Selling your farm: how to maximise its value and saleability
If you’re looking to sell your farm in the next few years, now’s the time to start planning and preparing for the sale. What are the most important steps to take when getting ready to sell your farm?
April 6, 2023
Thinking of putting your farm on the market?
If you’re looking to sell your farm in the next few years, now’s the time to start planning and preparing for the sale. The sooner you seek advice and start making improvements to your property, the better chance you have of selling it easily – and for a good price.
In this article, rural valuer Rowan Cambie outlines the most important steps you should take when getting ready to sell your farm.
The importance of getting everything up to spec
In the past, it’s been fairly common for farmers to start winding things down and letting maintenance slide when they know they’re going to sell their farm within the next decade.
And up until the last few years, this approach has generally worked out okay. Until recently, buyers were essentially just paying for the land – they weren’t particularly focused on the buildings, infrastructure and consents a farm had in place.
But these days, this kind of approach can get you into trouble once you put your farm on the market, as buyers are much more discerning now.
The current buyer mindset
If a buyer is going to pay top dollar for a farm, they want to make sure it’s nicely presented, has been well looked after and that it’s making a good profit.
Maintenance deficits won’t necessarily affect the value of your farm, but they have a large impact on saleability.
If there are two farms up for sale, the one that’s better presented will be much more likely to sell. It may not sell at a significantly higher price than the other (if both farms were sold), but it will be the one that gets the bulk of the offers and gets the sale more easily.
Why has buyer mindset changed in recent years?
Over the last few years, the average value of farms in New Zealand has increased significantly.
Buying a farm is now a $7-10 million investment in many parts of the country (even higher in some regions), so most purchasers simply aren’t willing to buy something that’s run down.
Two or three years ago, buyers would overlook things like substandard housing or fences that were in disrepair – but not anymore.
The capital required to get into farming is relatively high now, so buyers aren’t as willing to purchase a farm that needs work.
When should you start preparing your farm for sale?
If you’ve had a long-term maintenance programme in place and everything has been kept up to spec, all that may be required is a few small touch-ups and it’ll be ready to go on the market.
In reality, however, most farms need a lot more work than this to maximise value and saleability. If this is the case, we’d suggest that you start working towards the sale two years out.
If your farm needs quite a bit of work done and you attempt to just spruce it up over the course of a weekend and then put it on the market, you’re probably going to have trouble selling it (unless you’re willing to accept a heavily discounted price).
It’s better to take a longer approach and spend 12-24 months getting things right before you present it to the market.
Dipping your toe into the market just to see what happens might have worked ten years ago, but it’s not a good approach anymore. There’s a limited pool of buyers with deep pockets, so you don't get a second chance to make that first impression.
Once you've presented your farm to the market, there’s essentially no going back.
What kind of improvements should you make?
When preparing your farm for sale, make sure you have all of the following up to scratch:
- Housing – all houses and worker cottages should be well maintained and up to Healthy Homes Standards
- Soil testing – if you haven't been doing regular testing, take the opportunity to do at least two or three soil tests before putting the farm on the market
- General utilities, like sheds – often it’s just a case of demolishing and removing any old sheds and tidying everything up
Effluent consents, in particular, are an important thing to get sorted. They’re not overly expensive, but it’s a cost that buyers generally don’t want to pick up.
Housing can also have a significant effect on saleability. If you’ve got a few houses on your farm and one of them is really run down, you’re usually better off demolishing the one that’s run down and doing the others up a bit.
A good tidy-up of the common areas can go a long way too. When you’ve had your farm for years, you tend to stop noticing the areas that look untidy, so it pays to take a good look at common areas (like the space around the dairy shed and tanking units) and do whatever you can to spruce them up. Often, it’s as simple as getting rid of rubbish and scrap metal.
How we can help
When you’ve been working on your farm day in, day out for many years, it becomes difficult to see it through fresh eyes like a potential buyer will – and this is where outside advice can be really valuable.
It’s a good idea to speak with a valuer around 12-24 months before you’re ready to sell, as we can give you an objective look at improvements you can make to increase your farm’s value and saleability.
We have the largest team of rural valuers in New Zealand, with valuers located throughout the country. Whichever region you’re in, we’ve got you covered.
This article was originally published by TelferYoung