Within the last eighteen months or so, getting a ranch real estate transaction closed is much more of a battle than it was in previous years. Less than two years ago I can remember when a signed contract pretty much meant that you could “chalk that one up as a done deal.“ With the downfall in the economy, there are many more steps to overcome to ensure that a pending ranch sale closes.
I receive many phone calls that before tougher times were here, might have eventually turned into a transaction. These calls are typically on smaller tracts, somewhere between the $50,000 to $200,000 range and the potential buyer is hoping to put down around 5-10%. In the current real estate environment, those days are pretty much over. Buyers today are finding that many lenders are requiring a minimum of 25% down. Tighter lending restrictions mean that fewer transactions are getting done; however, if a buyer is approved by their lender, one of the major obstacles to closing on the purchase has been cleared.
This brings to mind another issue, “Appraisals.“ It takes a lot of explaining to clients how a property may sell for more than appraised value. Even though in some areas land prices have come down a little, many buyers feels as if they should be able to purchase property for appraised value or even less. A lot of buyers think that regardless of the appraised value, they should be able to put the minimum amount down that the lender requires no matter where the appraisal comes in. Depending on the appraiser, appraised values can vary quite a bit and should only be used as a data point in making your decision on which property to buy.
All of these issues are a part of a Real Estate Broker or Agents job to try to explain to clients and satisfy their requirements. I typically refer clients to a banker or attorney if I feel like I am unable to answer certain real estate questions. In closing, the ranch real estate market does seem stronger than it was a year ago and I look forward to more quality transactions in 2010.