If you have questions that you do not see here, feel free to contact us, and we will help you find answers.
How can I finance land in the country?
Should I always get a new survey on property I buy.
Who should pay for the survey?
Are the mineral rights the same thing as the royalty interests?
How much do I have to pay down?
Are there any tax advantages to owning land and cattle?
Does having a horse on the property qualify it for Ag Use Exemption?
Does raising exotic animals qualify for Ag Use Exemption?
What is the normal commission charged by an agent for selling my property?
What is a 1031 tax deferred exchange of like kind property?
Q: How can I finance land in the country?Return to Top
A: Most local area banks are happy to finance land within their county and get new customers. It is wise to have your bank or mortgage company pre-qualify you for a loan before you look for land.
Q: Should I always get a new survey on property I buy? Return to Top
A: If you want to obtain title insurance, you will have to provide a recent survey to the title company and if you are financing with a bank or mortgage company, they will also require a recent survey. If there is a survey that was dated within the past 2 years or so, it will probably satisfy lenders and title companies. Older surveys may have to be re certified by the original surveyor. This can be done with less expense than a new survey if most of the information is still current.
Q. Who should pay for the survey? Return to Top
A. Many things in a contract to purchase property are negotiable and this is one of those items. Sometimes the cost is split. Sometimes the survey is offered by the seller. Sometimes the buyer pays for the survey and this is a cost associated with the purchase and should be added to the buyer's basis in the property for future tax purposes.
Q. Are the mineral rights the same thing as the royalty interests? Return to Top
A. NO they are two different things. To put it simply, the Mineral rights come first and can be severed from the surface rights. The owner or owners of the mineral rights hold the right to negotiate the terms of oil and gas leases with companies who drill and produce the product. These are also called Executive Rights. Sometimes one person in a family is given the executive rights so the oil companies only have to contact one person and that person represents several others who own the remainder of the mineral rights. Sometimes each of the owners of the mineral rights must agree before a lease can be executed. All the mineral owners share in the money paid by the oil company for the lease (often called Bonus Money) based on their percentage of ownership of the whole. Many times these are separated into fractions with numerous owners. The Royalty owners get the money if the Oil Company actually makes a well that produces income according to their percentage share of the mineral rights and the terms of the lease agreement. Sometimes sellers retain the royalty interest in certain production for a period of time but transfer the mineral rights with the sale of the surface. These are basic and general answers. Go to the Texas Railroad Commission for more detailed information or contact an attorney who specializes in mineral rights.
Q: How much do I have to pay down? Return to Top
A: That is best answered by the lender, but in general you can expect to pay 25% to 30% of the purchase price as a down payment for raw land. If there is a home on the property and it is the major portion of value, then the mortgage companies have a variety of products ranging from a minimum of 5% down to as much as you want to pay. They usually offer the best rates on loans with at least 20% down. Terms and rates should be discussed with your banker or loan officer prior to looking for land so you know what price range to search for with your agent. You can be pre-qualified for land just like you can be for a home in town and it helps if the seller knows you can perform if he says yes to your offer.
Q: Are there any tax advantages to owning land and cattle? Return to Top
A: Talk to your accountant or the IRS about possible advantages when filing income tax forms, every situation is different. Local property taxing authorities often give Agricultural Exemptions on property used for Ag purposes such as cultivation of crops, grazing cattle, and other Ag activities like wildlife preserves and open land exemptions. Most land must qualify by having a 5 year history of Ag use. Your agent should be able to provide information about whether the land has been tax exempt for Ag use in the past. You must File an application with the county tax office when you purchase the land if you want to continue the exemption after you close your purchase.
Q: Does having a horse on the property qualify it for Ag Use Exemption? Return to Top
A. Not always. Different counties have different rules for granting Ag Use Exemptions. You should contact the county tax office for a list of qualified uses in that particular county.
Q: Does raising exotic animals qualify for Ag Use Exemption?Return to Top
A: See answer above.
Q: What is the normal commission charged by an agent for selling my property? Return to Top
A: The commission is negotiable and depends on the amount of service the agent will provide, difficulty of sale, dollar amount of sale, location of property, and many other factors. The fees should be understood and put in writing so everyone knows what to expect up front.
Q: What is a 1031 tax deferred exchange of like kind property? Return to Top
A: Most agents are familiar with tax laws and the conditions to qualify under the IRS code for tax deferred exchanges, but are not accountants or tax consultants, so you should seek advice from a professional who specializes in tax law. The general explanation is that if you want to sell one property or package of properties and buy or obtain another like kind property, you can avoid paying taxes on the gain of the sale of the first property by reinvesting your proceeds in the new property. The law states that you must identify the new property within 45 days of the closing of the sold property and you must take possession and close the new property within 180 days from the date you closed on the first property. There are many variables in this exchange and the basis you had in your first property will transfer to the new property so keep good records of your purchase, capital improvements, and costs of sales so you always know your true basis. The term 'like kind' has a wide variety of applications so check with your accountant. You may be able to exchange an apartment house for a ranch, but certain conditions apply, so check it out first.