The Ultimate Farm and Ranch Real Estate Glossary
Unlocking Real Estate Jargon
Key Real Estate Terms for Buying and Selling Farms and Ranches
1031 Exchange: Named for its section in the tax code, a 1031 Exchange allows investors to defer capital gains taxes when selling a property and reinvesting the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.
Acre: A unit of land area that is commonly used in the U.S. and other countries that do not use the metric system. It is equivalent to 43,560 square feet.
Agribusiness: A business that earns most or all of its revenues from agriculture. An agribusiness tends to be a large-scale business operation and may dabble in farming, processing, and manufacturing and/or the packaging and distribution of products.
Agricultural Easement: A non-possessory interest in land that limits the use of the land for agricultural purposes.
Amendment: A modification or change to an existing document or agreement, often used in real estate contracts.
Appraisal: A valuation of property, such as real estate, a business, an antique by a professional appraiser.
Arable Land: Land capable of being ploughed and used to grow crops.
Beneficiary: In the context of real estate, this is the person who receives or will receive benefits from a particular entity (like a will or a trust).
Capital Gains Tax: This is a tax levied on profit from the sale of property or of an investment.
Closing Costs: These are fees and expenses, over and above the price of the property, that buyers and sellers normally incur to complete a real estate transaction.
Comparable Sales: Often referred to as “comps,” these are recent sales of similar properties in nearby areas that are used to help determine the current fair market value of a property.
Conservation Easement: A type of agreement that limits certain types of uses or prevents development from taking place on the land in perpetuity while the land remains in private hands.
Cultivated Land: Land that has been prepared for crops by tilling or plowing.
Deed: A legal document that represents property ownership.
Deed of Trust: A legal document by which the title to property is transferred to a third-party trustee as security for a debt owed by the borrower.
Down Payment: An upfront payment made in the context of buying property, often expressed as a percentage of the total purchase price.
Due Diligence: The research phase before a business transaction where the interested party seeks to understand all risks, liabilities, and potential opportunities. In real estate, this often involves surveys, inspections, and a title search.
Easement: A legal right to use another person’s land for a particular purpose. For example, the municipal water company may have an easement to run water lines across a private property.
Eminent Domain: The power of a government or its agent to expropriate private property for public use, with payment of compensation.
Equity: The amount of money a property owner would receive if they sold the property and paid off the mortgage.
Fair Market Value (FMV): An estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market.
Farm Management: The process of making business decisions about the production and marketing of agricultural products.
Grazing Rights: The right to graze livestock on public land.
Land Management: The process of managing the use and development (in both urban and rural settings) of land resources.
Land Tenure: The legal regime in which land is owned by an individual, who is said to “hold” the land.
Land Use Planning: A planning technique to improve the quality of life in urban and rural settings by influencing the distribution of people and activities.
Legal Description: A written statement recognized by law as to the absolute location and boundaries of a parcel of land.
Pasture: Land covered with grass and other low plants suitable for grazing animals, especially cattle or sheep.
Power of Attorney: A legal document giving one person the power to act for another person, it can offer broad powers or limited powers.
Purchase Agreement: A legal document outlining the terms and conditions of a real estate transaction between a buyer and seller.
Real Estate Broker: A person who represents sellers or buyers of real estate or real property.
Survey: A precise measurement of a property‘s boundaries and land features.
Title: A legal term for an owner’s interest in a piece of property, often evidenced by a deed.
Title Insurance: Insurance that protects the holder from financial loss sustained from defects in a title to a property.
Zoning: A legal mechanism by which local governments control the development and use of land.
This real estate glossary is meant to help you understand important concepts when it comes to buying or selling farm and ranch real estate. Also, let us know if you have a term you think we should add to this real estate glossary!