This is part 2 of 2 of an article that originally appeared in the REALTORS® Land Institute’s Summer 2017 Terra Firma magazine.
Although it is somewhat romantic to purchase a vineyard, it can be stressful, emotional or drudgery to sell one that you have put your life and soul into and worked at for years. A buyer may not have the same passion as the seller.
Vineyards sell for a variety of reasons. Perhaps the owner has improved it to the point of capacity and wants a new challenge. Perhaps there is a death in the family and the succeeding generation does not have the desire or passion to continue. Possibly a vineyard has produced some exceptional grapes for wine or juice and a major player wants the label and juice bad enough to pay an exorbitant price for the vineyard. Perhaps there is financial difficulty that dictates moving on.
Juice grapes hold very little, if any, additional value for the variety. That land is considered similar to row crop land except that the vines need to be scraped off to make way for a higher and better use. Unlike merely a few years ago, when grape cooperatives had shares and the shares in the co-op held some value, the co-op shares are nearly worthless in today’s market. The returns are lower than most any other crop, especially in the western states, and growers are actually losing money in places. There is approximately a $1,000 to $1,500 cost to pull the vines and remove the infrastructure from a site. Sellers may take a hit in price for this reason unless the buyer has a higher use for the land.
Table grapes, on the other hand, tend to retain their longevity as a crop. Disease and urban encroachment are the largest factors confronting sellers of this type of land.
Wine vineyards have exponentially more hurdles in the selling process. Much of it is emotional; however, location within a specific American Viticulture Appellation (AVA) lends higher or lower value to a vineyard. One in demand can, and usually does, sell at a substantially higher value than the same plantings across the road if they do not sit within the desired AVA. Red Mountain AVA in southeastern Washington, is one of the smallest AVA’s known. The prices for vineyards and vineyard potential land can command one and a half to two times the price as a similar land parcel merely across the road–simply because of where someone drew the line for the AVA!
When selling, there are specific disclosures required. The disclosure most often overlooked is the five-year crop pesticide and chemical use records. There are also production records, income and expense records, labor hour records and sales contracts to disclose. Much of this type of information is disclosed only with ‘confidentiality agreements’ signed by potential buyers. Plus, there are state mandated disclosures that vary from state to state. In addition, some sellers may demand potential buyers to be registered and pre-qualified with a lender’s letter in hand before they will show or release any information about the property. If there are homes, buildings, or commercial parts to the sale, then, separate disclosures may be required for each endeavor.
One of the most important aspects of selling a vineyard (or any property for that matter) is keeping it clean, weed-free and presentable to the buying public. First impressions make a HUGE difference when buying a piece of property. Remember, sellers… Buyers often rely as much on emotional connection to a property as they do on business sense. A clean and showy place makes all the difference–especially if there is more than one property that a particular prospect is considering.
Vineyard sellers would also be wise to have in their possession (or at least make available or have access to) the weather data, seasonal harvest dates, freeze data and so forth in order for a buyer to make an informed decision about the property. The varieties, number of acres planted, age of vines, type of root stock (if they are grafted cuttings), row spacing, plants per acre, type of trellis, type of irrigation system, etc. are all pertinent to the sale. In addition, a recent soil analysis and pH analysis are very helpful to potential buyers and their brokers. The most important part of disclosures is to BE HONEST! If there has been a disease or problem in the vineyard, disclose it even if it has been corrected. Detail any environmental concerns such as being downwind from a processing facility, excessive dust from a gravel crusher, dairy nearby (fly spots on berries), etc. The more honest, complete and accurate the disclosure is, the less liability the seller shoulders in any transaction.
Also, sellers should think through the end of the transaction. What are they going to do with the money? Bank it and pay capital gains, convert the sale into an IRS 1031 Tax Deferred Like-Kind Exchange, split a partnership or family holdings? Bring in a qualified Certified Public Accountant early in the process so there are no last minute surprises–and be prepared for a long ride. Vineyard listings, especially wine vineyards, either sell very quickly or may take several years. If the numbers fit the return profile, they may sell quickly. If not, it may take a while. Investors don’t usually jump into the buying process on smaller acreages unless they have other similar property in the area or the holding and profit margin are substantial. As with most family-owned vineyards, that is not the case. You may need to take an additional harvest or two before you find the right buyer. Hang on for the ride!
About the author: Florence “Flo” Sayre, ALC, has been active in the land business for over forty years and licensed in the real estate industry for over twenty. A member of RLI since 2008, she is the current RLI Pacific Northwest Chapter President and the Chair of the ALC Designation Committee and serves on the RLI Board of Directors.