When you are buying a property with an open space valuation (i.e. agricultural, timber, wildlife or Ecolab) there are important questions to ask the seller. Many buyers and their agents treat the open space valuation as an afterthought. They just assume that the open space valuation is in place and don’t ask the right questions as part of the due diligence period. Here are ten questions that are essential to ask:
1. What type of open space valuation do you have on your property?
2. How long have you had an open space valuation on the property?
3. Do you have an agricultural valuation on the property? If so, please provide me with a copy of your lease.
4. Do you have a wildlife management valuation on the property? If so, please provide me with a copy of the wildlife management plan.
5. When is the last time you applied for an open space valuation?
6. Can you provide me with copies of your latest open space valuation application?
7. Has the appraisal district inspected the property in the last couple of years?
8. Has your open space valuation been denied in the last five years?
9. What have you done in the last five years to maintain your open space valuation?
10. Can you provide me with copies of any documentation of maintaining your open space valuation?
This may seem like over-kill – asking too many questions may destroy the deal. But, here’s why it is so important. A new buyer has to re-apply for their open space valuation and the form submitted to the appraisal district requires you to demonstrate how the property has been used for the past five years. So, if you don’t ask for the information as part of your due diligence and prior to closing, it may be difficult to provide the appraisal district with accurate information. Prior to closing, the seller is motivated to answer your questions and provide you with additional information. After closing, it’s your problem.
By asking questions, you may find out that the seller took the livestock off the property months ago to prepare it for sale and this could jeopardize the agricultural valuation. If a seller is leasing the property, then they may not know about the agricultural history of the property because someone else is taking care of it. You should ask to talk to their lessee so that you can understand how the property has been used for agriculture.
You should also call your local appraisal district and ask if they have any concerns about the property qualifying for an open space valuation. But, don’t take their word for it. Do your homework. For many buyers, the ability to continue an open space valuation on their new property is one of the major factors in deciding whether or not to purchase a property.
To learn more about the steps to take in purchasing rural real estate, please give Cassie Gresham a call at 512-894-5426.