A 120-acre tract of land near home will sell this winter because the heirs want money. We’ve farmed it for 20 years. It’s bad timing for us because crop prices are low. We own some land debt-free and other land that is 50% paid off. Should we expect a break because we’ve farmed it so long? Market price is around $10,000 per acre. Is this a time to go deeper in debt?

The Profit Planners Panel includes David Erickson, farmer, Altona, Ill.; Mark Evans, Purdue University Extension, Putnam County, Ind.; Jim Luzar, landowner and retired Extension educator, Greencastle, Ind.; and Steve Myers, farm manager, Busey Ag Resources, LeRoy, Ill.

Erickson: Begin honest discussions with your lender about the potential opportunity to purchase the land. Your lender can be a valuable partner in determining financial strength and projecting future debt service capability. Don’t expect a price break. However, the chance to buy the farm privately could be a big advantage. We should always make purchase decisions with the best possible information available, and then be willing to review financial positions on a regular basis for best results.

Evans: The heirs may have no connection to you, and you should not expect a price break. Consider the 120 acres to be on the auction block, which may end up being the scenario. However, if you do have strong connections, use these to your benefit. The good news is you have 20 years of experience there, so you know the potential: good, bad and ugly. Use this knowledge to make wise decisions moving forward.

While land prices may be high, there’s no real suggestion that prices will quickly drop anytime soon. Financing rates are currently low. Would you be able to refinance existing debt with new debt to have a better situation?

Luzar: Expect nothing from the family regarding a discounted price. With depressed margins, working capital is a priority: Complete financial projections for the investment, and seek external perspective from your accountant, legal adviser and financial planner. Beyond current plans, how does this investment fit in with your business succession planning efforts? It might make the evaluation more objective if you table the emotion of farming the property for 20 years.

Once you establish financial projections as to how this land acquisition will impact your operation’s future, some flexibility would be great. If you have goodwill with the family, seek right of first refusal. This agreement would keep you in the deal, should someone else offer a lower price. A right of first offer could be made if they object to right of first refusal.

Get your financial ducks in a row to decide if you want to purchase. Practice your script in meeting with the family representative. To repeat, expect nothing from the heirs but a thanks for doing business for 20 years!

Myers: While a break in price would be nice, you should not expect it — not because they don’t like you, but because business is business. Should you purchase it? Do the math, as you obviously have been down this buyer’s road before. Keep emotions out and let the “deal or no deal” decision stand on its own as to cash flow, equity position and, ultimately, your comfort or desire for risk. Get some assistance from your lender, bookkeeper or trusted adviser.