Hey Ya’ll. Are you enjoying Spring and the wonderful weather that comes with it? The weather here has been wonderful. Not to hot and not to cold. Just perfect.
Since the weather has been good I’ve been spending a lot of time outside cleaning up my new farm and getting it horse ready. Luckily this place was for the most part move in ready but there were some minor fixes/changes we wanted to make so we’ve been working on those.
Anyway, I thought I would share my buying story with you in hopes that if you are trying to buy a new farm you’ll know what to prepare for.
Believe it or not, I actually have been looking for a farm for a few years but didn’t get real serious about it until recently. As you know in the past year I’ve had to move my horses a couple times and it got to the point where I just decided I had had enough. I was ready to have my own place and not have to worry about moving again. So last fall I started looking for farms in the area I wanted to live in. It was at this point I realized there weren’t many established horse farms on the market and I might have to buy a house with land and build what I want.
So before I started I contacted a few banks to find out who had the best rates and would loan me money for a farm. After talking to a few it became clear my only option was to go through my local farm credit because other mortgage lenders wouldn’t loan money for as much acreage as I needed. So I talked to a lady at the farm credit and found out my options were:
- Land Loan – this loan requires a 20% down payment and you can only finance for 20 years.
- House Loan – 5% down payment required with the farm credit and can finance 30 or 15 years.
Since I didn’t have 20% to put down, I was going to have to find a house with land or an established horse farm. So I started looking and guess what. The bank told me the house has to appraise for 60% of the property value if you are buying lots of acreage. Well houses in the area I was looking at weren’t appraising as well as they use too. So finding one that would appraise for 60% was going to be hard.
So here’s how finding a farm went. Looked at a few and didn’t see anything I liked about them. Found one I loved but it was way out of my price range. Ended up putting an offer in anyway because my realtor felt they were asking too much to begin with. Needless to say, they didn’t accept and our counters got nowhere near what I needed them to be at. Back to looking. Looked at a few then found another I liked. It was going to require a lot of work but it was in foreclosure so I could get it for nearly nothing and then have money left over to make changes. Made an offer it was countered. Before we could counter back, someone else came in with an offer and we both had to submit our best price. Well my price was lower so lost that place. Back to looking. Looked at a few more then ended up taking a second look at this place and the second time fell in love. Not really sure why I wasn’t 100% for it the first time but the second time I was because I saw the potential.
So an offer was submitted. They countered back, we countered, finally a purchase price was decided on. So now the fun part began.
Since I don’t want to share every detail of the process I’m just going to say it was a nightmare. Problems came up that needed to be fixed and waiting on the approval felt like centuries but looking back it didn’t take as long as I was told it could. I’m just glad it’s over.
After going through it I do have a few tips I want to share about buying farm:
- Make sure you have a good down payment. PMI is costly so the more you put down the less you have to pay in PMI. In order to avoid PMI you have to have 20% of loan paid off.
- Research mortgage attorneys and pick one you like. Don’t just accept the one the bank offers.
- Be prepared to pay the Appraiser cost upfront. Sometimes you have to, sometimes you don’t. This cost is normally $400+ depending on the company.
- Make sure you have a good credit score. Your score affects your rate. The better the score, the better the rate.
Home Insurance Tips:
- Make sure you insure your house for a proper amount that will cover your barn and other buildings.
- Always check to make sure the insurer has your property in the right fire district. ISO Fire ratings can affect your premium. The better the ISO rating the lower you pay. (The company insuring my home has us listed in the wrong district and it caused our insurance to be $200 more a year then it should. We are in the appeals process now to get it fixed but it’s going to take a while. Sadly, I won’t get any of the money back I pay them. Even more sad the sellers paid the higher rate for years not knowing they were being over charged.)
- Rule of thumb is 2 acres per horse. The more acreage per horse the better and the less chance you have to worry about your pastures getting run down.
- Inspect the pastures well. Look for toxic weeds and how much grass is growing. Contact your local feed store (mine is Southern States) and get estimates for spraying weeds/re-seeding.
- Inspect the barn well. Look for things that could hurt your horse, cause fires or any other probs. For example, the sellers at my farm built their stalls with plywood. That is a huge hazard for my horses because I know they kick at the walls. So before I can use the stalls I have to complete redo the stalls.
- Check the fence for nails that are sticking up and can cause injuries.
Those are just some tips to keep in mind. I’m sure the more I write about the farm the more tips I’ll come up with. I should have done a better job writing down everything that was going on but I got caught up in the moment and didn’t document any of it. Hindsight is 20/20.
So tell me…
Have you recently bought a farm?
Do you have any tips for new farm buyers ?