TIPS FOR SELLERS

Act now

If you have finally arrived at the decision to sell, then act in time. I have met property owners who have toyed with the decision to sell their farm for two to three years. I know by their demeanour that it’s been an extremely difficult hurdle – you can see the nostalgia in their eyes. After all, it has been the family farm for generations. But once the decision has been made, start acting.

Approach your chosen selling agent and discuss every little detail with them. Remember, a lot of work (Land Registry maps, surveying, brochure etc) has to be completed before your farm appears in the paper, let alone before the auction. Approach the auctioneer at least three to four months in advance of your proposed selling campaign.

This gives you both plenty of time to get organised and deal with any hidden problems that might arise.

During the first meeting with the auctioneer, you should also discuss fees. Auctioneers generally work on a percentage basis. The commission on farmland is generally around 1.5%, depending on the size of the farm and the level of work involved. It’s worth negotiating a fee with your agent at the very start – at least you know where you stand. You will also have to pay VAT at 23%. Fortunately, both the fees and the VAT can be offset against capital gains tax.

The next step is appointing a solicitor for carriage of sale. The solicitor will prepare all the legal documentation and compile the conditions of sale. The fees for a solicitor will vary. Some will charge on a per hour basis. If there are any difficulties with items such as title or folio numbers, further work may be required. A solicitor may not be able to tell you their fee until all the paperwork has been finalised.

Timing

Decide when you will go to the open market. This might be determined by the weather and the presentation of your farm. You want it looking its best, so if the spring is too wet, then the autumn might be a better option. The spring season generally kicks off in March and follows through to June and even into July. The autumn season starts in September and begins to quieten towards the end of November. There is no evidence to suggest that either season is more favourable in terms of better prices.

The autumn can be just as good, if not sometimes better, than the spring. If your potential buyer is a farmer, then the weather can also determine his buying patterns just like it can determine your time frame to sell. If the weather has been unfavourable and farmers are short of fodder – as happened last spring – then buying land is likely to be the last thing on their minds. It can be a challenge sometimes to pinpoint the right time to sell, but once you have decided on a timeframe, stick with it.

Presentation of your farm

I have travelled the country to view farms over the past decade and, to be truthful, their presentation has been mixed. Interestingly, I found that during the boom years, the majority of farms were presented in immaculate condition because, in many cases, the owner was selling to cash in his assets at a time when the market was extremely buoyant and highly inflated. Back then, I always looked forward to meeting the owner of a property because I came away with a more in-depth insight into his farming practices and his reason for selling. During that period, a significant number of farmers, particularly those with no heirs, sold their properties for exorbitant prices.

As the recession hit in 2008, these types of sellers gradually diminished as land prices began to tumble from the dizzy heights of 2006. The type of seller mix changed dramatically and for the past five years, land sales have been dominated by executor and receiver sales. When I visit a farm now, I rarely meet the owner. Farm presentation can vary a lot. In the case of an executor sale, the owner may be deceased for a number of months or years and the farm can be left neglected. Remember, first impressions last. Simple husbandry practices such as cutting back ditches, hanging gates/posts, cleaning the moss and weeds off the yard, topping the land, whitewashing or opening up a few drains to let land dry out, are well worth the effort and expense. It might cost a few thousand euro but it may be the difference in finding a buyer and, more importantly, in getting the asking price.

A portion of the receiver sales in the current climate are owned by companies or syndicates who have no sentimental attachment to the land. In some instances, the property can become derelict because it has been unused for a number of years. Hence, by the time the decision is made to sell, the property can look wild and unattractive.

Having said this, I have visited some stunning properties over the last few years that were in superb condition. There is no guarantee that a pristine property will command top dollar, but it certainly makes it easier to ask for a premium. You only have one chance at ever selling your property. My advice – give it your best shot and don’t cut corners. After all, you want to get the best price.

Method of sale – auction or private

Discuss the selling options with your chosen agent. Sometimes this can depend on the type and quality of your property. Public auction is back in fashion. The main advantage is that it is transparent and quick, it brings all interested parties to a head in the same room, and, as the seller, you know exactly how much it is making. If you are not happy, then you have the option to withdraw and negotiate privately afterwards. The majority of executor sales tend to go to public auction and generally sell under the hammer. If using the auction route, the selling agent should ensure that the auction date doesn’t clash with another farm auction in the same area.

However, if you are uncomfortable with the public route, you can opt to sell your farm by private treaty. It’s less transparent and you won’t know when your farm might be sold, but sale details will not be disclosed.

Few farms are offered for sale by tender. This process involves the submission of a written offer by a certain date. The highest offer generally secures the sale, but this can be at the discretion of the owner of the property.

In recent years, there has been a growing number of off-market sales. By this I mean that the properties are never publicly advertised. Instead they are placed on an agent’s books and the agent then has to match the property to a potential customer on his client list or, alternatively, source a new buyer. The process is extremely private and no details are ever disclosed. In some instances, neighbours are not even aware that the property beside them has been sold.

Sometimes, if a seller has not fully made up his mind, he might put the property on the web or place a small ad in the paper in a bid to feel the market and determine the potential interest in his property. This is not something I would particularly advise. It’s amazing how quickly a buyer will figure out if a seller is genuine or not. And if a seller isn’t genuine about selling, buyers will back off very quickly as word gets out. In my view, this can completely destroy a sale and perhaps make it very difficult to sell in the future.

Lots or entirety

The seller will also have to discuss with the agent about potential lots. If the farm benefits from extensive road frontage, then it may be conducive to being offered in a range of attractive lots. Generally, smaller lots are more appealing and more affordable to a wider audience. However, over the past 12 months, there has been a notable lift in demand for big blocks of land (from 50 acres to 300 acres). People with cash on hand are willing to pay handsomely for big lots, provided they tick all the boxes. If circumstances allow, agents will generally offer a farm in one or a number of attractive lots. By doing this, they can determine the level of interest in both the lots and the entire, and subsequently decide which direction the auction should take from there.

Advertising

The key to selling anything is making people aware that it is for sale. Your selling agent will talk you through the advertising options but the main forms are local newspapers, national newspapers and the web. And in recent years, I have heard advertisements about upcoming auctions on local radio stations. During the boom years, auctioneers almost had a free hand as to how much they spent on advertising. However, when the recession hit, the purse strings tightened substantially and, in some cases, there was no budget made available by the seller for advertising.

The cost of advertising is borne by the seller and is on top of the auctioneer’s fee. It is critical to discuss a budget. Generally, a preliminary sale notice is followed by two to three ads in the local and/or national newspapers. The advertising budget will also include the creation and erection of ‘for sale’ signs, the compilation of a brochure, and the placement of the property on a range of property websites, including the agent’s own website.

Brochure

The quality of a brochure can range from a top-of-the-range glossy laminate to a single sheet of A4 paper. In my view, there is huge variation among selling agents and some leave a lot to be desired. The brochure is generally the first port of call for a potential buyer, whether it arrives electronically or by post. A brochure can be the difference between deciding to go for a viewing or not. I firmly believe that time and attention should be given to the brochure. Taking a professional aerial photograph of the property is getting more common but this comes at extra cost (€350 to €500). However, if you have a real gem, I think it’s worth it. Pack the brochure with pictures – these tell the real story. Apart from the vitally important but more mundane particulars such as location, size, maps and auction date, give details (where applicable) of previous cropping history, the farming system (eg spring or autumn calving), background to the residence/family or any major farm achievements or awards. These make for good reading, but don’t overfill it with editorial either. Remember, it can take a few weeks to prepare and print a brochure – it is advisable to have it ready by the time the first ad appears in the paper. A special glossy brochure will incur additional cost in the region of €300 to €500.

Guide price

Once an agent has walked your property, he will provide you with a written valuation. You will have to agree with the agent on the actual asking price or reserve for your property. This is different to the guide price, which gives an indication to a reader as to what the farm might be expected to make. Keep your expectations reasonable relative to the calibre of your property. Remember, you don’t want to scare off any potential buyers.

Selling campaign

If you are going down the public auction route, the selling campaign can be as short as four to six weeks. From the time your farm appears in the paper to the date of the auction, you are only talking weeks. This period can be quite intense for the seller. It involves a lot of viewings – these are generally conducted by the selling agent and are usually by appointment only. However, once the ‘for sale’ signs go up, people will dare to walk or enter your property, so be prepared for this. It is best if the owners are not present during a viewing – this allows the viewers more freedom to ask questions and perhaps gives the selling agent some clue as to the sincerity of their intentions.

Auction day

This can be an extremely anxious moment for the seller. Most auctions take place in the afternoon and generally on a weekday (there are some Saturday auctions) in either the selling agent’s own auction room or in a hotel. The owners of the property are normally accommodated in a private adjoining room on the day of the auction.

Before the auction takes place, the solicitor will read out the conditions of sale and if there are no questions, the auctioneer will proceed with the auction. There may be a number of recesses throughout the course of the auction to consult with the vendors.

If a successful sale is reached, the purchaser is required to pay a 10% deposit on the day. The sale generally closes four to six weeks after the auction, at which stage, the purchaser pays the balance. The actual closing date is read out by the solicitor during the conditions of sale. However, due to unforeseen events, especially those relating to probate, the closing date can be severely extended.

In some cases, a private deal can be struck prior to auction for an undisclosed amount. In this scenario, the seller should ensure that the contract is signed well in advance of the scheduled auction date for his own security and peace of mind in case the sale falls through. Potential buyers, on the other hand, should watch the papers to see if an auction has been cancelled.

Depending on the financial capability of the purchaser, a private sale can take much longer to close – sometimes months – as the buyer may have to wait to draw down a loan to pay for the farm.

Tips for buyers

Be financially prepared

The key element for any buyer is being prepared. Unless you have cash on hand, sourcing finance in the current climate is likely to be challenging, tedious and time-consuming. If you intend to bid at an auction, remember you will have barely six weeks to get your finances in order. Act in time. Talk to your financial institution and accountant to see if such a proposition is feasible. Repayment capacity is paramount. Depending on the bank, you will be required to come up with some capital yourself (perhaps 30% or more). Ask about the interest rate options and the level of security the bank will require. Remember, you will need approval by the time the auction date comes around. In some instances, approval can take months, which is not much good to you if the auction is in six weeks. You will also likely have to pay the bank’s solicitor’s fees, your own solicitor, and an auctioneer for any valuations that need to be conducted. Be prepared for all these extras.

Walk the farm

Arrange an appointment with the selling agent to view the farm. Alternatively, if you are familiar with the area, get a brochure and map from the auctioneer and walk it yourself. Figure out the boundaries. Get a feel for the layout, the access and the quality. If the house and yard is a major part of the sale, make an appointment to see the interior of the house and check out the farm buildings. Brochures are extremely useful but nothing will beat you seeing it for yourself. Walk it a second time if you need to and bring someone along to get their reaction.

If the house forms a major part of the sale and work is required, get it professionally surveyed, particularly if it’s an old residence.

Local knowledge

If you are not familiar with the area, it is worth trying to delve into the history of the property you are considering to buy. Use whatever contacts you have to gather as much local knowledge as possible. Is it a bank sale? Is it a NAMA sale? Who are the owners now? If it is owned by a syndicate or a company, is it possible to talk to the previous owner? What is the reason for selling? Were there ever any quarries/bog holes/ancient burial grounds on the farm? Are there access issues? Are the neighbours easy to get along with? What is the soil type? What is the lie of the land?

Seek goodwill

In my view, I think it is imperative to get “goodwill” with any purchase and in particular with a farm. When you invest hundreds of thousands and millions of euro in a property, you will want the operation thereafter to run smoothly and be progressive. Is the seller a willing seller? Are there any underlying negative feelings associated with the sale? Is there any bitterness? Where there is not goodwill, it may not be wise to proceed with the purchase.

Research future plans for the area

Again, if you are not local, it is worth going to the county council office to find out the future plans for the area. Take a map of the farm that you are thinking of buying with you to pinpoint its location.

Has planning permission been granted for a dump/quarry/television mast/factory/pylon close by? If so, will the noise, smell and disturbance affect the property? Are there any proposals for road widening and will it involve taking margins off the farm? Has the farmer next door submitted planning for a piggery or a windmill? These things may or may not annoy you but it is still good to be aware of them before you make the purchase.

Also check out local amenities – schools, bus/trains routes, supermarkets, playgrounds etc. If you get a chance, talk to the locals.

Conditions of Sale

If you are serious about buying, ensure you get a copy of the conditions of sale from the seller’s solicitor before the auction. This will outline the title, rights of way, turbury rights, wayleaves, vacant possession, farm payments, folio numbers, clauses etc. Sometimes it can be hard to follow the legal jargon in these documents, so it is worth getting your own solicitor to look over it.

If the farm has been rented or leased prior to coming on the market, find out if the tenant will have vacated by the time the sale closes. If not, then will the new purchaser be eligible for an apportionment of the rent until the lease matures?

Also enquire if the barley crop or the meadow is included in the sale. If not, can it be purchased by the new owner at extra cost? Also, if the entitlements are not included, can they be purchased separately?

Stick to your budget

Auctioneers generally provide a guide price for a property to give you an indication what it is expected to make. This is not the same as the asking price or the reserve, which could be much higher. By the time the auction arrives, you will know how much you can borrow or what your financial ceiling is. It can be easy to get carried away at an auction, especially if the bidding is brisk and the momentum is strong.

Granted, if the situation arises where the farm is making €10,000 or €20,000 over your budget, it may be worth being prepared for such a scenario by having a contingency plan in place. After all, €10,000 may be the difference between making a purchase or not. But, don’t go wild. If the property excessively exceeds your budget, let it off. Don’t put yourself and your family into a financial situation that will cause stress and worry for the rest of your life.

I have learned that there will always be land for sale – another farm or field will arrive on the market. It may not be the piece you would have preferred but it may come at a more affordable price. Let circumstances dictate your buying ability – not your head and desires.

Have the cheque book or bank draft ready

A lot of people hire an experienced solicitor or agent to act on their behalf at an auction but there is nothing from stopping you bidding yourself. If you are the successful buyer, a 10% deposit will be required on the day and you will also be asked to sign a contract. This deposit is non-refundable should any issue arise after the auction to cause the sale to fall through. The balance is then paid at close of sale, which is generally four to six weeks later (provided there are no issues). In a private treaty sale, however, if for some reason you decide not to proceed with the purchase, you will get your 10% deposit back.