Land is a factor of production which is critically important.This important arises out of the fact that land is the original source of all material wealth especially when you consider the Agricultural sector. Below are some critical tips which can guide you in buying farmland.
Plan Ahead – It is important to be very realistic when looking for a piece of land.The type of property you purchase will have a large effect on the size of down payment as well as how much you have to subsidize. More productive land offers more income potential so it requires less off-farm income.The more “recreational” the property, the more you will have to invest or subsidize.
Determine Your Financing Needs – If you are a cash buyer, you can simply look at property with a price tag that compares with the amount you want to invest. If you need to finance a portion of the purchase price, it is vital that you meet with a professional in the rural lending world. Your current banker may be a great source for loaning money. One thing to consider when evaluating the farm with your lender is how much revenue the farm is making.
Soil Type and Drainage – Ask questions about the soil type. Ask for any recent soil tests, or request a soil test. A soil test will provide a report of the nutrients present or missing from the soil. If you have to add additional nutrients to the soil to bring it back up to a tillable state that will cost you more money.Evaluate the percentage of tillable acres versus the total acres on the farm.
Working with a realtor – Unless you hire a buyer’s agent, the realtor is getting paid by the seller and is working for them. However, they bring a lot of information and will only get paid if the sale occurs. Realtors can offer a vast amount of information to help you. They will set up the closing and help both the buyer and seller meet the demands of the written contract. Real estate closings can be very complex. Realtors will be able to explain a lot of the procedures and work out who will be responsible for certain expenses of the transaction. This will include closing fees, document preparation, accruing real estate tax liabilities and recording fees.
Insurance – Title and flood insurance are critical when it comes to land ownership. Title insurance ensures your ownership of the farm in the amount that you paid for it as long as all of the items listed as exceptions are corrected. This may include transferring ownership by legal deed, or the seller having a deed of trust removed. The cost of the insurance can be very expensive depending on the type of buildings. Determine whether any of the buildings have suffered damage in prior floods and how the repairs were made.
Property Boundaries – Nothing is worse than finding out you didn’t get what you paid for. Unless you want to have a survey completed, no one will ensure the number of acres you are buying; they will ensure a legal description. It is important to pay attention to this aspect.