Dream Farm Fridays: So You Wanna Buy A Farm
Today I'll be sharing some of what I think are the most important things to keep in mind when shopping for a horse property. While the precise details and regulations vary from state to state in the U.S., I hope this information will help some of you become more confident, educated buyers!
Know Your Financial Capability
Before you even start thinking about looking for a horse farm, the first thing you need to do is figure out how much farm you can afford. There's no point in looking at million-dollar properties when you only have a quarter-million-dollar budget, and the LAST thing I want ANYONE to do is to spend themselves into a bad financial situation. While online mortgage calculators can give you a basic idea of what buying real estate will cost you, there is simply no substitute for talking to a lender who specializes in rural properties and can expertly interpret your financial information.
Because, surprise, not every bank or lending institution will finance farms or larger acreage!
However, lots of small, local banks or regional lenders (such as Mid Atlantic Farm Credit here on the East Coast) WILL give you a mortgage loan on a horse farm, and I'd recommend speaking to them vs. a big national bank. A knowledgable lender can help you understand your own buying power as well as let you know about special types of financing or programs that can provide a lower interest rate or a small-to-nonexistant down payment. If you plan on building a barn or arena, these institutions may also be able to help you get a combination mortgage and construction loan.
If you plan on paying in cash, that's great (and good for you!) but you still need to have a handle on all of the costs you'll incur during the purchase, which unfortunately include a lot more than just the purchase price and property taxes. Whether you pay in cash or obtain a mortgage, there will be closing costs at settlement in addition to the purchase price of your farm. These include transfer tax (in Pennsylvania this amounts to 1% of the purchase price), settlement and notary fees, inspection fees (we'll get to this later!), homeowner's insurance, and title insurance. I recommend having about $10,000 in cash to cover closing costs before you begin seriously looking for a farm, and more on top of that to cover the water heater or roof or dishwasher that will most certainly need replacing as soon as you move in. Because in real estate, like in horses, everything that can go wrong, will go wrong.
Focus On The Lay of the Land
Now that you know your budget, have a ton of cash saved up for a down payment, closing costs, and unexpected expenses, you're ready to start shopping!
Your #1 priority when purchasing property that you intend to keep horses on is the land itself, and it's also the one thing about a farm that can't be changed. Houses and barns can be built or remodeled, arenas can be dug out and installed, but you can't change a piece of land that is swampy and wet, or full of boulders, or on the side of a cliff, or too small, or not zoned for livestock. It doesn't matter how gorgeous the house is if you can't keep horses on the land! Make sure the land itself is suitable for what your needs are, and go from there!
Speaking of Zoning...
The farm buying process also provides you with a brand new friend: Your local township zoning officer! Especially if you're going to be running a business (like boarding or training), building a barn, putting in an arena, or clearing land to make more pasture, your friendly zoning officer is going to become your new BFF. They're the person that will tell you how many horses are allowed on the property, whether or not it's legal to do the things you want to do with it, and they can guide you through the process of getting approval for uses that might not currently be allowed. Getting in touch with the zoning officer should be one of the first things you do when you find a property you're strongly interested in - finding out what is and is not allowed, and if you can even keep horses on the land, is paramount!
Inspections - JUST DO IT
Home inspections can get pricy - here in Eastern PA they can run from a few hundred dollars up to $1,000 or so, depending on how detailed you want to get. This may tempt you to skip them to save a little money.
DON'T. YOU. DARE.
Home (and barn! and well! and septic!) inspections are so, so, SO important. An inspection takes a detailed look at all of the structures and systems on the property and identifies potential problem areas and things that need to be immediately repaired. Inspectors often find issues that are hidden from the layperson's naked eye, and can uncover serious problems that can make or break a sale. Like a septic system that needs replacement to the tune of $30,000, or a serious termite problem, black mold, or dangerous levels of radon gas. Especially if you are looking at an older home or barn with lots of wear and tear, or even a historic building that may have outdated wiring and plumbing, a thorough inspection is essential to getting a firm grasp on the condition of the structures on site. The results of an inspection can also spark a new negotiation period, and result in a lower sale price or the seller making repairs to the house or barn before settlement.
Build A Solid Team
While, yes, you CAN buy a farm without the help of a real estate agent, I don't recommend it, and that's not just because I want my commission. Like a lot of things these days, buying real estate is more complicated than ever and can be a financial and legal nightmare if things go south. A good team, including a horse-savvy buyer's agent to be your advocate, a lender with lots of experience in providing loans for the type of property you want to buy, and in some cases, a real estate attorney, will be your saving grace in any equestrian real estate transaction. Buying a home is one of the most stressful events in a person's life, and the right team of professionals can help you make it through in one piece with your sanity, and your bank account, intact!
Next week I'll share another of our gorgeous listings, so stay tuned for more drool-worthy horse property photos! The week after that, those of you who are curious about the nitty-gritty process of a farm purchase will get a detailed blow-by-blow rundown of a typical transaction to help you learn what to expect when you're ready to buy your own horse property.
Let me know in the comments if there are any topics in particular you'd like to learn more about!