Are you getting ready to sell your farm and you have no idea what the price should be? I totally get it. Every farm is custom built. Factors such as the outbuildings, acreage, location, layout, and the dwelling affect price in a major way and there may not be any true comps with which to determine price. How do you decide where to start?
Market 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 conditions 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 buyers still care about location.
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. Wooded acreage will carry less value for farm buyers. Conservation easements also have a significant effect.
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, the market doesn’t really work that way. Don’t get me wrong, nice barns and arenas definitely increase value, but you still need to be mindful of market trends.
House. The same goes for renovations in the house. Upgrades increase value, but you may not always get a dollar for dollar return on all renovations. So if you plan on renovating ahead of selling, be careful. This is where having an experienced agent walk through and advise on which projects to take on and which projects to skip can be very helpful. I know that a lot of farm sellers are surprised at how much the house matters since many farm buyers spend more time looking at the land and exterior amenities and they plan to live in the barn, but keep in mind that there is often a non-equestrian party involved in the purchase as well. The size and condition of the home is a major component in pricing.
The lack of comps for farms means that there is often a range 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 identical comps. It is common for farm sellers to list hundreds of thousands of dollars above where they should with the idea that they leave room to negotiate downwards. This only guarantees that you will be negotiating downwards. Overpriced properties sit and the longer a property sits on the market, the lower the offers will become. By pricing it right the first time around, you stand a better chance at a quick sale with offers at or above asking. 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 price it just right.
Sarah is a Realtor specializing in residential and equestrian properties. She is based in Howard County, Maryland.
Posted by Sarah Lipkowitz on
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