Dear Real Estate Adviser,
I am a 72-year-old retired widow who lives about 20 miles from town on 5 acres. It is getting harder for me to maintain my land. Is the market up where I might be able to sell?
— Geri A.
The market is improving, but it’s impossible to predict the most suitable time to sell because every region is unique, and sales are driven by different factors. Existing-home sales have risen consistently in many regions in 2012, interest rates remain low, real estate agents believe a sustainable recovery is finally on the horizon, and we see that job and consumer-confidence numbers are improving. In other words, the industry largely believes the bottom was finally reached, and we’re now beginning that slow climb back. Those are all encouraging signs, but prices remain low for now. Hence, it’s probably a pretty good time to buy but not necessarily a suitable time to sell.
However, there’s no reason to delay your initial marketing efforts. Why not put the land — and house if that’s included — on the market immediately at “next year’s prices,” and if you fail to muster an acceptable offer, you can always try again in the fall or early next year.
But I don’t advise trying to sell the property yourself in your circumstances. Interview at least three real estate agents, and be sure to find one who’s experienced at selling rural properties and who is willing to exhaust all potential marketing possibilities, including multiple Internet listings, print media, virtual tours, open houses, direct mail and e-fliers, and even real estate TV networks. Out-of-state buyers make up a surprisingly large segment of rural-land buyers, so be sure your agent explores that possibility.
You don’t say if you want to separate your house from the sale parcel and remain living there, though you imply it. Realize that selling the land and not the house might compromise your eligibility for a capital gains tax exclusion. There are ways to package land into a tax-free portion of your estate in many cases, and an accountant or estate agent can help you structure the sale strategically. Note this, too: Historically low capital gains taxes remain in place, though that could change should a future Congress start seriously looking at new revenue streams to balance the budget.
From the sound of it, your parcel already has access to power, water and other infrastructural necessities that buyers would want. But it is the location of your land that will ultimately dictate its selling and building potential, especially for a home builder who may be targeting such acreage for potential home construction. Depending on where you live, such buyers would have to gain approval from a planning and zoning commission or city council, or both, before consenting to buy property with the aim of redeveloping it. This can take time, which is all the more reason to get some feelers out right away.
If you retain the mineral rights, particularly in an area where natural gas or other desirable below-ground energy sources are abundant, that can be a big plus in a sale if you include those rights. Before doing that, try to determine, with the help of your agent, how much those rights are worth and whether you’re best off hanging onto them. Before putting the place on the sales block, you should consider hiring a professional appraiser to determine the separate values of the land and the house. Yes, I know that hiring the old triple-As (agent, appraiser and accountant) will eat into your proceeds, but using such pros is a lot less risky than making a blunder that will cost you much more money in the long run in your retirement.
In short, there no reason to not get a feel for the market right now. Good luck!
Ask the adviser
To ask a question of the Real Estate Adviser, go to the “Ask the Experts” page and select “Buying, selling a home” as the topic. Read more Real Estate Adviser columns and more stories about mortgages.