Pulse: When Choosing a Lender, Money Isn’t Everything

According to the LANDTHINK Pulse results, 41.6% of our audience believe that the greatest benefit of using a cooperative lending association to finance land is the fact that it is owned and governed by the member-borrowers. There are a lot of factors that borrowers take into consideration when researching lenders to finance their land purchase. Based on the results of last month’s survey, borrowers recognize the significant advantages a cooperative lending association, like the Farm Credit institutions, offer over traditional banks.

February Pulse Sponsored by

Last month, the February Pulse asked: What would you consider the greatest benefit of using a cooperative lending association to finance land?

When you buy a home, there are many different types of mortgages available, but when buying rural land for sale, especially large acreage tracts, it’s a different story. Because land loans are not insured by the government, sources of funding are limited. The good news is that with loans for land, the process is simpler and less frustrating than applying for a home loan. Land buyers should speak with their agent about borrowing money to buy land. A good land agent will direct their clients to seek advice from several lending institutions who are familiar with financing rural land and to explore all their financing options. Quite often, the best places to get land loans are local or regional banks and credit unions located near the land you plan to buy. Local institutions know the local real estate market and can better assess the value of the land and its potential. Farm Credit institutions offer lending solutions for farmers and ranchers and can help with financing land to grow crops, improve or expand current operations, or increase agricultural productivity. 

Established by Congress in 1916, Farm Credit is one of the nation’s oldest financial institutions, and borrowers can enjoy many benefits by doing business with their local Farm Credit office. Each association operates independently under the Farm Credit umbrella. 

Affiliates of the national Farm Credit System offer experience in agricultural and land financing, but the one thing that sets them apart from other lenders is that they operate as a cooperative, a business jointly owned by those who use its services. The majority of the LANDTHINK audience deemed this the biggest benefit of using a cooperative lending association to finance land.

Each Farm Credit institution is governed by a board of directors, elected by the institution’s stockholders at their annual meetings. The board provides important direction and sets policies to ensure the safety and soundness of the institution on behalf of their fellow customer-owners. This model of local ownership also ensures that the institution is responsive to the needs of the farmers and ranchers in their area, and helps assure that reasonably priced credit will be available during good times and bad.

Coming in a close second, 39.9% of our audience said the biggest benefit of using a cooperative lending association to finance land was that earnings are returned to the member-borrowers.

The member-borrowers get to share in the success. As a cooperative, Farm Credit net income is only used in two ways: 

1. Retained within associations to build financial strength that ensures continued lending
2. Passed on to customers by way of patronage dividends, effectively lowering the cost of borrowing

Usually it’s an appropriate mix of both options, as determined by the board of directors.

When member-borrowers get a portion of their interest returned, they keep money circulating within the local economy, by purchasing goods and services. It sets into motion a never-ending cycle that serves each point it touches.

Lenders come in many types and sizes, offer different products and services, and have different ethical standards and levels of customer service. They also have varied knowledge and experience of the different types and uses for land. There are many factors to consider when choosing a lender, and it’s important to select the one that’s best for your unique needs. In the current sellers market, buyers should be ready to move quickly when they find land they want to purchase. LANDFLIP made it easy for buyers that visit their network to connect with a lender early in the search for land online, joining forces with Farm Credit institutions throughout the Southeast to help buyers gain access to land financing.

The LANDTHINK audience certainly voiced a strong opinion on what they believe is the greatest benefit of using a cooperative lending association to finance land. The results showed some mixed views, but the majority of our audience (41.6%) indicated that it is the fact that it is owned and governed by the member-borrowers, followed by 39.9% who said the biggest benefit was that earnings are returned to the member-borrowers. Only 13.6% of our audience it was that all member-borrowers have an equal voice in the business and just 5.0% believed that the greatest benefit was due to the fact that the member-borrowers select the board of directors.

We were pleased that so many people chimed in on this question, and we thank everyone who answered the Pulse and shared it on social media with friends and connections in the land industry. LANDTHINK would like to extend a big thank you to First South Farm Credit for sponsoring the February Pulse and for choosing an interesting question to pose to our audience. As a part of the national Farm Credit System, First South Farm Credit has been financing rural America since 1916. First South Farm Credit is a member-owned cooperative providing short, intermediate, and long-term financing and related services to full and part-time farmers, agricultural-related businesses and rural landowners in Alabama, Louisiana, and Mississippi. They are ready to help make your dream of land ownership or farming your own land a reality.

Become a Pulse sponsor! It’s a great way to ensure your brokerage is the first one buyers and sellers call when they have a need to buy or sell property. You’ll get insane exposure on Social + Email + Web. That’s 500,000+ monthly eyes on you! Once you have it, you won’t want to give it up! Pulse sponsorships are offered on a first come first serve basis and are subject to certain limitations. If your business would be interested in sponsoring a Pulse question, please contact us soon.

Do you have a suggestion for next month’s Pulse question? Submit your question and we might choose yours!

We want to know what you think about our March Pulse question, chosen and sponsored by Hayden Outdoors Real Estate: What would be your primary use for purchasing recreational land? Answer now.