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Property special: How to divide farmland into lots to meet demand

Splitting the farm into lots can help appeal to different buyers in the market. Savills’ Will Douglas explains how to successfully divide the farm to achieve maximum returns.

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Property special: How to divide farmland into lots to meet demand

Expansion is the main reason for farmers looking to buy land, with the proportion of farmers increasing for the first time in two years during the second half of 2018.

 

These buyers are often looking for bare land. But smaller holdings and those with high amenity value are selling well, with growing interest in lifestyle farms and amenity estates.

 

Will Douglas, associate director at Savills, says with selling farms, the sum of the parts will often be greater than the whole.

 

“Most vendors accept that it is often sensible to lot a farm, where a proportion of the value is tied up in the residential and non-core farming assets,” he says.

 

“This ensures the property is exposed to as wide a market place as possible.

 

“There will be many buyers who are just interested in the principal house and its grounds, but are not in the market for 500 plus acres of farmland and certainly will not pay a premium to own it.


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“Equally, there will be parties interested in the commercial farmland but not the residential element and these potential buyers will probably discount the residential element if the property was only offered for sale as a whole.”

 

And by selling the farm in lots, it could help achieve the maximum price for the land.

 

“It is, however, extremely important not to lot a property too heavily as this can easily put off that one purchaser, who could be interested in buying the whole, but is put off by the prospect of having to buy too many lots, often in strong competition,” he says.

“Lotting a farm also helps potential buyers to see the value in the property. Rather than being faced with working out how a multi-million pound guide price for the whole was reached they are able to appraise the total value from that of the lots.”

 

Mr Douglas adds it also enables deals to be done.

 

“There will be parties who have funds available to buy the main house and the adjoining acres, but do not have the assets or indeed the motive to take on all of the farmland.

 

“The neighbouring farmers often are very keen to buy the bare land in order to add to their existing holdings and achieve economies of scale."

 

Understanding the market and knowing whether there are neighbours in the market for more land plays a big part in the overall package.

 

“Likewise, knowing the main house and grounds is tailor-made for a potential buyer on the books, all contributes to how the property is packaged up for sale,” he says.

 

Tips for lotting

  • Take care to adequately account for cross rights, such as water and access
  • Order of sale – secure sale of the main lot before agreeing others
  • Consider lotting land in varying sizes to avoid flooding the market to neighbours – different sizes, to suit different pockets
  • Do not presume somebody will definitely buy a lot to the detriment of a wider pool of buyers
  • Be flexible – lotting may have to evolve as buyers’ preferences and interest becomes clear

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