Broker Commission on Sale of Farm for Development - Posted by Jim

Posted by Killer Joe on January 05, 2007 at 17:44:15:


Thank you for the kind words. Coming from you that means a lot. And thank you for all the great wisdom you share, not only on this board, but also in your books.

Have a very prosperous New Year,


Broker Commission on Sale of Farm for Development - Posted by Jim

Posted by Jim on January 02, 2007 at 13:45:29:

Parents died and siblings and I are in process of selling family farm near major midwestern city. As only my brother lives in area and has no real estate experience, we are considering using broker to arrange deal. Question: what is a nominal commission percentage for broker arranging sale of 180 acres for residental and business development? Also, any links that explain how to work with, and possibly partner with, developers would be greatly appreciated. This is a multi-million dollar piece of property and we want to do it right. Thanks, Jim

Farm Development - Posted by David Krulac

Posted by David Krulac on January 15, 2007 at 22:51:06:

There’s not much to add to KJ’s post. However the rules, regulations, and policies can vary among the states. You don’t say what state you’re in, but here in Pa. the comprehensive plan is only advisory and not binding. Here the subdivision plan and the zoning ordinances reign.

Typically rural farm land is developed with septic systems. The rules for passing septic (perk) testing alos vary among the states. But nitrate testing is under Federal EPA jurisdiction and prohibits subdivision if the nitrate level exceed 10 PPM.

In some areas the county has the authority to approve subdivision plans but in other areas its at the local muncipal level.

Besides the lot size requirements and septic testing limitations, there are many other considerations including:

under ground stroage tanks

buried farm garbage dump (look for evidence in sinkholes and ravine areas)


tract shape

amount of existing road frontage

permits needed, driveway, well, septic, highway occupancy, stream crossing, wetland crossing

wetland mitigation

maximum cul-de-sac length



endangered species

historic sites

storm water management

erosion & sediment control

infrastructure costs including roads, sidewalks, curbs, utilities, trees, street lights, walking paths, detention ponds, etc.

building moritoriums

agricultural preservation

agricultural lands with development rights already sold

fire hydrants

minimum setbacks, lot widths, etc.

and everything else that escapes me at this hour

Brokers commision could be in the 5-10% range but to maximize your sale price you need an approved subdivision plan.

Sale of Farm for Development - Posted by Killer Joe

Posted by Killer Joe on January 03, 2007 at 20:22:41:


If you are looking to maximize the value of the land, there are several ways to do some of the initial footwork yourself, and reap a big payday. By this I mean, if working with, or selling to a developer is your goal, you can find out in advance what the chances are of the potential for the land by doing some research on your own. Specifically, how your county perceives the growth that your land use would encourage. There is no growth that does not impact the counties ability to service that growth whether it be roads, water, refuse, schools, etc., and so they want a say in how things unfold.

The county the property is located in will have a comprehensive plan that spells out how the county sees things unfolding. You need to get a copy of the CP as a start. Read it and understand it. Understanding this document will also give you an upper hand in negotiations with a developer as it will remove some of the mysteries for potential that any good developer should be aware of. You need to be on an even playing field in this deal, and knowing what can fly and what won?t, (or will meet zealous scrutiny by the locals), is an advantage you need on your side. Knowledge is power, and this kind is priceless.

The very first question a developer will need the answer to is ?can the property be subdivided?? You need to know this, too. You need to find out the maximum number of parcels that the land can reasonably yield. This is where the potential lies, and if you are able, I would spend the time and money to get the property subdivided. Not necessarily into its smallest parcels, but at least into major parcels that can later be subdivided. I have a close friend that receives 243 tax bills each year on his 216 acres, and I would only recommend that strategy if the sum of the individual tax bills is not grossly more than what the tax bill would be on larger parcels of perhaps 20 acres apiece or whatever is common in your area that still yields some tax advantages regarding lower rates for assessment. The jump from an AG zoning rate to a RES zoning rate can be staggering. It is often times used to discourage growth in farming counties such as mine.

The reason for subdividing before selling is that it is usually the one thing you can do to a parcel of this size that will add the greatest value for the least amount of effort. All land is not created equally, and being able to segregate choice parcels from marginal parcels can yield profits that could easily be diluted by an average cost per acre. Your market will look at the average per acre sold and these will be your comps. Land sells for more per acre the smaller the parcel. Use this to your advantage.

When working with a developer, the farther along the subdividing boundaries have either been explored or exploited, the sooner the potential of the land will be known. If your intention is to partner with a developer you owe it to yourself to bring as much to the table as possible regarding the value of the property. If you are selling, then having the ability to spin off a portion, or portions of the property gives you the most outs.

Perhaps your farm consists of multiple parcels already. If you are not intimate with the legal descriptions for this property now would be a good time for a revue of the facts. My families farm is in parcels, and we know what we can do with it. You should, too. All the best for the New Year. HTH


Broker commission - Posted by acw

Posted by acw on January 02, 2007 at 14:49:59:

All commissions are negotiable…however…if its farmland…you may have only a few choices amongest reputable realtors who market that type of property. Some commissions range from as low as 5% to as high as 10% on land. Depends on location.

Excellent post - Posted by ray@lcorn

Posted by ray@lcorn on January 04, 2007 at 20:19:13:


You hit the nail on the head… knowing what can be done with the land is paramount for establishing value. Taking it further down the road (such as preliminary subdividing into phases) is also the best way to add value. Some time spent with the comp plan, the zoning ordinance and a local engineering firm may cost a thousand bucks or so, but the benefits are huge.

A good friend of mine owns a very successful auction company. Their specialty is multi-parcel auctions of developable land. (He has a patented software system that tracks bidding for combinations, upsets and break-outs in real time during the sale.) The difference in value between a multi-parcel sale and single tract sales is immense, an order of magnitude equivalent to the difference between the cost of raw materials and finished products.

Great post, and great advice. Thanks for your many contributions here.


Find the busiest title company in your county… - Posted by Gary-Oregon

Posted by Gary-Oregon on January 03, 2007 at 13:39:57:

it may or may not be the biggest. Ask for the commercial desk or ask to talk to the title manager. Ask this person whom they would recommend for the development of farm land. They will be happy to make a recommendation because they want the business. The developer will be happy to joint venture with you if by doing so, they can keep their costs minimal. LOL