Starting Your Farm: Chapter 3
The Small Farmer’s Journal has decided to run editor and publisher Lynn R. Miller’s book Starting Your Farm as a serial series. Below is Chapter 3.
“Men stumble over the truth from time to time but most pick themselves up and hurry off as if nothing had happened.” – Winston Churchill
Measuring and Researching
In the last two chapters we discussed “Who wants to farm” and “The cost of farm acreage.” In this chapter we will discuss finding and learning about your future farm property.
WHERE TO LOOK FOR FARMS FOR SALE
After you have decided upon an area or region the all too simple way to proceed is to read real estate advertising and talk with local real estate agencies. It is my personal experience that to limit your search to listed advertised properties is a mistake. Especially if you have made a firm decision on just where you want to settle. Often people new to this process will make the mistake of going to one real estate office, describing their needs and accepting whatever agency offers, by way of information, as a complete view of just what is available. My wife and I knew we wanted to settle exactly where we are and asked local real estate agencies for help in locating available properties. We were laughed at and sent away time and time again. We were told there was no such property available- period. We almost gave up when an out of town realtor returned our call and suggested we come by and pick up a map to a remote, barely accessible, ranch property EXACTLY in the area we wanted. He said it wasn’t listed YET but thought it would come available soon. With is help we made an offer the very day it was listed and the rest is history.
Besides checking the ads and listings, drive the back roads, meet and talk with local folks, and visit the county seat and ask about acreage that night come up for auction sale because of unpaid back taxes. You are looking for people who MIGHT be selling soon, who are selling PRIVATELY without a real estate listing, who may be holding on to an abandoned farm property with the idea that no one would be interested in it, or who tried for a long time to sell and have tired or given up on the process. You need to leave your name and address with local banks and lending institutions with the information that you are looking to buy. You need to post little ads of your own stating what you are looking for. You need to snoop around.
You might find a farm or farms which are listed with real estate agencies. You might find farms which are for sale by private individuals who prefer not to deal with real estate agents.
You might find abandoned properties which belong to absentee owners including banks or holding companies who would be willing to sell or trade. Etc, etc… And each may require a different approach.
You may in your inquiries find realtors who have no listings that match your needs but who are quick to offer their services to you in finding a property. That is okay, HOWEVER if the realtor should ask of you that you sign a contract designating him or her as your agent I suggest it would NOT be in your best interest to do so.
Once you’ve found a farm you’re interested in, the work really starts. Now it’s time to research it and measure it against your needs and circumstance. Buried in this chapter is a master checklist which will hopefully ease what can be a trying process.
AFTER LOCATING A FARM PROPERTY
WITH A REALTOR
If the farm you’ve found is listed with a real estate agency you might be able to have them assist you in your work. But remember: REALTORS, and Real Estate Agencies, WORK FOR THEMSELVES, not for the buyer, not for the seller. They will almost always push to close a sale as fast as possible whether it’s to you or someone else who happens along. If you end up buying the wrong farm, or the right farm the wrong way, and find yourself in difficulty the realtor will still get his or her commission. Your best interests are not necessarily theirs. The honest, easy-going, intelligent real estate agent is rare. Be on your guard.
So first, let’s proceed as though a realtor were involved:
1) Get a copy of the listing agreement.
2) Ask if a recent title search has been done on the property and, if so, get a copy of the results.
3) Name and address of owner if somehow missing from listing agreement.
WARNING: DO NOT LET A REALTOR TRICK YOU INTO A PREMATURE ‘EARNEST MONEY AGREEMENT’ BY SUGGESTING IT’S THE ONLY WAY THEY CAN RELEASE THE ABOVE LISTED DOCUMENTS. SIGN NOTHING WITHOUT A REVIEW BY A KNOWLEDGEABLE THIRD PARTY (preferably a lawyer).
If a realtor is unwilling to provide the above information, suspect a problem with either property OR realtor OR both. (A good realtor will understand the necessity for this information and will work aggressively to anticipate all the questions you might have so as to be prepared. This is to the realtor’s best interest because it expedites the inquiry process and can speed a sale without undue hassle. If you get lucky you’ll find such a realtor and cut your “investigation” time way down.
Assuming you’ve got the documents, look for the answers to these questions:
A) Who actually owns the listed property? What is the asking price? Does the seller require cash in full? Will seller allow a percentage down payment with owner financing? What down payment amount is required? What nature of owner financing (i.e. land sale contract, deed of trust, etc.) is acceptable and sought? Is there an existing mortgage against the property and is it assumable or transferable?
B) What is being bought? Exact acreage? Some paper evidence or any conditions as in guarantees of production levels or statements as to “sold as is” (more on this later). Improvements specified? A complete listing of all items to be included with purchase as well as those not going with property (i.e. portable outbuildings, irrigation equipment, above ground storage tanks, etc.)
C) Is anything currently owed against the property? What manner of contract security is involved? Are there any liens currently held against the property and by whom? Any collateral pledges as guarantor for other transactions? (Later, we’ll talk about STATUS of above.)
D) Any easements recorded? (more later)
E) Any rights withheld? (i.e. mineral or timber rights not transferring or transferrable and easements related to same)
F) Water rights recorded and filed? Age of same (more later)
G) Property taxes? Any in arrears?
H) Relevant districts? School, etc.
I) Any conditions for viewing property and improvements? (i.e. lengthy advance notices and restrictions on subsequent revisits during purchase negotiations.)
In a few paragraphs you will learn the significance of the above questions. Just because you have some paper evidence of this information you will be careful not to bank on the veracity (or accuracy) or it. This is why you will insist on escrow closing with a fresh title search and title insurance when, and if you close the transaction (complete purchase of the farm).
After reviewing this information return to the realtor and request these additional facts:
4) Pertinent local zoning restrictions, (i.e. dust, noise, livestock, restrictions). Now is the time, NOT LATER, to discover that your dream of a broiler or dairy operation would not be allowed by local ordinance due to dust, noise, manure, and fly concerns.
5) Neighborhood information: Churches, Schools, distance to markets, fraternal organizations, proximity to fire protection, etc. Now is the time, NOT LATER, to learn whether or not the general community might be at odds with your religion, value structure or appearance.
6) Cost of utilities, (especially if electrical service is required for some important aspect of the existing or proposed farm operation such as irrigation, refrigeration, etc.
7) Current fire insurance coverage. (If the conditions of the buildings or the absence of a fire district rule out fire insurance coverage you should know this in advance especially if third party financing is required. Often a lender will require fire coverage to protect the security interest, if none is available it MAY result in financing falling through. It is always best to understand this limitation at the beginning of application processes as it may save a lot of headache and expense down the road. We have no fire insurance coverage on our ranch because we have no fire district, however, we were able to finance the purchase with a lender because the borrowed amount was far below the full value of the property.)
8) Wells tested for water purity. (Contaminated water source(s) can make a particular farm seem farm less attractive and even hazardous to your family. It’s a good idea to get this information early on. The tests are usually inexpensive.)
Many realtors will baulk at above requests often for no more better reason than because they are lazy. If the information is provided you casually (as in “oh, sure yeah we checked all that and it’s fine…”) doubt it and require the realtor to verify it in writing.
That done, you will have to dig up a little more. Research the answers to these added questions yourself by talking with the seller, neighbors, experts, and local business people (i.e. farm supply companies and feed store owners).
9) What are the resident soil types? Most recent soil type analysis? When was the last soil fertility test taken and by whom? (This information will be valuable to you in determining what crops may be initially suitable and the degree of soil rebuilding you will have to plan for.)
10) History of serious livestock contagions? (Make a point of checking with the local veterinarian to find out if there have been any serious contagious livestock disease outbreaks in, on and around the farm in question. It could be disastrous for you to move your valuable breeding stock to the new farm and have them all die of an avoidable or preventable disease.)
11) History of farming practices? Nature and extent of agri-chemical applications over last three years? (You will benefit from learning whether or not this farm has been organically, biodynamically or chemically farmed and to what relative degree. Even if it is your choice to farm chemically it is still important to know if large amounts of certain substances have been recently applied and what that might mean to your future plans. And if your plan is to farm organically, chemical residues will have a negative effect on those plans whereas a history of poison-free practices will be worth money to you.)
12) Structural conditions of buildings? (Will you be faced will some immediate and expensive repairs?)