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WHAT TO DO ABOUT TAX WHEN YOU BUY A HOUSE FAQ's Select a FAQs Category Capital Acquisitions Tax Capital Gains Tax Employer Information Corporation Tax Customs & Excise Revenue Audit Value Added Tax (VAT) Vehicle Registration Tax What to do about Tax when you buy a house Do I need to tell the tax office if I buy a house? Can I claim tax relief on my mortgage? What is a sole or main residence? To help with the mortgage repayments, I intend letting part of my house. What tax relief can I claim against my personal income tax and against the rental income? Does residence only mean a house? Can I claim tax relief on a loan for home improvements? What can the loan be used for? How much tax relief will I get? How can I claim the relief? If I sell my house will I have to pay Capital Gains Tax? What happens if I had let part of the house or used part of the house for business purposes? What happens if my property has "development value"? 1. Do I need to tell the tax office if I buy a house? Yes - you should inform the tax office as soon as possible so that all correspondence can be sent to your new address. » Back to Top 2. Can I claim tax relief on my mortgage? Yes - if the house is situated in the State, Northern Ireland or Great Britain and is used as your sole or main residence. » Back to Top 3. What is a sole or main residence? A sole or main residence is the residence which is your home for the greater part of the time. It does not have to be owned by you e.g. your parents residence may also be your sole or main residence, if you normally live there. » Back to Top 4. To help with the mortgage repayments, I intend letting part of my house. What tax relief can I claim against my personal income tax and against the rental income? In this situation, part of the mortgage interest may be claimed as a normal interest credit against your personal income tax. However, the balance of the interest may not be claimed as a rental deduction. The mortgage interest applicable to the let part of the house will be determined on a just and reasonable basis. For example, the apportionment of the interest may be by reference to the number of rooms let. » Back to Top 5. Does residence only mean a house? No. It also includes: A flat Any garden or grounds of an ornamental nature which are used along with the house or flat A Mobile Home/Caravan - provided it: Is on a permanent site Is of a reasonable size to fulfill the requirements of use as a permanent residence Has electricity and other services supplied to it Is immobilised (i.e. wheels removed and mounted on blocks). 6. Can I claim tax relief on a loan for home improvements? Yes. You can claim tax relief on a loan used by you to purchase, repair, develop or improve your sole or main residence or to pay off another loan (or loans) used for that purpose. » Back to Top 7. What can the loan be used for? The loan can be used for most work done on your sole or main residence except for money spent on furniture or removable fittings (e.g. light fittings, curtains, carpets etc.). Examples of what the loan may be used for are: Extensions, purchase/construction of garage, garden shed, greenhouse etc. Construction of driveway, path etc. Conversions, painting and decorating Installing central heating Rewiring or replumbing (including bathroom suites) Replacing or installing windows Purchase and/or installation of burglar/fire alarms Purchase and installation of bedroom and kitchen units which are affixed to and become part of the building Treatment for damp, dry rot, woodworm etc. Landscaping gardens (including garden walls) Contributions to group water and sewerage schemes. » Back to Top 8. How much tax relief will I get? Tax relief is granted on the amount of the interest paid, at the standard rate subject to the overall limits as set out in Leaflet IT60 (Home Loan Interest Relief - 2000/2001 onwards) . Special provisions apply for "First Time Buyers". The period for which relief is available is 7 years (this does not apply to mortgages taken out before 6 April 1998). » Back to Top 9. How can I claim the relief? From 1 January 2002, tax relief for home mortgage interest is no longer given through the tax system but is instead granted at source. This means that your mortgage lender gives you the benefit of the tax relief element on the mortgage interest on behalf of the Revenue Commissioners. Your mortgage repayment is reduced by the amount of the tax relief. Your lender in turn claims this amount from Revenue. Any future adjustments in the tax relief (for example, arising from changes in interest rates) will be made automatically by the lender on behalf of Revenue. It is not be necessary to claim mortgage interest relief in the annual tax return, and it no longer appears on your Notice of Tax Credits. Borrowers who are taking out new mortgages must complete a TRS1 form. Your lender will supply you with a TRS1 form. Forms can also be obtained from the TRS Section, Collector-Generals, Sarsfield House, Francis Street, Limerick. Further details are available on the Leaflet TRS (Mortgage Interest Tax Relief at Source) . » Back to Top 10. If I sell my house will I have to pay Capital Gains Tax? No. If the house (including grounds of up to one acre) has been occupied as your sole or main residence throughout your period of ownership you will be exempt from capital gains tax on the sale. » Back to Top 11. What happens if I had let part of the house or used part of the house for business purposes? Full exemption may not be due if only part of the house has been used as your residence. In this case an apportionment will be made to arrive at the exempt portion of the total gain and you will have to pay capital gains tax on the balance. » Back to Top 12. What happens if my property has "development value"? Where your property has development value i.e. if it is sold for a price higher than its normal current use value then the relief from capital gains tax as outlined above is confined to what it would be if the property did not have development value. » Back to Top

Buy Property

Amazon.co.uk: Buying a Property in Spain: An Insider Guide to Finding a Home in the Sun: Books BOOK SEARCH BROWSE CATEGORIES SPECIAL OFFERS TOP SELLERS AUDIO BOOKS Paperbacks 3 for £12 NEW & USED TEXTBOOKS HARRY POTTER SELL YOUR BOOKS All Products -Books -Used Books -Collectable Books All Subjects -Art, Architecture & Photography -Audio Cassettes -Audio CDs -Biography -Business, Finance & Law -Children's Books -Comics & Graphic Novels -Computers & Internet -Crime, Thrillers & Mystery -Fiction -Food & Drink -Gay & Lesbian -Health, Family & Lifestyle -History -Home & Garden -Horror -Humour -Mind, Body & Spirit -Music, Stage & Screen -Poetry, Drama & Criticism -Reference & Languages -Religion & Spirituality -Romance -Science & Nature -Science Fiction & Fantasy -Scientific, Technical & Medical -Society, Politics & Philosophy -Sports, Hobbies & Games -Travel & Holiday -Young Adult All Subjects Art, Architecture & Photography Audio Cassettes Audio CDs Biography Business, Finance & Law Children's Books Comics & Graphic Novels Computers & Internet Crime, Thrillers & Mystery Education & Languages Fiction Food & Drink Gay & Lesbian Health, Family & Lifestyle History Home & Garden Horror Humour Mind, Body & Spirit Music, Stage & Screen Poetry, Drama & Criticism Reference Religion & Spirituality Romance Science & Nature Science Fiction & Fantasy Scientific, Technical & Medical Society, Politics & Philosophy Sports, Hobbies & Games Travel & Holiday Young Adult BOOKS INFO At A Glance Reviews Customer Reviews Search Inside! Table of Contents See more by this author E-mail a Friend About This Item Recommendations If you already own this, rate it and improve your recommendations , Not Rated Find a huge selection of books at 30% off Become an Associate Join our Associates Programme and make money from your website! Buying a Property in Spain: An Insider Guide to Finding a Home in the Sun Harry King Search inside this book List Price: £10.99 Our Price: £7.69 & eligible for Free UK delivery on orders over £15 with Super Saver Delivery. See details & conditions . You Save: £3.30 (30%) Availability: usually dispatched within 24 hours. 41 Used & New from £2.95 See larger photo Edition: Paperback More Product Details ~ See Table of Contents Perfect Partner Buy Buying a Property in Spain: An Insider Guide to Finding a... with The Best Places to Buy a Home in Spain today! Total List Price: £22.94 Buy Together Today: £16.05 Customers who bought this item also bought: Buying a Home in Spain 2005 ;Paperback~David Hampshire Going to Live in Spain: A Practical Guide to Enjoying a New Lifestyle in the Sun ;Paperback~Harry King Buying a House in Spain: Where and How to Do It (Buying a House S.) ;Paperback~Dan Boothby Gone to Spain: You Too Can Realise Your Dream of a Better Lifestyle ;Paperback~Tom Provan Living and Working in Spain: How to Prepare for a Successful Visit, Be It Short, Long-term or Forever (Living & Working Abroad) ;Paperback~Robert A.C. Richards Explore similar items ... Product Details: Paperback 256 pages(May 1, 2002) Publisher: How To Books Language: English ISBN: 185703791X Category(ies): Home & Garden , Travel & Holiday Average Customer Review: | Write a review Amazon.co.uk Sales Rank: 96,288 (Publishers and authors: improve your sales ) sign in to turn on 1-Click™ ordering. 31 New from 2.95 10 used from 3.50 Have one to sell? (We'll set one up for you) View my Wish List . Reviews Synopsis This guide to buying a property in Spain offers first-hand advice on where to stay, dealing with estate agents and builders and the types of properties available. It covers building your own home, renovating a ruin, and renting a cosy cottage. From the Author 'After 38 years of corporate life, work was giving little satisfaction. A change was necessary. I wanted to stop work but knew I couldn't simply retire and live happily in the UK. I still needed a challenge. Finally I decided to move to Spain. Why? Because Spain is relatively close to home, it has an excellent climate and the cost of living is lower than in Northern Europe. During my life I've made some good and bad decisions - but coming to Spain was one of the best I've made. I now live in a town house, on the edge of a Spanish village. The back door opens onto a path leading to the mountains. The front bedroom window overlooks the Med only a few kilometres away. The neighbours are all Spanish. It doesn't get much better than that.' See all reviews... New! Search Inside! ( Learn More ) Search inside this book: You can view sample pages from this book. Customer Reviews Avg. Customer Review: Write an online review and share your thoughts with other shoppers! Don't waste your time or money , October 6, 2005 Reviewer: feeMag from Dublin, Ireland I can see how this guy managed to buy a house in Spain. He wrote a book that is padded to the hilt with useless information fo fund it. If you want to know what the weather or the people in Spain are like then you can read about it in this book. The amount of helpful information about buying property in Spain can be found in about 2 pages, information that you would probably find online. Seriously don't waste your money by buying this book, save it for your house in Spain. Was this review helpful to you? 13 of 14 people found the following review helpful: A really practical guide to buying a house in Spain , June 30, 2003 Reviewer: Richard Parker from Bradford, England I found this book very helpful, especially the explanations of all the different legal documents. None of the other books I considered explain the legal documents involved in buying a Spanish property quite as clearly. The sample documents helped me to understand what was asked of me. As somebody who has never dealt with Spanish solicitors and agents before, I was glad to get a low-down on what they do and what to look out for from this book. A really useful book; well done, Harry King! Was this review helpful to you? 18 of 23 people found the following review helpful: Look elsewhere!! , June 4, 2003 Reviewer: Mr N Batcheler from London United Kingdom If you've never been to Spain before, know absolutely nothing about the country, and don't perhaps possess at least a minimal ammount of common sense then you might, just might, find something in this book of some use. Otherwise I would urge you not to waste your time or money by buying this book - I made the mistake so you don't have to! The style of writing is amateurish to say the least, the layout has obviously been designed by someone that's just bought some new software and wants to use all it's features at once, the content is shallow and next to useless as a guide to buying property. All in all I am amazed that this book ever made it into print, it really shouldn't have. I've only given it one star as it's not possible to give none! Was this review helpful to you? 54 of 58 people found the following review helpful: Buying a property in spain , November 9, 2002 Reviewer: mozz43 from Leeds, West Yorkshire United Kingdom If you,like me are considering buying a property in spain,either for permenant living (as i am)or soley for holidays and rental purposes buy and read this book before you do anything else. The book deals with all aspects of buying and all the legal side of a purchase in spain, and all the strange spainsh laws that us English do not understand,such as checking that the property has no debts attatched to it or if you buy and it has YOU are responsable for them. This book is well written,and in most part (not the law side)very easy to understand ,and has informed me of a lot of things i did not know which is very valuable when you are spending a lot of your hard earned cash on a purchase in a different contry with such uncommon laws,i would highly recommend this book if you are considering a place in the sun. Was this review helpful to you? Customers who bought books by Harry King also bought books by these authors: David Hampshire Joanna Styles Guy Hobbs Charles Davey Dan Boothby Look for similar books by subject: Browse for Books in: Subjects > Travel & Holiday > General Subjects > Travel & Holiday > Speciality Travel > Living & Working Abroad Subjects > Home & Garden > Buying & Developing Property > Property Guides Search for books by subject: Economics Housing & property for the individual Legal Reference / Law Profession Living & working abroad Portugal Property Spain i.e., each book must be in subject 1 AND subject 2 AND ... 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Real Estate Investing Newsletter

Real Estate Investing Newsletter - REIClub Free Investing Books, Audios - Click Here to View Receive 5 Free Bonuses! Click Here to Subscribe! Site Navigation Investor Information Home Investing Newsletter Real Estate Articles Success Stories Recommended Reading Free Investing Books Investing Glossary Investing Abbreviations Community Tools Real Estate Chat Room Chat Room Schedule Real Estate Forums Newsgroup Forums Beginners, Carlton Sheets Bird Dogs, Wholesaling Foreclosures, Short Sales Sub2, Lease Options Rehabbing, Landlording Financing, Hard Money Asset Protection, Legal Commercial, Mobile Homes Real Estate Marketing Product Catalog Best Sellers All Investing Products Real Estate Audios Real Estate Books Real Estate Courses Real Estate Ebooks Real Estate Forms Real Estate Software Real Estate Videos Course Specials Investor Services Miscellaneous Real Estate Seminars No Risk Guarantee Investor Resources Real Estate Clubs Cash Flow Clubs Hard Money Lenders State Property Codes Tax Appraisal Districts Investor Referrals Business Tools Real Estate Forms Investor Network Ads Real Estate Classifieds Site Information Advertising Rates Advertiser Login Link to REIClub Contact REIClub Real Estate Investing Newsletter 5 FREE BONUSES FOR SUBSCRIBING TODAY: (Only While Authorized) Stay Informed! Web Site Updates Twice Per Month! Don't Miss New Articles, Products, Tools, Events, etc. 1.) Ebook == Buying Homes in Nice Areas With Nothing Down (288 pages) 2.) Ebook == A Special Introduction to Real Estate Investing (112 pages) 3.) Report == Tax Lien and Tax Deed Investing Fundamentals (17 pages) 4.) Ebook == Jobbing: How to Be a Real Estate Bird Dog (119 pages) 5.) CD == 10 Things You Must Know Before You Buy Real Estate Enter Full Name: Enter Email Address: Privacy is important to us; therefore, we will not sell, rent, or give your name or address to anyone. At any point, you can select the link at the bottom of every email to unsubscribe or to update your personal subscription information. Testimonials I just wanted to let you know that this information is very helpful to me. I am learning things through your emails that I don't have the time to learn by going to the library or even through researching on the Internet. While I am at work I can review the information, print it and read it again on the way home from work or later that night and even refer back when getting ready to make an offer. Thanks for taking the time to do this. I pray God blesses you with a harvest that you don't have room to contain for the seeds you are planting in my life and in the lives of many others. Oleta S. Tennessee Pennsylvania   I am a beginning investor in California. I am 25 years old, and very new to the RE game. I am constantly trying to absorb any information I can, and have found your newsletter invaluable. I have only been subscribing a short time and have already picked up several great tips and cultivated some good ideas using the information in the newsletter. Just had to say thank you, you guys are GREAT! Angie Bragg California   I just wanted to thank you for the very informative newsletter. Number one.. it pertains to the TEXAS investor with some of the information. Number two...I really enjoy the tips every month. Whether you are full time or part time we all forget those little gems that will equal CASH. Thanks for a great newsletter. Dee Henderson Texas   Add Testimonial Privacy | Terms of Use | View Cart 2002-2004 All Rights Reserved. REIClub.com

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property Sheffield property in Sheffield to rent house rent gumtree.com > Sheffield > Flats to rent > Flat / house to rent -- Search for: Price: pw -- -- How does this work? Sheffield rent - houses / flats for rent post an ad edit/delete an ad | repost an ad | subscribe free | unsubscribe | What is RSS? Bookmark this Page Thursday 8th December 126pw 2 bedroom house wanted (Sheffield area) Available 07/12 Wednesday 7th December 45pw 1 Room To Rent (Near Netto n City Center) (sheffield) Available 24/12 Tuesday 6th December 45pw Room available in 4 bed house in Walkley (Walkley) Available 01/12 Monday 5th December 150pw 15th Century Cruck Cottage for rent (Stocksbridge) Available 01/01 Sunday 4th December 92pw Flat to rent (Heeley) Available 04/12 92pw 3 Bed-Semi to Let (Kimberworth) Available 03/12 60pw Double Bedroom City Centre (abbeydale road) Available 03/12 Wednesday 30th November 72pw Room to rent (s10) Available 01/01 Tuesday 29th November 69pw house share (granville road) Available 01/12 Sunday 27th November 55pw 2 Double Rooms for rent in Nice Postgrad 5-bed house (ECcesall Road/Hunters Bar) Available 27/11 50pw Room available immediately (ECcesall Road) Available 27/11 50pw Room available immediately (City Centre Norfolk Park-) Available 27/11 45pw 2 rooms available in 4 bed house from 1st July 2006 (Crookes) Available 01/07 Friday 25th November 65pw 1 lovely Double Bedroom in large victorian shared house , S7 (Nether Edge) Available 15/11 Wednesday 23rd November 126pw Young, modern, well furnished 2-bedroomed apartment in a quiet, exclusive Sheffield suburb (Bradway (S17)) Available 25/05 Friday 18th November 105pw Newly Decorated 2 Dble Bedroom Flat (S3) Available 17/11 Wednesday 16th November 45pw 1 double bedroom available (sharrow) Available 28/02 126pw House To Let In Whiston (Whiston, Rotherham) Available 16/11 Monday 14th November 138pw appartment for rent (sheffield city centre) Available 31/12 Saturday 12th November 50pw 2 double rooms available in friendly shared house (Hunters Bar) Available 20/11 100pw 3 Bedroom furnished decorated house, S4 area (Sheffield S4) Available 21/07 Friday 11th November 124pw Spacous 3 Double Bedroom House (Walkley) Available 05/12 55pw Student house in Crookesmoor (university) Available 10/06 Tuesday 8th November 138pw 2 bed appartment (city centre) Available 01/01 103pw 2 bedroom flat (swallownest) Available 01/01 [ Previous ] [ Next ] Sheffield rent - houses / flats for rent Search for: Price: pw -- -- How does this work? Adelaide | Auckland | Belfast | Birmingham | Bournemouth | Bradford | Brighton | Brisbane | Bristol | Cambridge | Capetown | Cardiff | Christchurch | Coventry | Dublin | Durban | Edinburgh | Exeter | Glasgow | Guildford | Johannesburg | Krakow | Leeds | Leicester | Liverpool | Lodz | London | Manchester | Melbourne | Middlesbrough | Newcastle | Norwich | Nottingham | Oxford | Perth | Plymouth | Portsmouth | Reading | Sheffield | Southampton | Swansea | Sydney | Warsaw | Wellington | Wroclaw | York |

Real Estate Prices Still

Agricultural Economist Newsletter: Winter 2001--Farm Real Estate Prices Still Rising in Minnesota Farm Real Estate Prices Still Rising in Minnesota Steven J. Taff Average Minnesota farm real estate sales prices just keep on climbing (figure 1). This despite low output prices, rising input costs, and continued uncertainty about the future of federal subsidies. Sales price increases were seen in all parts of the state except in the northwest. In this annual sales price summary, I can provide only an overview, some cursory analysis, and--as always--a few opinions. I'll not bore you with text that simply repeats what's already shown in the charts. Instead I'll spend some time discussing how land transaction data are recorded, adjusted, and employed. I think it's useful to go through some administrative and procedural details to further our understanding of what these data are and what they are not. If this prospect makes you say, "Just show me the data, Steve," then you can stop right after the sales summary section. Or, if your impatience knows no bounds, go straight to the Minnesota Land Economics (MLE) Web site at http://apec.umn.edu/faculty/sjtaff/landdata/index.html and start working the numbers yourself. Farm Land Sales in 2000 Assessors are required to report initial assessments in late fall, based on sales data to date. That's why the data are reported on a "record year" basis: these are the sales that were, presumably, available for assessor scrutiny at the time the initial estimated market-values are calculated. Final values are set by summer, to be used in the succeeding tax year. So, for example, sales made in late 1999 are used by assessors to set initial values for January 2001. These estimates are adjusted in spring 2001, finalized in summer 2001, and then used for tax purposes in 2002. The adjusted record year 2000 sales data were therefore not available until April of this year. Figure 2 shows the distribution of all farmland sales in 2000. The bulk of the sales lie between $500 and $2,000 per acre. I excluded a small number of sales that exceeded $5,000 per acre as well as those involving parcels of land less than 20 acres in size. Both were excluded as not being plausibly "agricultural"--despite their designation on the Certificate of Real Estate Value (CRV) as "agricultural" land. (Although excluded from figure 2, these data are included in the MLE Web site data.) Even though MAE readers and MLE Web site users can view the full distribution of sales prices, most still ask for a single number that somehow captures the story behind the figures. Obviously, for a set of sales that span such a wide range in prices, any single number fails completely to accomplish this end. Movements in averages, while arithmetically correct, usually fail to tell the entire story. The particular average I use in this article is a location- and size-weighted mean (table 1). In last year's farm real estate report ( agecon.lib.umn.edu/mn/mae699.pdf ), I discussed the usefulness of such weighting as well as the desirability of examining sales data at the smallest geographic scale possible. Table 1. Minnesota farm real estate sales summary Record year Number of sales Acres sold Average price* 1996 2,504 263,728 936 1997 2,641 296,803 1,039 1998 2,724 303,968 1,113 1999 2,212 235,359 1,196 2000 2,258 250,979 1,222 * Location- and size-weighted per-acre mean Figure 1 compares the movements of actual sales price averages with those two other estimates of land value--the United States Department of Agriculture (USDA) annual state estimates (based on a farmer opinion survey) and the average assessor estimates (the location- and size-weighted mean estimated market value). The University of Minnesota sales prices averages are location- and size-weighted means. The fact that all three (somewhat) independent estimates of farmland real estate values shown in figure 1 move in lockstep adds credence, I believe, to the conclusion that, on average, farmland values really are increasing in Minnesota. Geographic variations in real estate values for the past 11 years are shown in the box-and-whisker plots of figure 3. (District boundaries are shown in figure 4.) The range of sales prices for each district for each year is shown by the endpoints of the vertical lines. The ends of each box show the prices at which 25 percent of the sales were higher (or lower). The median is indicated by the horizontal bar within each box. So, for example, the median Central district farmland sale was about $1,200 per acre, with 25 percent of the sales lower than $750 and 75 percent lower than $1,850 per acre. In previous years' reports, I've noted the wide variation in average price movements among districts. Such differences were accentuated in 2000 by the continued climb of values in the South East district combined with the continued stagnation in the North West district (figure 5) . Farm Sale Data When a Minnesota property is sold, the transaction details must be recorded at the county courthouse on a form called a CRV. On it, the seller attests that such-and-such a property was sold to so-and-so on a certain date for a specific price. Other information about the property (its size, soil characteristics, prior year's estimated market value) is often entered on the CRV as well. Frequently, the per-acre prices that underlie this article and are also shown in the MLE Web site are not the prices entered on the CRV. Long before a land sales figure enters the official data base, it has been passed through an array of filters and adjustments designed to make comparison among transactions more meaningful and more reliable. Recording the Transactions There are many possible slips between an ownership change and data analysis. Of course, there is always the chance that simple recording errors are made. For example, numbers may be miscopied from bills of sale onto the CRV, or into a computer file, or into a spreadsheet. There is also a chance of misrepresentation. The person who fills in the CRV might have a reason to understate or overstate the actual sales price--perhaps to avoid a tax. This, of course, is illegal, but, as any courthouse veteran can tell you, it occasionally happens. Not every sale receives further processing. Local or state officials remove from subsequent analysis any sale not deemed "arms-length," because it was sold, for example, to a member of the seller's immediate family. Or, a sale might be pulled because the new buyer intends to convert the land to a non-agricultural use. Adjusting the Prices After this filtering, sales prices are frequently adjusted to make comparison among sales more appropriate. First, to expunge the effects of inflation, sales prices are deflated by an officially reported rate to January 2 of the year in which they were recorded. This "adjustment for time" is fairly minor in years (like the past decade) where inflation has been low. The second adjustment is "for terms." Not all farm real estate sales are for the full property. Some are made through a contract for deed, an arrangement that allows the buyer to pay a certain amount now and other amounts at stated intervals. Until the final payment is made, the property remains in the possession of the seller--even though it has been "sold." Because the full payment schedule is entered on the CRV, the Department of Revenue can calculate a present value of the initial and subsequent payments at an official discount rate. This becomes the official sales price of the property, regardless of what the buyer and seller had in mind when they sealed the deal. Adjustments don't end with a time- and terms-adjusted sales price, honestly reported and accurately recorded. In most cases, users of the data are interested in per-acre prices, not per-parcel prices. That means some chosen total price must be divided by some total acreage. But which price? Which acres? Should we use the total price or should we first subtract out the value of buildings, personal property, ancillary property, or machinery to get closer to the "true" land price? In this article (and on the MLE Web site), I choose to follow conventions established years ago in Minnesota. I report the time- and terms-adjusted total sales price, minus the value of personal property, divided by the entire acreage of the parcel. That's why, when I'm being careful, I speak of the average price of farm real estate, not of farm land . Employing the Data The sales reported here are only those recorded between October 1, 1999, and September 30, 2000. These "record year 2000" sales are so bundled because of the way real estate transactions are used to help local assessors value land for property tax purposes. Strange as it may seem, the Department of Revenue does not collect sales data merely to satisfy the data cravings of University economists like me. No, statewide sales data are collected principally to create statistics that are used to "equalize" property tax valuations across county boundaries. Each year, county assessors are required to assign an estimated market value (EMV) to each of the thousands of real estate parcels in the county. The estimate is supposed to be based on an examination of similar properties that were actually sold recently. (The combined valuations for each township, city, or county are the source of the Land Values--in contrast to the Farmland Sales--data on the MLE Web site.) Because every county has its own assessor who uses largely independent valuation procedures, there are inevitably discontinuities across county lines--even for adjacent properties. Farmer Brown wonders why Farmer Olson's land, just across the fence line in the next county, carries an assessed value that is lower by $200 per acre. The state has created an equalization procedure that is supposed to smooth over such discontinuities. Assuming that nearby properties really would sell for similar prices, any observed difference in assessed values for otherwise similar properties is presumed to be evidence that one or both of the assessors is either undervaluing (that is, assigning an EMV that is too low) or overvaluing properties. To test this, the state calculates a sales ratio (the EMV divided by sales price) for every property sold in a particular area. If an assessor systematically undervalues properties (shown by sales ratios that are consistently lower than some threshold), the state might demand the EMVs in that jurisdiction be uniformly raised, to better accord with what is thought to be "true" market conditions. How Accurate Are the EMVs? We can see for ourselves how close the final assessor estimates are by comparing actual sales prices against the previous year's estimated market values for the same property (figure 2). Each point in the figure represents one sale. For example, the rightmost point is for a property that was estimated to have a value of $4,900 per acre, but actually sold for only $2,900 per acre. While some of the estimates are obviously way off (like this example), the bulk are pretty close. In most cases, the EMV was lower than the sale price, but in a neatly predictable manner. A simple one-variable regression model, shown as the straight line in the figure, accounts for nearly 75 percent of the observed variation in farm real estate sales prices. Parting Thoughts What accounts for the ever-onward-and-upward movement of average farm real estate prices in Minnesota? We need only to round up the usual suspects, most of which I have discussed at length in previous issues of MAE . These include 1) perennial farmer optimism about future crop and livestock prices, 2) expected extensions of federal farm subsidy programs, 3) continued favorable local property tax treatment for farmland, 4) the desire of some farmers to increase the size of their current operation by buying adjacent farmland, 5) the desire of some non-farm buyers to use land as a hedge against inflation, and 6) inflation itself. An additional suspect that we need to add is the increasing prominence of location even in rural land markets. We simply can't explain current price levels on the basis of income potential (including subsidies) and speculation potential alone. Clearly, where the land sits with respect to job centers and what it looks like is influencing the price buyers are willing to pay for a particular parcel of land. As always, I caution potential land buyers and sellers about reading too much into the average land prices reported here and elsewhere. If you've got land to sell or if you have a hankering to buy land--look before you leap. The financial stakes are too high for casual empiricism. Hire an appraiser. Talk with your spouse. Check your finances. Think about the children. Be careful out there! Steven J. Taff is an associate professor and extension economist with the Department of Applied Economics at the University of Minnesota. Return to Minnesota Ag Economist Newsletter Index Page University of Minnesota Extension Service HomePage