doing. To avoid this, a person should be very sure everyone that is advising them knows the full picture of what programs already exist on the property and more importantly, what the owner’s goals are for the future.

The bottom line when making decisions about enrolling a property in a program is to remember that the only thing permanent is change. The person that is “never going to sell their property” often will have a change of plans if they lose their job, develop a health condition, or lose a spouse. That being the case, if landowners want to maximize the value of their property when/if they need to sell, they should try to anticipate what the next person may want to do if they were to buy the property and plan accordingly.

If you are considering a government program for your property, you will want to discuss the pros and cons with your tax advisor and/or attorney. If you think there’s a chance you might sell your property before the program would expire, you may also want to seek the council of a land professional to get input on minimizing or eliminating problems when it’s time to sell.

To learn more about how a land professional helps sellers maximize their rural property sale, visit www.MaximizeYourLandSale.com

*Disclaimer: All tips in this article are intended for general informational purposes only. They are not intended to advise in any specific situation.

Strong, Stable Rural Land Market

SW Wisconsin Land Market Update

A trend has emerged in the rural land market of southwestern Wisconsin. Since 2014, we’ve seen a strong showing in the first half of the year, then a slower third quarter followed by a rebound during the fourth quarter. That’s precisely what the numbers show for 2016 as well.

2016 Rural Land Market Review

1st Quarter- 2296 acres sold in 32 transactions for an average of $3,325/acre

2nd Quarter- 2481 acres sold in 42 transactions for an average of $3,484/acre

3rd Quarter- 1763 acres sold in 26 transactions for an average of $3,181/acre

4th Quarter- 2767 acres sold in 39 transactions for an average of $3,472/acre

land-market-update-blog-post-image

Current Market Characteristics

  • Low Inventory Continues

This sounds like a looping track, but low inventory persists. This has been the case since around October of 2015. Nice properties 40-150 acres are selling quickly. The average parcel size that sold during fourth quarter was 71 acres. This is a great time for landowners to put properties on the market.

  • Buyers Waiting in The Wings

Land buyers continue watching and waiting; but immediately jump in the game when a fairly priced property comes on the market.

  • Prices rebound

Rural land prices rebounded from third quarter’s average of $3,181/acre to finish the year at $3,472/acre. This 4th quarter 2016 average price/acre when compared to $3,308 in the 4th quarter of 2015, was an increase of 10.8%.

4th Quarter 2015 vs. 4th Quarter 2016

Here’s a look at land sales by county in SW Wisconsin:

Grant County

4 tracts of land sold during the 4th quarter 2016 (involving 583 acres) compared to 8 sales during the 4th quarter of the previous year (involving 516 acres). The average price per acre was $3759 compared to $3026 a year ago; an increase of 24%.

Iowa County

7 tracts of land sold during the 4th quarter 2016 (involving 652 acres) compared to 6 sales during the 4th quarter of the previous year (involving 399 acres). The average price per acre was $3686 compared to $3855 a year ago; a decrease of 4%.

Lafayette County

Zero land sales were reported during the 4th quarter 2016 compared to 2 sales during the 4th quarter of the previous year (involving 62 acres). The average price per acre (carried over from third quarter) remains at $4688 compared to $3475 a year ago; an increase of 35%.

Sauk County

10 tracts of land sold during the 4th quarter 2016 (involving 479 acres) compared to 8 sales during the 4th quarter of the previous year (involving 696 acres). The average price per acre was $3444 compared to $3570 a year ago; a decrease of 3.5%.

Vernon County

7 tracts of land sold during the 4th quarter 2016 (involving 320 acres) compared to 8 sales during the 4th quarter of the previous year (involving 721 acres). The average price per acre was $3219 compared to $2745 a year ago; an increase of 17%.

Crawford County

5 tracts of land sold during the 4th quarter 2016 (involving 354 acres) compared to 5 sales during the 4th quarter of the previous year (involving 310 acres). The average price per acre was $2671 compared to $2677 a year ago; a negligible decrease of 0.2%.

Richland County

6 tracts of land sold during the 4th quarter 2016 (involving 379 acres) compared to 5 sales during the 4th quarter of the previous year. The average price per acre was $2834 compared to $2582 a year ago; an increase of 10%.

Averages Are Just Guidelines

Buyers and sellers need to be aware that average sale prices are only a general guideline. An on-site property evaluation by an experienced land agent is needed to give you an accurate picture of what a property is worth in the current market. To learn more about the rural land market in Southwest Wisconsin, begin your search here: Southwest-Wisconsin-Real-Estate.com

For Landowners

If you would like a more detailed land market report for your area (free)*, visit www.LandMarketReport.com for instructions on how to order.

*SW Wisconsin includes Grant County, Lafayette County, Iowa County, Sauk County, Richland County, Crawford County, & Vernon County. All data was sourced from the SCWMLS & WiREx. Because this article was intended to review the rural land market, properties smaller than 20 acres, residential, and commercial land sales were not included.

Slow But Steady Rural Land Market

SW Wisconsin Land Market Update

Similar to a year ago, there was a lull in rural land market activity during the 3rd quarter in southwestern Wisconsin. At first glance, the sold prices for 3rd quarter make the land market look like it is in the doldrums (compared to the 1st and 2nd quarters of 2016). This is mostly due to the fact that about half of the region didn’t have enough sales to establish any kind of a trend. This pattern of a strong first half of the year, followed by a slower third quarter has held true for three years in a row.

3rd qtr land market update image

Current Market Characteristics

  • Buyers are patient

Buyers are not quite as excited about purchasing land compared to the first half of the year. They are still looking for a fair price which no doubt factored into the lack of price increases during 3rd quarter.

  • Low Inventory Continues

Low inventory persists and we continue to see fewer than usual new properties coming on the market. Nice properties under 100 acres are selling quickly. The average parcel size that sold during 3rd quarter was 68 acres. Even larger parcels that are priced correctly get a lot of attention and spend much less time on the market than a year ago. This is a great time for landowners to put properties on the market.

  • Prices level

The number of sales dropped compared to 2nd quarter 2016 from 42 to 26 transactions. The average price per acre also declined from $3,484 to $3,181. However, it needs to be remembered that 3 of the 7 counties in the region didn’t have enough sales to establish a firm average. Richland County appears to be the best example of what the overall market is doing with level prices and a near even number of transactions.

If you would like a more detailed land market report for your area*, visit www.WisconsinLandValues.com for instructions on how to order.

SW Wisconsin Rural Land Sales*

Southwest Wisconsin 2nd & 3rd Qtr 2016
Grant Iowa Lafayette Sauk
2nd Qtr 3rd Qtr 2nd Qtr 3rd Qtr 2nd Qtr 3rd Qtr 2nd Qtr 3rd Qtr
# of sales 4 1 6 7 4 1 14 6
# acres 404 102 403 583 181 80 795 288
woods 197 63 232 212 104 3 393 185
tillable 113 39 142 307 11 77 341 37
pasture 90 0 25 53 59 0 53 66
wetland 0 0 3 0 7 0 0 0
avg $/acre $4,352 $2,173 $4,131 $3,936 $3,605 $4,688 $3,729 $3,253
Vernon Crawford Richland TOTAL
2nd Qtr 3rd Qtr 2nd Qtr 3rd Qtr 2nd Qtr 3rd Qtr 2nd Qtr 3rd Qtr
# of sales 6 5 3 2 5 4 42 26
# acres 337 205 153 276 208 229 2481 1763
woods 220 101 121 189 136 222 1403 975
tillable 96 67 19 64 60 1 782 592
pasture 21 37 12 16 10 1 270 173
wetland 0 0 0 5 0 0 10 5
avg $/acre $3,296 $2,502 $2,185 $2,628 $3,088 $3,084 $3,484 $3,181


Buyers and sellers need to be aware that average sale prices are only a general guideline. An on-site property evaluation by an experienced land agent is needed to give you an accurate picture of what a property is worth in the current market. To learn more about the rural land market in Southwest Wisconsin, begin your search here: Southwest-Wisconsin-Real-Estate.com

*Free Land Market Reports are available for these SW Wisconsin Counties: Grant, Lafayette, Iowa, Sauk, Richland, Crawford, & Vernon
*SW Wisconsin includes Grant County, Lafayette County, Iowa County, Sauk County, Richland County, Crawford County, & Vernon County. All data was taken from the SCWMLS & WiREx. Because this article was intended to review the rural land market, properties smaller than 20 acres, residential, and commercial land sales were not included.

Rural Land Prices Holding Firm

SW Wisconsin Land Market Update

Little has changed in the rural land market during the 2nd quarter of 2016 in Southwest Wisconsin. The number of transactions was up over 1st quarter 2016 from 32 to 42 transactions. The average price per acre rose slightly from 1st quarter; however, the average parcel size came in at just 59 acres. This is quite a bit smaller than a year ago where the average was 102 acres. Smaller parcels tend to sell at a higher dollar per acre than larger parcels, so the general land market appears to be strong with prices holding firm.

Current Market Characteristics

  • Low Inventory Continues

For the past year there have been fewer nice properties on the market. For prime real estate, multiple offers are now fairly common. The stiff competition has triggered a few offers above list price which follows the trend in metro areas where buyers are desperate enough to add escalator clauses to their offers.

  • Prices are inching upward

Four of the seven counties saw an average price per acre increase over 1st quarter. The average price-per-acre went from $3,325 in the 1st quarter of this year to $3,484/acre in the 2nd quarter. When other market factors are figured in, this isn’t much of a gain, but neither is it a loss.

  • Sellers wait and see

The summer months are typically a little slower in the rural land market, but this year the trickle of fresh new listings has almost dried up. The uncertainty of the upcoming national election results might be influencing sellers to hold off. Also, the trends in urban real estate show a hot seller’s market, and some of the property owners I have talked to recently are waiting to list in hopes that this trend will reach the rural markets as well.

  • Buyers searching, waiting

The competition for rural land is heating up a bit. Buyers are actively searching for rural properties, many waiting for something suitable to come up for sale. In most cases they do their research and aren’t bidding on overpriced parcels. Properties priced correctly for the local market are moving quickly.

SW Wisconsin Rural Land Sales 12 Month Review

SW Wisconsin 2015 2015 2016 2016
3rd Quarter 4th Quarter 1st Quarter 2nd Quarter
# of transactions 36 42 32 42
# of acres sold 3670 3377 2296 2481
% of acres tillable 23% 27% 25% 32%
average $/acre $3,308 $3,133 $3,325 $3,484
 …
Avg $/acre by county 2015 2015 2016 2016
3rd Quarter 4th Quarter 1st Quarter 2nd Quarter
Grant $2,339 $3,026 $3,136 $4,352
Iowa $3,451 $3,855 $4,885 $4,131
Lafayette $6,364 $3,475 $3,475 $3,605
Sauk $3,737 $3,570 $3,684 $3,729
Richland $2,382 $2,582 $3,122 $3,088
Crawford $2,549 $2,677 $2,532 $2,185
Vernon $2,337 $2,745 $2,439 $3,296


If you would like a more detailed land market report for your area (free), visit www.WisconsinLandValues.com for instructions on how to order.

Copy of SW WisconsinLand Market Update

Buyers and sellers need to be aware that average sale prices are only a general guideline. An on-site property evaluation by an experienced land agent is needed to give you an accurate picture of what a property is worth in the current market. To learn more about the rural land market in Southwest Wisconsin, begin your search here: Southwest-Wisconsin-Real-Estate.com

*SW Wisconsin includes Grant County, Lafayette County, Iowa County, Sauk County, Richland County, Crawford County, & Vernon County. All data was taken from the SCWMLS & WiREx. Because this article was intended to review the rural land market, properties smaller than 20 acres, residential, and commercial land sales were not included.

Lack of Inventory Holding Back the Land Market

SW Wisconsin Land Market Update

Quiet and steady best describes the 1st quarter 2016 land market in Southwest Wisconsin. The number of transaction was down from 4th quarter 2015 but was not unusual for a 1st quarter at 32 transactions. The average price per acre rose slightly from 4th quarter to end up at $3,325/acre.

Current Market Characteristics

  • Prices are slowly moving up

Four of the seven counties saw an average price per acre increase over 4th quarter. Those three that didn’t had very few transactions leaving us with not enough data to get a firm average price.

  • Low Inventory Continues

There continues to be very few nice properties on the market. When one does go up for sale, it gets a lot of attention often leading to multiple offers.

  • Sellers hesitate

Some sellers that have contacted me about selling are hesitating to actually put their property on the market. Land prices have increased steadily since 2013 and many have a wait-and-see attitude gambling that an even better market is in the future.

  • Buyers savvy and somewhat cautious

Buyers are actively searching for rural properties, but in most cases they do their research and aren’t willing to go way out on a limb to own it. Properties priced correctly for the local market are moving quickly.

SW Wisconsin Rural Land Sales 12 Month Review

 SW Wisconsin 2015 2015 2015 2016
2nd Quarter 3rd Quarter 4th Quarter 1st Quarter
# of transactions 37 36 42 32
# of acres sold 3162 3670 3377 2296
% of acres tillable 37% 23% 27% 25%
average $/acre $3,947 $3,308 $3,133 $3,325
Avg $/acre by county 2015 2015 2015 2016
2nd Quarter 3rd Quarter 4th Quarter 1st Quarter
Grant $3,387 $2,339 $3,026 $3,136
Iowa $5,649 $3,451 $3,855 $4,885
Lafayette $6,364 $6,364 $3,475 $3,475
Sauk $4,098 $3,737 $3,570 $3,684
Richland $2,415 $2,382 $2,582 $3,122
Crawford $2,592 $2,549 $2,677 $2,532
Vernon $3,127 $2,337 $2,745 $2,439


If you would like a more detailed land market report for your area (free), visit www.WisconsinLandValues.com for instructions on how to order.

SW Wisconsin Land Market Update 1st Qtr 2016

Buyers and sellers need to be aware that average sale prices are only a general guideline. An on-site property evaluation by an experienced land agent is needed to give you an accurate picture of what a property is worth in the current market. To learn more about the rural land market in Southwest Wisconsin, begin your search here: Southwest-Wisconsin-Real-Estate.com

*SW Wisconsin includes Grant County, Lafayette County, Iowa County, Sauk County, Richland County, Crawford County, & Vernon County. All data was taken from the SCWMLS & WiREx. Because this article was intended to review the rural land market, properties smaller than 20 acres, residential, and commercial land sales were not included.

Land Market Strengthens at Close of 2015: SW Wisconsin Land Market Update

After a pause during 3rd quarter, the land market started making headway again during the 4th quarter of 2015 in Southwest Wisconsin.

4th Quarter 2015
The number of transactions was up 16% over 3rd quarter with 42 completed sales. Total acres sold remained about the same as 3rd quarter with 3,377 acres changing hands of which 27% was farmland.

2015 Land Transactions Graph

Five of the seven counties in SW Wisconsin saw an average price per acre increase when comparing the 3rd and 4th quarters. Sauk County’s average price per acre was down slightly due to buyers closing on larger parcels which usually effects a lower $/acre price. Lafayette County also averaged a lower sale price due to the sales being predominately recreational land rather than farm land. When studying the individual transactions in these two counties they show a steady to strengthening market.

During the 4th quarter SW Wisconsin had low property inventory. A good number of nice properties were sold and not many new listings came on the market. This tight market should push prices upward and encourage potential sellers to put their property on the market.

SW Wisconsin Rural Land Sales 2015 in Review

 12 month Review
2015 2015 2015 2015
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
# of transactions 30 37 36 42
# of acres sold 2272 3162 3670 3377
% of acres tillable 44% 37% 23% 27%
average $/acre $3,502 $3,947 $3,308 $3,133
 …
Avg $/acre 2015 2015 2015 2015
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Grant $3,228 $3,387 $2,339 $3,026
Iowa $4,778 $5,649 $3,451 $3,855
Lafayette $4,726 $6,364 $6,364 $3,475
Sauk $3,589 $4,098 $3,737 $3,570
Richland $2,591 $2,415 $2,382 $2,582
Crawford $2,684 $2,592 $2,549 $2,677
Vernon $2,914 $3,127 $2,337 $2,745


Land as a Long-Term Investment
Now that we are through the recession years, it is interesting to look back and see how far the land market has come. The average price per acre in Southwest Wisconsin has gone up 16% over 5 years. For those savvy enough to buy at the bottom in 2012, the average investment has increased in value about 18.5% over the last three years.

 5 Year Review – SW Wisconsin
2011 2012 2013 2014 2015
Avg $/acre $2,996 $2,929 $3,114 $3,260 $3,473


If you would like a more detailed land market report for your area (free), visit www.WisconsinLandValues.com for instructions on how to order.

Buyers and sellers need to be aware that average sale prices are only a general guideline. An on-site property evaluation by an experienced land agent is needed to give you an accurate picture of what a property is worth in the current market. To learn more about the rural land market in Southwest Wisconsin, begin your search here: Southwest-Wisconsin-Real-Estate.com

SW WI Land Market Strengthens 4th Quarter 2015-2

*SW Wisconsin includes Grant County, Lafayette County, Iowa County, Sauk County, Richland County, Crawford County, & Vernon County. All data was taken from the SCWMLS & WiREx. Because this article was intended to review the rural land market, properties smaller than 20 acres, residential, and commercial land sales were not included.

Land Market Hits Pause: SW Wisconsin Land Market Update

After a record-breaking price gain during second quarter this year, the land market has paused to take a breath. The average price-per-acre for rural land in southwestern Wisconsin during the third quarter this year dropped 16% compared to second quarter ending up at $3,308/acre. In studying the details I find that this lower average price is (in most cases) a reflection of the type of properties that were sold during third quarter rather than a drop in value. The average parcel size was larger and the percentage of tillable land was significantly lower which affects the final $/acre in a transaction.

This plateau in the market follows the 2014 trend of higher prices during the first half of the year followed by a third quarter drop. If the market continues to follow last year’s trend we will see a nice price recovery in the fourth quarter. Current market activity indicates this is quite possible. The number of transactions during the third quarter remains fairly high at 36 as well as the number of acres sold at 3,670 (second quarter saw 37 transactions in which 3,162 acres sold).

3rd Quarter 2015 Land Price Trends chart

Iowa County and Grant County felt the strongest price correction which is likely due to larger parcel sizes and mostly recreational land being sold (and very little agricultural land.) Vernon County also felt the pinch with a 25% drop in the average price. One possible factor there could be the sale of several tracts of land with conservation easements which tend to hamper the value somewhat. The remaining four counties held the line on price in which any price changes can be attributed to the type of properties sold.

Average Price-per-acre by County

Avg $/acre 2014 2015 2015 2015
4th Quarter 1st Quarter 2nd Quarter 3rd Quarter
Grant $3,041 $3,228 $3,387 $2,339
Iowa $3,592 $4,778 $5,649 $3,451
Lafayette $5,820 $4,726 $6,364 $6,364
Sauk $3,190 $3,589 $4,098 $3,737
Richland $2,558 $2,591 $2,415 $2,382
Crawford $2,842 $2,684 $2,592 $2,549
Vernon $3,154 $2,914 $3,127 $2,337


If you would like a more detailed market report (free), visit www.WisconsinLandValues.com for instructions on how to order.

Buyers and sellers need to be aware that average sale prices are only a general guideline. An on-site property evaluation by an experienced land agent is needed to give you an accurate picture of what a property is worth in the current market. To learn more about the rural land market in Southwest Wisconsin, begin your search here: Southwest-Wisconsin-Real-Estate.com

*SW Wisconsin includes Grant County, Lafayette County, Iowa County, Sauk County, Richland County, Crawford County, & Vernon County. All data was taken from the SCWMLS & WiREx. Because this article was intended to review the rural land market, properties smaller than 20 acres, residential, and commercial land sales were not included.
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