Your Guide to Buying a Farm
Buying a farm is not something you do every day, so Agrisell has developed a guide to familiarise buyers with the process. A farm can be a valuable asset, with a huge influence on your lifestyle and financial future.
1. Make contact with your bank (if finance is required)
Pre-qualification as a buyer at a bank or financial institution will give you an indication of whether you qualify for a loan and for which amount. Pre-qualification indicates that you are a serious buyer.
2. Make contact with an agent
There are various benefits in contacting an agent when you are interested in buying a farm. Discussing your requirements, such as envisioned farming activities, area, soil types and so forth, as well as your budget will enable the agent to search for a suitable farm.
Agrisell agents work closely together in matching buyers and sellers through our network of agents in all areas. Often the agent can inform you directly before a suitable farm comes on the open market. Your Agrisell agent will be your trusted partner in obtaining the most suited farm.
3. Request information
Upon identifying a farm you are interested in, your Agrisell agent will provide you with more information to determine whether it would be worthwhile to schedule a visit.
4. Schedule a farm visit
Contact your Agrisell agent to arrange a farm visit with the owner, at a convenient time. You and your Agrisell agent will visit the farm together. It helps to take notes and photos for consideration afterwards.
5. Sign an offer to purchase
Once you have decided to go ahead with the purchase, you should inform your Agrisell agent, who is mandated to sell the property, to prepare an Offer to Purchase for you to peruse and sign.
Agents are obliged to verify buyers' details in terms of the FICA Act. The offer will usually only be valid for a couple of days for acceptance by the seller. The seller can accept your offer as is, or make a counteroffer with adjustments on their terms and conditions.
You can then accept or reject the counteroffer and make your own counteroffer. The Offer to Purchase becomes final and binding once the parties have agreed to all the terms and conditions and it is duly signed by the relevant parties.
Your knowledgeable Agrisell agent is essential when negotiating the terms and conditions of your purchase.
6. General Offer to Purchase
Examples of suspensive conditions include financial approval, the sale of another property or the requirement of a due diligence report on the farm.
7. Signing of transfer documents
The seller has the right to appoint the conveyancer that will attend to the transfer. Once all conditions of the Offer to Purchase have been met, the transfer and bond documents, if applicable, are drafted by the conveyancer.
Both parties will then sign the respective transfer documents and the buyer will sign the bond registration documents (if applicable). The buyers is responsible for all the relevant transfer costs.
8. Rates clearance / transfer duty receipt / Municipal receipts
The seller pays the rates, including advance rates if required. The conveyancer applies for a transfer duty receipt from SARS, a rates clearance certificate and makes the necessary payments on behalf of the seller and purchaser.
9. Compliance certificates
The seller is now required to provide the required compliance certificates (e.g. electrical, gas or electric fence as applicable). These costs are for the account of the seller.
The conveyancer obtains guarantees from the buyer or his bank or financial institution for the purchase price, or the balance of the purchase price, if a deposit is paid. The seller's existing bond on the property is prepared to be cancelled, if applicable. The conveyancer requires FICA compliance as a protective measure against fraud or money laundering.
11. Deeds Office
When all documents are signed, costs are paid and certificates obtained, the documents are prepared by the conveyancer for lodgement at the Deeds Office.
12. Registration and proceeds
The conveyancer lodges the necessary documents at the Deeds Office to register the deed of sale. The conveyancing process is explained here. Ownership passes from the seller to the purchaser.
The buyer's bond is registered and the seller's existing bond is cancelled (if applicable). The guarantees are paid to the conveyancer, where after the seller receives the net proceeds less the estate agent's commission. The new owner takes occupation of the newly bought farm.
13. Congratulations, you are now officially the new owner!
You are now officially the new owner.
14. Handover procedures
It is important to plan for a smooth handover to the buyer on the date of transfer to ensure that farming operations are not disrupted and all relevant licences, service/supplier contracts and movable assets are transferred into the new owner's name.
15. General pitfalls to avoid
a. Ensure you are pre-qualified for a loan as financial approval usually takes a long time for agricultural properties.
b. Determine whether the seller is a VAT registered entity and the farming enterprise can be purchased as a going concern.
c. Familiarise yourself with the existing Title Deed to ensure there are no existing restrictions and limitations on the farm.
d. Find out if there are any registered servitudes on the farm or in favour and to the benefit of the farm.
e. Make sure the farm is zoned for the purpose that you will be using it for.
f. Ensure that the water rights are duly registered when irrigation forms an integral part of the farming.