With a rise in the popularity of land being sold off-market, Charlie Evans, of Strutt and Parker, looks at the pros and cons of marketing land privately or on the open market.
Increasing numbers of landowners are looking to sell land or farms privately, rather than on the open market.
Over the past few years it has become more popular for farms to be sold ‘out of the public eye’ without any advertising, according to Strutt and Parker head of estates and farm agency in the South West Charlie Evans.
In 2017, 26 per cent of the farms and estates Strutt and Parker sold in England were ‘off-market’ transactions, compared to just 12 per cent in 2015.
Mr Evans says there are varying degrees of privacy involved when it comes to private sales.
The most common is a sale without advertising, publicity or editorial comment about the property.
With some private sales, a brochure for the property is widely distributed so it is well-known about in the market.
However, other deals were so confidential the only parties privy to the transaction were the buyer and the seller – as no other potential buyers were approached.
Mr Evans identifies two main reasons for the rise in off-market sales.
“The first is uncertainty about land values, given the wide range of prices currently being achieved, with demand being highly location-specific.
“Landowners would like to sell, but at the right price – and realise that if a property is marketed openly, but is perceived to be overpriced, then the property could stick and they will be on the back foot during any negotiations.
“Testing the market, without exposing the farm to the public glare, means if a private buyer does not emerge, the owner has kept their powder dry for an open-market launch when they are confident market conditions are right.”
A second reason is there are very few active buyers in the current market who are not already known to selling agents, with many of them looking to roll over development money from another land sale.
“Good agents will know who the most interested parties will be and will be able to identify the likely purchasers of a property before it goes to market, whether local or from further afield,” he says.
He adds this makes it more important for buyers to contact a range of agents when they start looking or they could be missing out on opportunities to buy.
“Some may also consider using the services of a property-finding service.”
Mr Evans says if a vendor offers a buyer an exclusive opportunity to purchase a property without the threat of competition, then it is sometimes possible to secure an exclusivity premium on the price.
“It is by no means the norm, but there are a number of off-market sales ongoing which have been agreed on this basis.
“It requires the owner to be confident they have the ideal property for a particular buyer and that the buyer is sufficiently keen to be prepared to pay extra to secure the property.”
But while selling privately is right for some owners and some properties, it is not suitable for everyone so openly advertising farms will continue to the most popular approach.
Advertising land openly is the only way a vendor can be confident they have achieved the best price possible.
“If the objective is to maximise the sale price, this is important.
“For example, this is vital for trustees so they can demonstrate they have fulfilled their duty to the beneficiaries of getting the best price available,” Mr Evans says.