Buying a farm is no small feat. Especially if the farm you want is for sale at a public auction. Mr. Martin and I are going to go after a farm property at auction this week. I’m excited and terrified all at the same time.
We found the listing earlier this month. In one night we kicked around ideas on what our max bid could be. How did we come up with that? Well to be honest – it’s a wild a$$, best guess.
There were a couple of things we considered. One major point of consideration is the type of farm. In this case it’s pasture, hay and has a house and some sheds. Set up just right for a small size cow/calf operation. So in theory it shouldn’t bring as much as straight crop ground.
Some top notch pasture ground in our area has been going for around $4,000+ an acre. Next we consider the house and buildings. This farm has a house built in the 1930’s and it has some oddness, which we are hoping will make it a little less appealing to most. The sheds are really nice! All the buildings add value.
Finally we found a plat book and checked out the neighbors. This farm has some pretty big operations around it. Why are we considering this? Well to be honest in my humble opinion – all farm auctions have a couple of wild card factors; sentimental value and neighbors. I don’t know if there is an aggressive farmer in the area who has to have all or if it shares a boundary with someone who would want to, “square up” his farm. I don’t know if there is a dispute between siblings and this could be the, “home place” up for sale. These two factors can turn ordinary auctions into bidding wars and things can get stupid expensive in a hurry.
I don’t necessarily begrudge these people who can keep bidding, and bidding. We’ll maybe I do a little because it is frustrating. If more farms were sold privately I honestly believe we could get more young farmers into the picture. It would take a couple of those wild card factors away and maybe make things a little more fair. But life is not fair….officially getting off my soapbox.
Ahem….So taking all this in and all the what if’s, we put together the max offer we think would be reasonable for us.
The next night I actually penciled out a budget. With the help of an online amortization schedule and checking out my local banks interest rates I got a pretty good idea of what we can expect in a payment.
If you have never considered buying a farm something you should know is that most banks require 20% down of the agreed upon price. We’ve been saving for a long time and also have some equity in our current residence. We are lucky and in our situation our local lender is willing to work with us and help balance the needed cash down should we win the bid.
Some programs offered through the Farm Service Agency are designed to assist those who do not have a down payment and may not obtain credit through traditional means. But those programs are really hard to use when the real estate is offered at auction. Auctions also typically require 10% down day of sale. Something a local FSA office could not provide. But that is neither here nor there.
In this case we figure high on the max bid and go from there. By figuring high we know anything below that max bid should be affordable. It also gives us a number to talk to our lender about. It’s important to be prepared when visiting with loan officials. Anyone can come into an office with a broad goal and a dream. Do your homework. Put together projections and estimates!
So now we have a green light on what we can offer at the auction this week. We may be out of the race with the opening call. We will have to see.
But hey a girl can dream.
To be continued…………………….