Factors That Affect the Value of a Farm Property

Owning a farm is a matter of pride but a lot of hard work too. All of this is worthwhile only if your farm appreciates at a good rate above the average price in the real estate market. The only way to ensure this is to understand what factors affect the value of your farm property and apply them effectively. 

Although the land has a property value of its own, there are many factors that can add to its value. For instance, the poor condition or excellent condition of the land may affect its price. If the land is used for agricultural purposes, its production capacity can add to the farm income. Apart from this, the location of the land, its terrain, the presence of water bodies on its premises, etc affect the average trading price of your land. If your farm is improved with a nice dwelling or barns that can push your value upwards. Likewise, if you have sold off any easements, your value on the open market might be less. 

Let us take stock of all the factors that affect the value of a farm property first. 

5 critical factors that influence the value of your farmland 

Farm Income

This is the income generated by the farmland by virtue of its usage for agricultural purposes. The land rent for tillable acres on the Eastern Shore of Maryland can be fairly high. Soil quality, field quality, and water quality are the factors that have an impact on these agricultural land values. It is also good to know the rent paid for this agricultural property along with its payment history. This should be compared to the yield generated in the same time period to determine the net income through the income approach. In Kent and Queen Anne’s Counties especially, leasing the hunting rights can also generate significant income. If you have wooded acreage, the timber value may surprise you! 

Real estate market conditions- supply vs. demand

The prevailing land prices in the area impact the value of the farmland. Apart from this, the number of buyers also plays a role. The higher the number of buyers, the better the land value. 

The number of buyers is actually the demand for the farmland and this demand is created by many factors including the farm income of the land, the nature of its agricultural produce and yield, its location, soil composition, rental rate, etc.

If the type of farmland you own is unique in our area, its demand will be more as its supply is less. Waterfront farms for sale in Kent County, Md would be an example of this. 

The prevailing agricultural land price in the area is determined by the number of sales in the area, the comparable sale prices, the adjustments made for differences in the farms, etc.

Call a professional appraiser to make property inspections and prepare a farmland value survey. They will give you a qualified appraisal report at a nominal appraisal fee. This appraisal report will help you get a fair acquisition price or average selling price as the case may be. Alternatively, a local real estate agent with a background and experience in agriculture, could provide you with a comparative market analysis. 

Location 

You can find a residential property in any location you like. But, finding an agricultural property in the location of your choice could be difficult. What you need here is the able help of a reliable real estate agent to help you find the farmland of your choice in the location you like. Only these professionals will have contacts with such landowner groups and can help you clinch a good deal.

Commodity prices

This has a huge bearing on your farmland price. An increase in the commodity prices will cause a corresponding increase in your farmland value. The most commonly grown crops or commodities on the Eastern Shore of Maryland are corn and soybeans. Global Macro factors like drought, war, pest attacks, and the economy can impact local commodity prices. 

Current economic conditions 

The state of the broader economy influences the purchase and sale of farmlands. If there is a recession, this is sure to hit the farmland market too. The existing economic conditions can affect the short-term interest rates that farm owners pay on loans. They also affect the rental prices and the average rating price of the land. 

During the Great Recession, farmland values rose during the run-up before they fell into a sharp decline. But, on the contrary, during the pandemic of 2019-2020, farmland values or pastureland values were not much affected.

Experienced real estate agents can predict such economic upheavals and help you get a fair market price for your farmland. 

Engaging experts and trustworthy real estate agents like Billy Sutton and Lacey Sutton of Coldwell Banker Chesapeake Real Estate are as vital as asking a commercial appraiser to appraise your land. While the qualified appraiser assesses the physical condition of your land, your real estate advisor can help verify your land title documents, check its legal description, and fetch a good price within a reasonable period. They have the ability to sell your Kent County or Queen Anne’s County farm to the right people and for top dollar!