Pricing A Farm
Every farm is custom built. Factors such as the outbuildings, acreage, location, layout, and the dwelling vary wildly from farm to farm. This affects price in a major way, but there may not be any true comps. As you might imagine, this can make pricing a farm a bit tricky and it is common for all the agents you interview to give you a different price. Sometimes the spread is 100K or more! How do you decide where to start? Here are the factors to consider when pricing a farm.
Comps and Location. First and foremost, what will the market support? I’d love to tell every farm owner that their property is worth millions, but the reality is that your property is only worth what buyers are willing to pay. You have to pay attention to the market in your particular location. A 15-acre property with a 10-stall barn, a state-of-the-art indoor arena, and an updated farmhouse in one zip code may be worth far less than an identical property just one zip code over. Residential sellers see this all the time and have come to expect it. One neighborhood is more in demand than another and so the home prices are higher for homes that are otherwise identical. Farm owners tend to think about the community as a whole because there are fewer comps to draw from. As an equestrian, I understand the tendency to think about the equestrian community as a whole in the county or even the state, but farm buyers still care about location. In some ways, it is even more important to them. Access to grocery stores, gas stations, thoroughfares, and veterinary care are major draws. A farm that is conveniently located along commuter routes will be worth more. I have seen stunning farms that would be worth 800K if they were to be picked up and moved just a few miles over, but the lack of demand in the area means that buyers just aren’t willing to pay that amount no matter how nice the property is. If a seller really needs to sell, they will have to list at an amount that will bring in offers.
Acreage. This is an obvious one. The size of the property will be a determining factor in price. Price per acre will depend on the area and the zoning so do a bit of research before you list.
Outbuildings. Farm owners who have put a lot of money into building barns and arenas are tempted to add up the costs in order to come to a price for the property. Unfortunately, improvements on a property don’t necessarily mean you will make money at the end of the day. Nice barns and arenas will certainly increase price, but don’t expect to recoup the cost in the sale.
House. The same goes for renovations in the house. If you plan to renovate for your own use and enjoyment, then do it! If you are renovating with an eye on selling, be careful going all out. Not all renovations are worth it. It may be worth updating a dated kitchen, but keep in mind that what was there had value. A 50K renovation to a functional, but dated kitchen may only really add 25K worth of value. In many cases, you’ll be lucky to break even when you sell. Come up with a detailed plan and budget for renovating so you don’t overspend.
That being said, the house does play a huge role in pricing a farm. An in-law suite or grooms’ apartments are a major plus. Updated kitchens and bathrooms are nice, but they don’t need to be gold plated. If you are custom building with the intent to sell one day, keep in mind that many farm buyers are uninterested in large homes, preferring instead to purchase a property with a moderately sized 3-4 bedroom farmhouse.
The lack of comps for farms means that there is a bit of a range in the price that farm sellers can get away with. A few thousand dollars will make less of a difference for a farm than for a residential property that has plenty of comps. However, it is common for farm sellers to list hundreds of thousands of dollars above where they should in the hope that an offer will come along. Keep in mind that the longer a property sits on the market, the lower the offers will become so it is important to get the price right the first time you list. Pay attention to sales in your immediate area, do your research, and work with an agent who has experience with farms and you should be able to come to a reasonable price.