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Estimate his farm

How to determine the right selling price of my farm property? What is the fair price of my farm? these questions are paramount and the answer will strongly impact the communication and the transmission trajectory.

There are different methods to evaluate a farm and we will quickly introduce them.

Asset valuation

Asset valuation is the sum of the value of each of the elements of your farm taken separately: land, buildings, equipment, livestock, stocks, house, etc. It is advisable to retain the sale value of each of these items. While the operation is relatively simple for movable assets (equipment, livestock, stocks, etc.) for which market values are known, it is more complex for real estate assets:
  • Land: market prices hide very significant disparities that take into account both the quality of the land and the local market, but also particular opportunities. Beware also of price rumours that are sometimes far from reality.
  • The dwelling house: defining the selling price of a house is difficult. This is even more so when it is inseparable from the farm and may not be suitable for the wishes of the purchasers of the farm. It is therefore generally appropriate to apply a discount (between 10 and 50%) to local market values.
  • Farm buildings: they generally have little or no value when sold without the rest of the farm. Also, the value retained is generally calculated by comparison with the new price.

This patrimonial approach is favoured by sellers but will come up against the purely economic approach of buyers.

Economic valuation

In this approach, the profitability of the agricultural holding should be considered. Indeed, a company has no value unless it generates a result. Different methods are then applied:

  • Forecast profitability: the value is determined on the basis of the known profitability of the operation (EBITDA), the investments to be expected, a safety margin, etc.
  • Repayment capacity: based on the same criteria, it is the company's ability to repay the loans taken out for its acquisition that will determine its valuation.

Combined valuation

The various values ​​should generally be mixed to determine a combined valuation.
Since agriculture is an activity that requires significant capital, economic values ​​are often inferior to heritage values, which makes it easier to retain economic value.
However, the value retained can not be lower than a floor price, which will most often be the valuation of goods in the context of a cut-off sale.

Combined valuation

In addition to these methods, market values should also be considered. Indeed, the local market can have a significant impact on the selling prices recorded. As well as the characteristics of the farm which are not always taken into account in heritage and economic approaches: location of the plot, neighbourhood, functionality of the buildings, possibility of future development, etc.
A very well configured farm with a production that is highly sought after by buyers will be sold at a higher price than a farm with a very dispersed parcel of land and a production that is not very popular. And yet, these companies can have a very similar combined valuation.
Quatuor Transactions negotiators work on productions they know and on markets they explore every day. They are therefore able to enlighten you on the market and help you set a selling price that is in line with the market. They can also help you determine the scope of the sale.

The selling price

Determining the price you want to obtain is an important first step. But the selling price can sometimes be different. It may be necessary to allow for some negotiating room. These remarks are regularly made to us and are justified.
However, it is important to remain cautious and not to forget the main objectives of each seller:

  • If the seller has a very long time to complete the sale: it is then possible to provide a margin for negotiation (do not exceed 10%) but it will be necessary to be careful in communication. Indeed, a property for sale beyond the market risks being roasted on the market and the risk then exists of having to sell in fine below the market value.
  • If the sale is to be carried out quickly: it is then necessary to set a selling price as close as possible to the market value. This is the best way to meet the planned schedule.

 

Determining a sales price is therefore a complex affair. We can only advise you to carry out an assessment with an accounting center or land expert and complete this approach by the opinion of a Quatuor Transactions negotiator.
You will then have in hand information allowing you to calmly take the best decisions.

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