When it comes to selling the farm to your kids, a lot of factors go into finding the right price
What is the price of your farm? While you may have an easy answer to this question if selling to an unknown buyer, your answer might change if you plan to sell to your kids or other relatives.
Reg Shandro, owner of Farmacist Advisory Services Inc. in Lacombe, Alta., is a qualified mediator who works with farm families in areas such as succession planning. He often helps families address the topic of selling the farm to the next generation.
“The gold lies in the mediation process and getting everybody to sit down to talk about what market value or the agreement is,” Shandro told Farms.com.
The first piece that needs to fall into place for farmers looking to sell the farm to their kids is to have a willing participant. Then, when the time is right, everyone should meet and discuss what the price could be, said Shandro.
“When I sit down with farm families, (some) founders make the statement 'Oh, (my kid is) going to pay for everything and he or she is not going to get gifted anything. He or she is going to have to earn it all.' Well, my answer is ‘Then we don't have a succession plan because if the successor has to pay for everything, there's no way (the operation) will be viable and sustainable,’” he said.
Families must have some give in this situation. One option is to consider the time and effort the potential successor has already put into the farm, said Shandro.
“Otherwise, that successor is buying it twice. Buying it once with his or her efforts, and the inflationary increase of that asset. Then he or she is buying it again when the farm transfers with the agreement,” he said.
Families must also consider what the farm operation can afford.
In the discussions, participants should remember that each party will have to sacrifice, said Shandro.
“Ultimately, you're working towards collaboration, meaning a win-win for everybody. But often you must work towards a compromise where there's a win and a bit of a loss position for each party,” he said.
Shandro aims to get both parties into this collaboration spot and to ensure they are the ones who make the final decisions.
“People want me to make decisions for them. Then, they can they can blame or put onus on that guy who came in and said we should do this, especially if it matches their perspective. But my process is more sleuthing it out amongst the parties,” said Shandro.