Missouri Farm and Land Real Estate - Leon R Miller Co

  Two years ago, a Warren County land owner asked me to appraise his property for the purpose of listing.  After a thorough study of the market, I gave him my written report that concluded his  land would sell in the range of $2,400 - $2,600 per acre.   He disagreed and few days later he listed with another real estate broker for $3,800 per acre.  One year later he had received no offers, but he relisted with the same broker at $3,400 per acre.  Finally, after two years when the property had not sold, he called and we agreed to a listing price of $2,800 per acre. 

Within a few weeks, we obtained a buyer and he signed an all cash contract with no contingencies at $2,500 per acre. The sale closed 30 days later.  At the closing, I was surprised when the seller complained that the value of his land had dropped $1,300 per acre in two years!  I reminded him of my report of two years earlier and that the selling price was within our reported range.  The only decline was his unrealistic expectation of $3,800 per acre.  The fact that he found an agent who agreed to list the land at this unrealistic price, did not change the value.   

A residential real estate broker told me of a similar incident.  The prospective seller told the agent that her home was worth at least $350,000 because the neighbor’s home had sold for that amount.  The agent explained that the neighbor had remodeled the kitchen and had a finished basement.   The agent agreed to list at $350,000.  At the end of 30 days, the seller agreed to lower the asking price and 45 days later the home sold for $310,000.   The residential agent said that at closing, the seller continued to believe her home to be worth as much as the neighbor’s, but she rationalized that the down turn in the housing market had forced her to sell for less.   

Several years, I sold a farm that three brothers and three sisters had originally inherited from their parents in 1968. In 1975, one of the sisters died.  She was a widow and her three children (we knew of only two at the time of the sale) inherited her 1/6 share ownership of the farm.  A second sister died in 1984.  At the time of her death, she was  married and had two children - a son and a mentally disabled daughter.  In 1990, her husband died leaving his entire estate (which he believed included his wife’s 1/6 interest in the farm) to the son who was caring for his sister.

We listed the property in June.  By early August, a contract had been signed and the closing was set for September 1st.  The Title Company requested a copy of all divorce decrees from the three sellers who had been divorced and remarried.  One of the decrees showed that an ex-wife had not signed the proper documents at the time of the divorce.   Legally, she had an interest in her husband’s inheritance.  After a few tense days for the ex-husband, she signed a quit claim deed that gave up any interest she might have claimed to the property.   

Next, the Title Company determined that one of the dead sisters had three children and not two.  The third child, his wife and family were in the Federal Witness Protection Program. Two weeks later with the help of an anonymous source, I found him. He and his wife agreed they would sign the deed, but the time and place would be determined later and I was to be ready to meet on a very short notice. Then a major problem surfaced! The Title Company discovered that the second sister died without a will. This meant that her husband inherited only one-half of his late wife’s interest in the farm and their two children had inherited the other half.  The intent of the parents had been for the son to receive 100% of the mother’s interest in the farm for taking care of his mentally disabled sister.   Now the brother learned that legally he was entitled to only 50% of his mother’s interest in the farm.  Since he was not his sister’s legal guardian, the Court would have to appoint a guardian to represent her in the sale of her share of the farm.   Furthermore, the brother would have to go to Court against his sister’s guardian to establish who was to get the heir’s share of the farm.   An attorney was appointed to act as a guardian for the sister.  The Court ordered that the mother’s interest in the farm be appraised as of the date of her death in 1984.   Because I had been selling the land in the area since 1967, the Court accepted my appraisal of the property.  Then, nothing seemed to happen.Sixty days had passed since the scheduled closing and no one seemed to know when the Court would make a final decision.  The sellers were becoming concerned.  Suppose another heir died before the sale was closed?  Or, what if one of them became ill and could not act on their own behalf?   They wanted to close the sale as quickly as possible.  I offered a suggestion to the Title Company and they agreed. The Title Company would close the sale.   All of the  owners would get their share and the Title Company would hold the disputed 1/12 share in an escrow account. Once the Court made a decision, the Title Company would pay the money to whom the Court designated. The sale closed in December - 90 days after the scheduled closing. Three months later the Court ruled that 1/2 of the mother’s share of the farm (or 1/12 of the sale proceeds) would go to the brother as the parents had wished. But, by this time it didn’t matter to the brother. Here’s why: the 1/12 disputed share of the sale was $15,580. The Court costs and legal fees amounted to $14,250

  When I was a young kid, I knew Uncle Charlie.  He seemed like an old man then, but when you’re eight years old, everybody over the age of 50 is old.   In those early years, Uncle Charlie worked for my dad and other farmers in the area.  These men were referred to as the “hired hands.”    

Uncle Charlie was born in 1898 on a farm in southern Illinois.  He farmed with horses from the time he “could follow a plow.”  Years later, those who knew him said he was one of the best ever with a team of horses.    Funny what you remember as a kid.  I recall that Uncle Charlie couldn’t bend the pinkies on each hand.  I was told that his fingers got caught in the reins of a runaway team.  Uncle Charlie couldn’t read, but he would look at pictures in the farm magazines.   Sometimes he would ask me to read to him if the picture showed new farm equipment.  Then he’d mumble something about how nothing would ever take the place of a good team of horses.  Uncle Charlie “was set in his ways.”  Dad tried to teach him to drive a tractor, but it always ended in disaster.  The last time Uncle Charlie  drove a tractor, it went through a woven wire fence.   Most of us conclude that Uncle Charlie was too stubborn to enter the farm mechanization age.  So, Uncle was relegated to doing only manual labor.   He was a hard worker and never complained.  He could walk all day cutting weeds out of beans.  But when herbicides were introduced, that job was eliminated.   As farmers reduced their cowherds, less hay was baled which eliminated the manual labor associated with baling hay.  Even cutting weeds along the roadside was eliminated with power mowers. Uncle Charlie’s labor had little value to others as he was being replaced by modern farming methods. 

I hadn’t thought of Uncle Charlie for several years until the other day when I was having coffee with Larry, a real estate broker I hadn’t seen in years.  I mentioned how effective my website had been in selling land.  Unimpressed, Larry countered with: “I don’t have a computer, don’t know how to use one, and don’t plan to learn.  If buyers wanted to buy my listings, they can find me just like they’ve found me for the past 30 years.”    Later, he complained of having fewer listing and fewer buyers than he had ever had. I thought how Larry and Uncle Charlie were so much alike.  In today’s business, there is a big difference between learning experiences and just experiences.  Uncle Charlie and Larry have experiences but they quit having learning experiences.  Real estate brokers who have been in business for a number of years use their years of experience as a reason why people should deal with them.  The question is: Do they have 30 years of learning experiences or do they have one year of experience repeated 29 times? 

None of us would go to a dentist if he was using the same dental equipment today as he did 30 years ago.  Then why should we expect less from a real estate broker if his marketing methods are the same today as they were 30 years ago? 

   Under traditional real estate, when two brokers are involved in a transaction, the seller’s agent shares a portion of the real estate commission paid by the seller with the cooperating agent.  And of course, the higher the price paid by the buyer, the larger the commission to be split between the agents.  This fact alone is why the seller is due a fiduciary duty and the buyer is due something less. 

 A few years ago, efforts began to promote the “buyer agency” so the buyer would receive as equal representation as the seller.  State laws and regulations were passed and many real estate agents now claim to be representing buyers, but do they?

The Problem:  In the real world, any transaction where the real estate commission is paid by the seller, even the buyer’s agent wants to make sure that the seller likes the deal, if he is to get paid.  The buyer agent is mentally representing the seller.  The buyer wants his agent to negotiate the lowest price possible, but to do so means the agent will make less commission.  The buyer agent’s objectives and the buyer’s objectives are conflicted.  

So what law, regulations or disclosure is going to persuade the buyer agent to negotiate for a lower purchase price that will result in a small commission check? Unfortunately, no rules can change human nature. 

The Solution:  As long as the buyer agent’s income is from the seller and that income is based on a percentage of the purchase price, buyer can never be assured they have the representation that state laws and regulations were intended to give them; therefore, the method by which buyer agents are paid must be changed.  Buyer agents need to be paid by the buyer and that fee should be a flat fee rather than a commission or percentage of the sale.  

Buyer agents cannot expect a buyer to pay unless they provide a complete service.  A complete service would include calling expired listings, contacting for sale by owner, and searching out new listings before they are placed on the multiple listing service.    When this occurs, the laws of the State and the laws of human nature will provide buyers with the same representation as presently received by sellers.   

 The other morning I was meeting with two lawyers and their stockbroker.  One of the lawyers asked the stockbroker, “Well, how did we do yesterday in the stock market?”  The stockbroker gave a self-assured response by referring to the market being down based upon the DOW, the NASDAQ and the S&P indexes.

Then one of the lawyers asked me,  “What is the real estate market doing?”   I responded,  “Are you asking about farmland around Bowling Green or hunting ground around Fulton?  And, if you’re asking about Centralia, are you asking about north or south of Centralia?  And, as far as hunting land, are you asking about hunting ground south of Fulton or west of Fulton?  What size tracts are you asking about?  To which market are you referring?”  Then I explained that unlike the stock market, there is no “national” real estate market.  And if there were, it would be meaningless.  Here’s why.

No two real estate transactions are ever the same.  Even two identical houses built side by side are not the same because they are in different locations.  Furthermore, the location factor is not the only issue that stops real estate from becoming a recognized  national market.

The stock market is based upon national and international economies while the real estate market is based upon the local economy.  For example, economic changes that affect Microsoft stock will change the value of Microsoft all over the world.  In real estate, economic changes in Chicago that affect the local real estate market have no direct effect on the real estate market in Troy, Missouri, or in any other part of the world.  Changes in interest rates are probably the only issue that affects real estate on a nationwide basis and even there we find exceptions.

Even though real estate cannot be expressed as a national market, people still refer to the real estate economy by using nationally-based statistics.  While the statistics are attention-grabbing, they do not reflect the economic differences of each local real estate market. 

Furthermore, the nationally-based statistics do not recognize the uniqueness of each home, commercial building and/or parcel of land within that local economy.  In other words, these national, state and even county statistics are worthless to a buyer and/or seller.

So this is why when I’m asked, “What is the real estate market doing,” I respond with, “To which real estate market do you refer?

On June 26^th, I was driving by the Bade Brothers Farm just west of Warrenton as they were harvesting wheat.  

Top picture - The combine has a 30 ft header which means that under normal conditions they can harvest 15 acres an hour or about 750 bushels.  (Now compare that to the “good ole days” when the combines had a 6 ft header and it would take at least 5 hours to harvest the same amount of acres while getting less yield per acre.) 

Middle picture - Once the bin on the combine is nearly full, the grain is augered from the combine to the wagon parked at the end of the field. 

Bottom picture - The grain is being augered from the wagon into the truck.  The truck will haul the grain to the local grain elevator.  Since several farmers are hauling grain to the same elevator at the same time, there is usually a line waiting to unload.  The wagon in the field allows the combine to continue to harvest without waiting for the truck to return.   

There are three ways to test wheat to determine if it’s ready to harvest.  

First test - Sight - The top picture taken on June 19^th,  show the wheat heads pointed upward.  When the heads begin bending down,(as shown in the second picture taken on June 25th), then wheat harvest is about ready.  Not all the heads have to be turning  down to start harvest.  In fact, if all are turning down, then the farmer has waited to long and there will be loss at harvest.

Second test - Taste - The farmer crumbles a few heads in his hand, blow off the chaff, and bites down on the kernal.   The lower the moisture content, the harder the kernal. 

Third test - Test for moisture content - A farmer will either field test or have the local grain elevator test the moisture content.   The grain charts show that a bushel of wheat weighs 60 pounds.  That is based upon a 13.5 percent moisture content.   If the farmer believes he can complete his harvest in less than 5 days, he will usually start when the moisture content is down to 15 percent.  Hot a humid summer day, the mositure content can drop 2 - 3 percent

Generally, the grain elevator will charge a dockage for grain with a moisture content more that 15 percent, but if the farmer knows that harvest will take more than 6 days, it makes good sense to take the discount. 

Timing is essential.  When wheat dries below 15 percent, storms may cause field losses as high as 10 bushels per acre and test weight dockage of 50 cents per bushel.  That  could be as much as $50 to $80 per acre income loss.  

 Instructions:

1.      Installl EasyGPS (FREE);  www.easygps.com

2.   Open Property GPS Waypoints found at each property. 

3.   The file will appear a computer read out.     Just save it to your   computer but name it by adding  .GPX TO THE FILE NAME (example: AC31.gpx);   You must do this to get the correction  extension.

4.   Store file on your computer. 

5.   Now open the file from your computer.  You’ll see the computer printout has been transformed in to the property boundaries.  In some cases, we have added other landmarks such as locations of deer stands, cabins, etc. 

 If you have one of the GPS systems supported by www.easygps.com , then follow the instructions and download  to your hand held PGS.  Now have fun finding the corners while viewing your future investment.   (A feature found only at the Leon R. Miller Co website)

PLEASE NOTE:  Only a survey by a licensed surveyor can located the actual corners. 

can sure smell sweet When the wind comes right behind the rain.”

From the Musical Oklahoma

June 18^th – Wheat Field in Montgomery County, Missouri – In 2006, Missouri was twelfth in the nation in wheat production.  That year, 1 million acres of Missouri farm land was planted in wheat with a total estimated value of  $174 million dollars.    

June 20th - This field of beans is just off I-70 near Williamsburg. In a normal season, these beans would be at least 6 inches tall by this time, but the planting was delayed by unusual spring rains. Corn stalks from last year can be seen. Another sign of good conservatin practices by today’s farmers.  I’ll tell you why later.  Stay in touch.

The same field as above on July 23, 2008.  

Soybeans are setting on their blooms