Upsizing, downsizing, relocating, combining households and shifting to a different farm enterprise entirely: These are legitimate reasons you may want to sell your small farm. Regardless of your reasons, you may have conflicting feelings about putting your farm up for sale, and no doubt you‚Äôre receiving conflicting advice.
Even in this article, the words of one real estate agent may not apply to your property. No two farms are alike. Additionally, real estate laws vary from state to state.
Despite‚ÄĒor maybe because of‚ÄĒglobal uncertainties, the U.S. real estate market is strong nearly across the board. This is especially true for those who sell small farm properties.
‚ÄúThe increase in inquiries and sales definitely coordinates with the onset of COVID-19. I think that the pandemic has made a lot
of people seek less dense populations and room to ‚Äėspread their arms‚Äô a bit,‚ÄĚ says Jim Elliott, a real estate agent with Hayden Outdoors, licensed in Kansas and Nebraska.
Farther east, the situation is much the same. ‚ÄúThe market for small farms is strong in Central Kentucky. And I expect it to stay that way for the foreseeable future,‚ÄĚ says Heather Housman, a realtor with Bluegrass Realty and Investments.
Rural real estate investors, low interest rates and subdivision developments are making small farms more expensive and harder to come by. This is good news, of course, if you think you might sell your farm.
Begin with a Listing
When you‚Äôve made the decision to sell your farm, you start the process by listing it for sale. You can either enlist the help of a real estate agent or do so independently. (Read more about choosing a real estate agent in ‚ÄúSpecial Agent,‚ÄĚ below.)
From here, it can take a few days to two weeks to have your property listed for sale.
‚ÄúI always like to start with an introductory meeting and discuss the options and find the best path for the specific seller,‚ÄĚ says Elliott, who also happens to be a Class A Member of the Professional Golfers Association of America.
You‚Äôll disclose property highlights, known defects, easements, water and mineral rights, and other property details. A real estate agent will do a comparative analysis of sales prices from similar properties.
Is there something unique about your farm? Are you listing for sale by owner? An appraiser can help determine an asking price.
‚ÄúOnce the seller is comfortable with the marketing plan, initial asking price and any listing-contract specifics, we sign all the required documentation, including the listing agreement and a property disclosure form,‚ÄĚ Elliott says.
When you sell your farm, it is a paperwork-heavy proposition. Most of this, however, can be done virtually.
Your real estate agent will order photography and write a catchy description of your property. With your approval and the click of a few buttons, they upload your property onto their brokerage‚Äôs website and affiliate websites.
From here, your real estate agent may use social media, their own marketing tools and networking to spread the word about your property.
‚ÄúReal estate markets are local. In central Kentucky right now, a reasonably priced small farm will generally be under contract in less than 30 days,‚ÄĚ says Housman, who also holds a green designation from the National Association of Realtors.
Sell in Good Time
You may have heard that the best time to sell a home is during the summer, while school is out. But the timing of a farm sale in a hot real estate market is less essential than in a dull market. And is summer really the best time for a farmer to move?
‚ÄúIf you‚Äôre a major garlic grower and busy harvesting garlic in July, I would not list your farm for sale then. I would choose a time of year when it‚Äôs going to look its best,‚ÄĚ Housman says.
Also consider where you‚Äôre moving when you sell your farm, and try to time your sale accordingly.
‚ÄúI am a planner by nature, so I personally would need to know where I was going if my home sold tomorrow. But there is no requirement to have a new place identified,‚ÄĚ Elliott says.
Housman points out that if your farm menagerie comprises just a few horses and your buddy is willing to board them for a few months, you have the flexibility of shopping around for the right property after you sell your farm. On the other hand, if you have many animals, it would be stressful to sell your property without an exit plan.
Make a Plan
We each have our quirks, and our farms do, as well. Contingency plans are written into sales contracts to address these.
Back to the garlic that you planted. Will you be prepared to leave your crop behind if you have to move in December?
‚ÄúIf you just put in all your garlic, you can write into the contract that the crop is yours to harvest,‚ÄĚ Housman says. ‚ÄúEven if there‚Äôs a farmer that has rented the property from you, you can negotiate for the harvest of their crops. It‚Äôs one of those things that would get negotiated during the offer process.
“More than likely, that contingency would be accepted. But the buyers may have other plans.‚ÄĚ
‚ÄúWith some farms having varying land uses, we can get pretty specific about the possession dates of the different areas on a farm or ranch,‚ÄĚ Elliot says. ‚ÄúBut in the end, the contract can be written to explain whatever the two parties agree to do.‚ÄĚ
Contingencies can apply to the purchase terms, as well.
‚ÄúA lot of times, I see sellers identify a new farm and put in a purchase contract … with a contingency of the sale of their current farm,‚ÄĚ Elliott says. ‚ÄúThis can really help if you are planning on completing a 1031 exchange, too, in an effort to mitigate or defer capital gains tax.‚ÄĚ
(A tax or real estate attorney can answer capital gains questions specific to your situation.)
Read more: Go for garlic in the garden this year!
Clean up Your Act
When you sell a farm, it is just like selling a residential property, only harder. You have more area and outbuildings to polish and probably more animals and equipment, too. ‚ÄúStaging‚ÄĚ your property‚ÄĒtouching it up to showcase its best assets‚ÄĒapplies across the farm.
Typically, your real estate agent will offer a list of things you should do to make your place more appealing for potential buyers. Most of these will be inexpensive fixes.
‚ÄúTidy and picked up are the most important things,‚ÄĚ Elliott says. ‚ÄúIf there is a home or outbuilding, I think it helps to have the it mowed and trimmed and any unusable equipment removed.‚ÄĚ
Housman‚Äôs pre-showing checklist includes ensuring barn doors easily open and close and securing farm dogs during showings to give property viewers full access.
Her No. 1 staging tip is obvious but often overlooked. ‚ÄúMake sure the entryway to your home, in particular, looks really nice. That‚Äôs where potential buyers will stand while they‚Äôre waiting for their realtor to arrive.‚ÄĚ
Offer relevant information to your buyers, too. Do you have a market garden or livestock fields? ‚ÄúI would write out the history of your fields,” Housman suggests. “That might open you up to people who are interested in growing organic, if you‚Äôve followed those practices.
“Get a soil test and have a soil map available. I would mark the property lines so anyone who sees the property knows exactly where they are.‚ÄĚ
Real estate sales can move fast, so be prepared before listing. In a busy market, your property could have a dozen showings in a matter of days. It takes just one buyer to mark your farm sold.
‚ÄúOnce someone has a contract to buy your place, typically you have about 45 days from that date to the sale closing,‚ÄĚ Housman says. ‚ÄúUnless you‚Äôve negotiated otherwise, you turn over the keys to your farm on the day that you close.‚ÄĚ
Your farm has brought you years of growth‚ÄĒliterally and figuratively. Moving on might not be easy. Whatever your reasons for parting, know you‚Äôre not the first to go through this. And in a market like 2021‚Äôs, you won‚Äôt be the last.
Sidebar: Special Agent
Depending on your level of legal knowhow and the amount of time and money you can invest in marketing, it‚Äôs possible to DIY a farm sale. Items you‚Äôll handle on your own without a real estate agent include determining fair market value, professional photography, staging, marketing online and elsewhere, and legal issues surrounding farm sales.
If it‚Äôs worth it to you to pay a professional a small amount (usually 5 or 6 percent of the sale price) to handle those items, be sure to find the right agent for your team.
- First order of business: Find a real estate agent who knows something about farms!
- Ask folks you know for referrals, and don‚Äôt be afraid to vet real estate agents yourself. ‚ÄúCheck out a few farms for sale, and call the agent,‚ÄĚ says Heather Housman, a realtor in Kentucky. See what marketing materials they have on the property. Use that as a gauge for how responsive they are to potential buyers.‚ÄĚ
- Look for the characteristics you want in any business partner. ‚ÄúThe individual agent must be honest, trustworthy, hard working, organized and personable. Being a great communicator is key for any agent,‚ÄĚ say Jim Elliott, who works in real estate in Kansas and Nebraska.
- Consider the agent who will represent your property as well
as the brokerage firm the agent is affiliated with.‚ÄúThe brokerage provides the marketing plan and typically is invested in various platforms used by the agents,‚ÄĚ Elliott says. ‚ÄúThese platforms provide continual, passive marketing, and the more investment in those platforms, the more reach and higher visibility your property will have on the internet and social media, for example.‚ÄúI think sellers are often surprised to see the reach of the internet and a successful marketing plan. It is always fun for me to see how far away buyers are willing to come from.‚ÄĚ
Sidebar: 10 Tips for Buying a Farm
The flip side to selling your farm is buying one. Whether you‚Äôre looking for your first farm or going for a change of scenery, keep a few things in mind when looking at properties:
- Know your wants and needs, and set priorities before you view a farm. It‚Äôs easy to fall in love with the forested hills in front of you, forgetting you need flat land for market crops.
- Have a real estate agent on your team. With farm properties so in demand, some are sold without being listed. An agent in the know can plug you in to these before-market sales.
- ‚ÄúTalking to a lender first is really helpful, because then you know what‚Äôs possible for you financially,‚ÄĚ says Heather Housman, a realtor in Kentucky. You may qualify for properties of a higher sales price‚ÄĒor a lower one‚ÄĒthan you thought possible. A buyer pre-approved for a mortgage is more attractive to sellers, as well. Certain properties allow for U.S. Department of Agriculture and other special financing, and a lender can explain those.
- Know your rights: especially water rights and mineral rights; especially in the Western U.S.
- Understand easements. Housman suggests asking about conservation easements, which may dictate building sites and property uses, as well as right-of-way easements, which could allow neighbors and utility companies access to areas of the property.
- Ask about leases. These might cover hunting, farming, a home or an outbuilding on the property.
- Ask about the land‚Äôs previous uses. You may want a soil test, just as you‚Äôd get a home inspection.
- Look into the uses of neighboring properties, and consider your best neighbors.
- Check on infrastructure, especially for rural properties. If you work from home, high-speed internet may be a must-have. Understand septic systems and lagoons common to rural land. If the property has a well, ensure its water quality and reliability.
- Be patient. It can take years for the right property to come about.
This article originally appeared in the January/February 2021 issue of Hobby Farms magazine.