How to choose the right way to sell your farmland
© ING Image Digital marketing and bureaucracy have changed the way farms are now being sold in the UK.
Auctions were once the preferred method and do remain a popular route for selling small farms and blocks, or in specific circumstances, such as probate sales.
But the ability for agents to reach a global audience when advertising a farm sale online has boosted the popularity of private treaties.
See also: Suffolk estate on market for first time in more than 100 years
Informal tenders are still used regularly but formal tenders – where successful bids are legally binding and must include a deposit payment – have limited appeal.
Strutt & Parker farm agent Kezia Hart said: “With internet marketing, buyers can now look at UK farmland anywhere in the world.
“Private treaty affords sellers the greatest degree of flexibility and time. They can choose to enter negotiations early or wait to compare offers.
“Previously the market would be more about local buyers and a set date for auction was the obvious method.”
Richard Nocton, partner at Woolley and Wallis, said the rise in popularity of private treaty sales was also due to the increase in off-market farm sales.
“This method helps buyers and sellers negotiate and reach deals to suit both parties,” he said.
He added that the level of due diligence and legal considerations meant potential buyers needed more time to prepare bids.
“There’s a lot more to a farm sale than there used to be: BPS entitlements, nitrate vulnerable zones and stewardship schemes, for example.
“These details and checks take time to work through and a hard deadline for formal or informal tenders can be a barrier.”
How to choose the right method for you: Kezia Hart’s guide
Private treaty
- Farmland is marketed, with offers invited at any time
- Sellers can choose whether to enter negotiations early or wait for competing bids
- Useful for lotted sales or where buyers need to make arrangements ahead of making an offer
- Flexibility means sales can be concluded by best or best and final offers
Informal tender
- Set marketing period followed by a deadline for written tenders
- Vendors can compare all offers on a like-for-like basis
- Sellers are not bound to accept any offers and can enter further negotiations with an interested party
- Offers are not legally binding
- Encourages purchasers to commit to and conclude a sale, but maintains flexibility on timescales and further negotiations
Formal tender
- Sale is advertised and deadline set for written bids
- Each tender received includes a legally binding contract and accompanying deposit
- Once a bid has been accepted, the deposit is taken and sale contracts are exchanged
- Both parties are legally committed and must complete the sale on a specified date
- Failure to complete means the deposit is lost and additional fees may be incurred
- Rigid structure is less popular in modern markets, but rate of progression is higher due to legally binding nature
Auction
- Guide price set, but farmland is sold to the highest bidder at the auction
- Viewing days are held for interested parties and a legal pack is made available
- The successful bidder is legally bound to purchase the property on the fall of the hammer
- A deposit is usually required on the day of auction
- Commission fees are due for both buyers and sellers, and both parties must complete the purchase on the stated completion date, most commonly four weeks afterwards
- Purchasers must have arranged any finance and undertaken due diligence prior to the auction
Dutch auction
- Rarely used for farm sales, the opening price is set high then reduces until a bidder in the room raises a hand