Top tips for farm sales.

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Author: Price, Natalie

If you have sold property before or have a personal relationship, either through livestock sales or farm management, you may already have an agent of choice. If not, it is normal to get two or three agents to visit you and provide sales advice.

Often the advice is similar, with little variation in the costs of sale or the tactics of sale and, therefore, the choice comes down to personality and who you feel you will work best with. It will be tempting to choose the agent who proposed the highest sale price, but often starting too high can put off initial enquiries from potential buyers.

Selling farms is becoming an ever-more specialist discipline as rules and regulations become more complicated and the range of people buying farms broadens. Therefore, it is important to have a full knowledge of potential buyers and also the intricacies of farm agency.

This has become even more important recently in relation to the single farm payment and transfer mechanisms. You also need to consider TUPE regulations affecting existing employees, rights of way, and water supplies, various tenancies of cottages and licences on farm buildings.

Often the vendor has a relationship with a local firm, which might be the regional office of a national firm or an independent local agent. There is a difficult choice as to whether to choose a national agent with the specialist experience in pure farm agency or a joint agency at a higher commission rate respecting the relationship he has built up with his independent local surveyor over many years.

In many cases, the final decision will depend on the type of property being sold and where the potential buyers might come from.

Agents generally tend to take a commission ranging from 1.5-2% depending on the sale. Marketing costs will be extra and would range from £1500 to £2000 for a small property with a simple brochure, advertised once in just one journal, to £10,000 or more plus as the campaign becomes more extensive.

If you use joint agents the commission will increase to about 2.5-3%.

Legal costs will vary according to the complexity of the sale and you should discuss this with your solicitor at the outset.

This is vital. Again there may well be a long relationship between the vendor and a solicitor, which should be respected, but the legal aspect of farm sales is becoming more complex.

Vendors must ensure that their solicitors, who should be appointed at the same time as the land agent, have had recent experience of farm sales, particularly with regards to the transfer of single farm payment entitlements. If not, it may be necessary to advise them to sub-instruct another firm of agents to help with these technical matters or, for the one-off sale, to instruct a firm which has direct experience in this field.

The importance of this cannot be underestimated, as delays in concluding the legalities of the sale can prove costly. This is particularly so if competitive bidding has resulted in an exceptional price being achieved and it is imperative that the momentum of the sale is maintained.

Farms and estates are traditionally brought to the market when they look their best. This is generally thought to be from spring through to the end of October. The peak selling months, when most agricultural property is launched on the open market, are April, May and June and then again in September after the summer recess.

But consideration should be given to alternatives; outside those periods when your property will be competing against a multitude of others available at the time. It is interesting to note that sales launched in January and February each year, when properties have not looked at their best, have focused the attention of buyers when little else is available, resulting in successful sales in quick time frames.

Properties launched early in the year capitalise on the pent up demand that builds over the winter months. But in these circumstances it is best, if possible, to have the farm or estate photographed in the autumn, while the trees are still green and the fields in stubbles or early autumn cultivation.

Although most farms are advertised publicly, a good number are sold privately each year. This may be because the vendor does not want any publicity and it also allows them to "test" the market without incurring too many costs.

But the downside of this approach is that they miss potential buyers who are not known to buying agents and might have been prepared to pay a premium. It is amazing who does come out of the woodwork when a farm is advertised.

Public auction was the traditional way of selling a farm, but is less common now. The advantages are that the deal is done and dusted as soon as the hammer goes down and there is complete transparency.

It is still popular in strong livestock areas of the country, like the north and south west, where buyers are used to bidding at auction. In other areas it can yield good results for properties that might attract a large diversity of buyers, like a set of barns with development potential, for example.

But some buyers are deterred from bidding at auction due to the cost of the due diligence work only to be unsuccessful.

This is probably the most common method now as many of today's buyers are not used to bidding at auctions. It allows the selling agent to negotiate independently with a wide range of interested parties and provides more flexibility, especially if selling the farm in lots.

Where there is strong competition, a date for "best-and-final offers" can be set often using a "sealed-bid" process. This forces potential buyers to offer a price they feel will be better than other bids. But it may not necessarily bring out the maximum they would be prepared to pay.

This is in many way similar to an auction in that potential buyers still incur the cost of due diligence in advance of submitting an offer and on acceptance of that offer the contract is binding.

A comprehensive marketing campaign is essential to ensure that the sale is widely promoted and will attract the previously unidentified buyers. The farms and estates market is traditionally of interest to buyers who have not necessarily registered their requirements with agents. This is more the case where the property is in a part of the country where very few properties of a similar quality have been sold in recent years.

Marketing requires high quality photography to portray the property at its best. So even if you are not planning to sell immediately some professionally taken shots of you farm in its full glory might come in handy.

A quality brochure will attract buyers and also make sure that they know the precise details of the property for which they will be offering. The brochure needs to include a plan of the property as well as floor plans of the principal house.

A careful advertising campaign must be considered, with most farms and estates advertised in the farming press such as Farmers Weekly. If part of a farm has development potential it might be worth advertising in specialist publications like Estates Gazette.

Most agents will also advertise on the internet either through their own site or shared portals. This is becoming increasingly important, as we are finding that buyers from abroad, particularly Denmark and Ireland, are playing a larger role in the market.

The costs of marketing vary, depending on the size and value of the farm. It is particularly important that farms of high value are not made to look insignificant by the production of poor-quality, cheaply produced marketing material that buyers might feel reflects the value and quality of the farm.

Before marketing, agents will advise on what works of tidying, repair and maintenance need to be carried out to help present the farm in the best possible light. It is unlikely these will be excessive, as considerable expenditure may well not be reflected in the eventual sale price, whereas limited works of repair and maintenance at minimal cost can be more than justified.

It is also sensible to investigate any planning potential and other ways to add value the property before selling (see pages 12-13).

Once the property is on the market, viewings should, if possible, be accompanied by a professional member of staff from the vendor's agents. They should have full knowledge of the property and the ability to listen to questions and answer enquiries, portraying the property in the best possible light and getting to know the viewers, their financial ability and desire to buy.

Every sale is different; it has been known for a deal to be wrapped up in a couple of weeks. Conversely, some properties may take over a year before the right buyer comes along. In the current market it is probably best to allow six months from the date the farm is advertised to completion.

It may be necessary to have a delayed completion to allow crops to be harvested by the vendor or to satisfy the 10-month rule for claiming the single payment.

* Appoint agent and solicitor at same time

* Ensure good photographs are available -- making a good impression is vital

* Consider timing -- early launches may attract more attention

* Match marketing and sale method to potential buyers.

* Check out our land agents directory on pages 6-8 to find a land agent near you.

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By Natalie Price, Strutt & Parker

Edited by Andrew Shirley, 020 8652 4920