How To Sell A Farm
Updated: Dec 29, 2019
40.5% of the US is farmland, but selling a farm is no simple task. Many farm owners face this daunting mission when they are ready to retire or downsize. How do you sell your farm? After all, farming is often generational. There aren’t that many people going into farming nowadays. What if you don’t want to sell to developers? Here’s what you need to know about selling a farm.
Know Your Rights. Do you have Transfer to Development Rights (TDRs) on the property? Are there restrictions on the deed? Depending on the status of zoning and TDRs, you may not be able to sell to developers. Previous owners may have also put restrictions on the deed so that the land may not be developed. If you do not want to sell to developers, you don’t have to. In fact, you may be able to put restrictions on the deed that will provide some protection against development down the line.
If you live on an agricultural reserve, have you taken the tax credit? Agricultural reserves, like many properties zoned for agricultural use, often have a limited number of TDRs. If a previous owner has taken a tax credit on the land, then you may not have any TDRs and this will stay with the land meaning that a new owner will have the tax credit (subject to reassessment upon the sale of the property) without any TDRs.
It also important to know what type of ownership is listed on the deed. It may be prudent to do some digging and be sure there isn’t anything obvious that might impede your ability to transfer title, such as a lawsuit. Once the property is under contract, the title company will do a more in-depth title search.
Be Prepared. It is important to keep in mind that you will have a smaller pool of buyers when selling a farm. This doesn’t mean that the task is impossible, but it does mean that you should be prepared for a lengthier project. On the whole, farms take longer to sell than standard residential properties, but there are a few ways to prevent a property from sitting on the market for ages…
Spruce It Up. Mowing for days…Readying a farm for sale takes effort. You probably already knew that. You have much more than a house and a tiny yard to make presentable. Pastures, outbuildings, and fence lines need to look well maintained. Unfortunately, there is no way around it. Barns need to be presentable, as does the land. Curb appeal is just as important, if not more so, when selling a farm. The new owners need to know that they can successfully raise animals or grow crops. While the reality of these activities is often messy, people don’t want to think about that when they are about to make what is likely to be the biggest investment of their lives.
Hire An Agent. Yeah, you knew it was coming…Hiring an agent is really important. Am I biased? Sure, but the stats don’t lie. Agent assisted sales will net you an average of 11% more profit. Even with a commission, you will come out ahead. Money aside, agents have access to a lot of tools when selling a property meaning more exposure for the listing and farm listings need all the exposure they can get.
Availability and paperwork are major obstacles for FSBO (for sale by owner) transactions. You need to be available to show the property and for many home and farm owners, this is just not feasible. The paperwork is often very complicated and if you are trying to sell your farm yourself, you might feel a bit overwhelmed. Contracts are routinely dozens of pages long and the disclosures and necessary additional documents for the sale of a farm can be particularly complex. Even agents get tripped up, especially those not used to working with farms. Hiring an agent who specializes in farms will help to make sure your transaction is airtight. No one wants a nasty surprise months or years after closing.
Lastly, an agent is an ally. Negotiations can often be contentious, emotional, and draining. In fact, negotiations are frequently the cause of sales falling through (often over issues that could have been resolved). Having an agent in your corner can help get you the best terms possible while holding the sale together. Putting your farm back on the market after a failed contract is the last thing you want to do because it will cost you both time and money as buyers will come to you with lower and lower offers.
The process of selling a farm is unique among real estate transactions and comparing it to other residential sales—as people often do—will only make you frustrated. If you do your research, interview multiple agents, and know what to expect going in, then you should be pleased with your experience.