Plenty of land in our counties changes hands without an auction. It passes from parents to a son or daughter who has farmed beside them for years, and the hard part is rarely the decision. It is the money: what the land is worth, how a younger operator pays for it, and how the parents get the retirement income they are counting on. Buying the family farm from your parents is still a purchase, and it works best when it is planned like one. Here is how the price gets set, the ways the deal gets financed in Minnesota, a worked example, and what a lender looks at before anyone signs.
Buying from your parents is still a purchase
A sale inside a family carries more history than any other land deal, and it needs the same basics. The price needs to hold up for the lender, for tax purposes and for the brothers and sisters who are not buying. The financing needs to fit an operation that is about to take on land payments, often for the first time. And your parents need a plan for what they live on once the land income becomes your payment to them.
Start with an independent appraisal. A lender lends against appraised value, so the appraisal sets the ceiling on what a bank finances no matter what price the family agrees on. A price well below the appraisal is partly a gift, which has tax and estate consequences, and a price well above it leaves you financing the difference out of cash flow. Neither is wrong on its own, but it should be a decision the family makes with an attorney and a tax preparer at the table, not a number someone remembers from a coffee conversation.
It also helps to separate what is being sold. Land, machinery, the grain bins and the cattle are different assets with different financing. Land is a long term loan. Machinery and livestock usually sit on shorter terms, and the operating side runs through the farm operating line. Some families transfer the machinery and the operating side first and the land last.
Four ways to finance the family farm
Most family land sales draw on some mix of four sources, and a sound structure often uses more than one.
A bank farm real estate loan
A bank loan on the land is the backbone of most purchases. The bank looks at the appraised value, the equity going in and the operation's cash flow with the land payment in it. That equity does not have to be cash. Acres you already own, or equipment owned outright, can count toward it. Our post on financing a farmland purchase walks through how a lender looks at land, including what land sells for in our counties and how the payment compares with cash rent.
A contract for deed your parents carry
On a contract for deed, your parents keep title until the contract is paid, and you make payments to them instead of to a bank. Families use it for the whole price or for a slice of it alongside a bank loan. It turns the land into a monthly or annual income for your parents, and it often carries a lower down payment than a bank loan alone. A common structure is a contract that runs for several years and then balloons, by which point the buyer has built equity and refinances the balance with a bank. If your parents still owe on the land, that loan has to be paid off or worked into the plan first.
Farm Service Agency programs
FSA's farm ownership loans include direct loans up to $600,000 with repayment terms up to 40 years, and a down payment program in which a beginning farmer puts down 5 percent, FSA finances up to 45 percent and a bank finances the rest. On the guaranteed side, a bank makes the loan and FSA guarantees a portion of it, up to $2,558,000 as FSA publishes the limit today. FSA also offers Land Contract Guarantees up to $500,000, which protect parents who sell on a contract for deed to a qualifying beginning farmer. That guarantee can make the difference for parents who want to help but need the payments to keep coming.
The Minnesota Rural Finance Authority
Under the RFA's Beginning Farmer Loan Program, the state buys up to 45 percent of the bank's loan, to a maximum of $500,000, at a reduced rate, so the buyer's overall rate is a blend of the two and the buyer makes one payment to the bank. The buyer's net worth must be under $1,069,000 in 2026, the program asks for enrollment in Farm Business Management for the first three years, and the RFA portion balloons at ten years.
A family farm purchase example
The scenario below is a composite, built to show how the pieces fit together. It is not a customer, not a transaction we have financed, and not a quote.
Parents farming 320 acres are ready to slow down. Their daughter has farmed with them for eight years and rents part of their ground. The family agrees she will buy 80 acres now at its appraised value of $9,000 an acre, rent the remaining 240 acres from her parents, and buy more in stages as her equity grows. She puts in cash, her parents carry part of the price on a contract for deed in second position behind the bank, and a bank loan covers the rest.
| Where the $720,000 comes from | Amount | Share |
|---|---|---|
| Cash from the son or daughter | $72,000 | 10% |
| Contract for deed carried by the parents | $144,000 | 20% |
| Bank farm real estate loan | $504,000 | 70% |
| Purchase price, 80 acres at the appraised $9,000 an acre | $720,000 | 100% |
| Annual payments (illustrative) | Per year | Per acre |
|---|---|---|
| Bank loan, 20 years at an illustrative 6.8 percent fixed | $46,200 | $578 |
| Parents' contract for deed, 15 years at an illustrative 5 percent | $13,700 | $171 |
| Total land payment | $59,900 | $749 |
| For comparison: 2025 southern Minnesota cash rent | $257 |
The land payment runs about $749 an acre, close to three times what the same ground would rent for. That is the normal shape of a land purchase at today's values, and it is why the land is carried by the whole operation rather than its own crop. It is also why buying in stages helps. The daughter pays $59,900 a year on 80 acres instead of four times that on 320, she keeps renting the rest from her parents, and their rent plus the contract payments become part of their retirement income. About $18,900 of the first year's payments is principal, which is savings the operation keeps in the ground.
Two programs could change this picture. If she qualifies, the Rural Finance Authority could buy up to 45 percent of the bank loan, $226,800 here, at a reduced rate, which lowers the blended payment. And if her parents' contract is set up under the FSA Land Contract Guarantee, they carry less risk on the slice they finance.
Planning a family land sale? Bring the acres, a rough idea of price and the balance sheet, and one of our ag lenders will run the payment against your operation before anyone signs. Talk with an ag lender
What a lender looks at on a family land sale
A family sale gets the same underwriting as any land purchase, and a few questions get more attention.
- Cash flow with the land payment in it, including family living. When the parents depend on rent or contract payments from the same operation, a lender looks at whether the operation carries both households.
- The appraisal and the agreed price, and how any gap between them is handled.
- Any debt your parents still owe on the land, and how it gets paid off or worked into the new structure.
- Who owns and finances the machinery, grain and livestock after the sale, and whether those pieces move now or later.
- Your track record. Years of running part of the operation, with your own records, count in underwriting.
That last point is the advantage a family sale has over most first purchases. You already know the ground, the drainage and the yields, and the lender can see what you have done with it. Our agricultural lending team can walk through a structure with you before the family sits down to sign anything.
Being fair to the brothers and sisters who are not farming
The hardest conversations in a family farm sale are usually about the children who are not buying. A sale at appraised value goes a long way, because it keeps the transaction from becoming a hidden gift to one child. From there, parents often balance the estate with other assets or life insurance, and some give the farming child a right of first refusal or an option to buy more land over time. The pattern is the same as a son or daughter buying out a parent's share of a business: settle the price and the terms while everyone is at the table.
Those decisions belong in the parents' estate plan, written with their attorney before the sale closes. Our post on farm succession planning in Minnesota covers the estate side, including how land held in trust passes without probate, and our trust department works with farm families on that side of the transition.
Beginning farmer help when the seller is family
Not every program treats a family sale the same way, and it is worth knowing which ones apply before the plan is set.
- Minnesota's Beginning Farmer Tax Credit gives the seller a state tax credit for selling farmland to a qualifying beginning farmer. Under the statute, a sale to a family member qualifies when the price equals or exceeds the land's assessed value on the date of the sale. Your parents' tax preparer can tell them what it means for their return.
- Minnesota's Down Payment Assistance Grant does not cover buying a farm from a direct family member, so do not count on it for a purchase from your parents.
- Farm Service Agency and Rural Finance Authority eligibility turns on the buyer and the deal. Call your local FSA office and your lender in the same week, early in the planning.
Our ag lenders
Our primary ag lenders are Adam Lindeman, Joel Ebert, Jon Dahlke, Eric Thalmann, Judy Meyer, Paula Schons and Jacob Vasek. They finance farms across McLeod, Carver, Sibley, Renville, Meeker and Isanti counties from our offices in Glencoe, Brownton, Hamburg, Mayer and Cologne. The lender who helps plan the purchase is the same one who writes the loan and sits across the table at the next renewal.
Adam LindemanSenior VP, Ag BankingGlencoe Corporate officeCall 320-864-2016Email Adam
Joel EbertVP, Ag/Commercial Loan OfficerGlencoe Downtown officeCall 320-864-2014Email Joel
Jon DahlkeVP, Ag/Commercial Loan OfficerBrownton officeCall 320-832-1013Email Jon
Eric ThalmannLoan OfficerCologne officeCall 952-698-1973Email Eric
Judy MeyerVP, Branch Manager, HamburgNMLS #649586Hamburg officeCall 952-777-3650Email Judy
Paula SchonsBranch Manager, Consumer LenderBrownton officeCall 320-832-1012Email Paula
Jacob VasekLoan OfficerMayer officeCall 952-657-2309, ext. 5Email Jake
Questions families ask about buying the farm
How do I buy the family farm from my parents?
Start with a price set by an independent appraisal, then decide how it gets paid: your own cash or equity, a bank farm real estate loan, a contract for deed your parents carry, and beginning farmer programs from the Farm Service Agency and the Minnesota Rural Finance Authority. Bring your parents' attorney, your own attorney and a tax preparer in early, settle what happens to the land your brothers and sisters expect to inherit, and talk with a lender before anyone signs so the payments fit what the operation can carry.
Can I get a bank loan to buy farmland from my parents?
Yes. A bank finances a purchase from a parent the way it finances any farmland purchase: it looks at the appraised value of the land, the equity going in and whether the operation's cash flow carries the payment. A family sale often makes the structure easier, because parents can carry part of the price on a contract for deed or rent the acres the buyer is not ready to buy. Every loan is subject to credit approval.
Should my parents sell me the farm on a contract for deed?
It can work well. On a contract for deed your parents keep title until the contract is paid, you make payments to them, and the payments become retirement income. Families often use one for part of the price alongside a bank loan, or for a few years before the buyer refinances with a bank. If your parents still owe on the land, that loan has to be addressed first. The Farm Service Agency offers Land Contract Guarantees, up to $500,000, that protect the seller on a qualifying contract with a beginning farmer. Each family's attorney should write and review the contract.
What price should I pay my parents for the farm?
Start from an independent appraisal. A lender lends against appraised value, and a price well below it is partly a gift, which carries tax and estate consequences your parents should review with their tax preparer and attorney. In Minnesota, a land sale to a family member qualifies for the Beginning Farmer Tax Credit when the price equals or exceeds the land's assessed value on the date of the sale.
Can I use beginning farmer programs to buy land from a family member?
Some apply and some do not. Minnesota's Beginning Farmer Tax Credit allows a sale to a family member if the price meets the assessed value rule. Minnesota's Down Payment Assistance Grant does not cover buying a farm from a direct family member. Farm Service Agency and Rural Finance Authority eligibility turns on the buyer and the deal, so ask your local FSA office and your lender early in the planning.
How do we keep a farm sale fair to brothers and sisters who are not farming?
Most families start with a price set by appraisal, so the sale is not a hidden gift to one child. From there, parents often balance the estate with other assets or life insurance, and some give the farming child a right of first refusal or an option to buy over time. Those decisions belong in the parents' estate plan, written with their attorney, before the sale closes.
The right time to talk
I would much rather sit down with a family a year or two before the land changes hands than the week before closing. There is time then to stage the purchase, line up the programs, get the appraisal and make sure your parents' plan and yours fit together. A first conversation commits you to nothing. If you are planning to buy the family farm from your parents, our ag lending team is the place to start.
Ready to plan the transition? Tell us where things stand, and we will connect you with the ag lender who works in your area. Talk with an ag lender
- Keep reading
- Farmland purchase financing, land prices in our counties and the payment next to cash rent.
- Farm succession planning, passing land to the next generation through a trust.
- Farm operating line renewal, what your lender needs when the line comes up this winter.
- Ag lending basics, the loans behind a farm operation.
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Growing, together.
The family sale scenario and its figures are an illustrative composite, not a customer and not a quote. Payments use fixed rates for the arithmetic, exclude property tax and insurance, and are not an offer of credit; actual rates, terms and amounts vary. Cash rent is the 2025 southern Minnesota average from the Minnesota State Farm Business Management reports. FSA and Rural Finance Authority limits and requirements are as published by those agencies in November 2026, adjust periodically, and are subject to agency eligibility and approval. Beginning Farmer Tax Credit and Down Payment Assistance Grant rules are summarized from Minnesota Statutes section 41B.0391 and the Minnesota Department of Agriculture as of November 2026. Every loan is subject to credit approval. This post is general information, not legal, tax or financial advice; work with your attorney and tax preparer on your own situation. Page last reviewed November 2026.
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