Although the high cost of farmland and an inability to qualify for a traditional bank mortgage loan is often a barrier to farm ownership for new farmers with limited capital or credit, there are a variety of government resources available to help farmers interested in purchasing farmland via a traditional sale. The USDA Farm Service Agency (FSA), for example, can provide access to loans for farmers and operations that meet specific requirements. See below and also visit the Federal Conservation Programs page for more information on government resources for farm buyers.
Before purchasing a new farm, however, farm buyers should carefully evaluate the land, farm buildings, soil, water, and accessible markets for the type of farming envisioned in order to ensure it will be possible to build a profitable operation. This page contains a list of tips for prospective farm buyers.
At the end of the day, if a traditional farm sale isn’t financially possible or appears too risky, farmers could consider a test period via a short-term lease or could look into one of the innovative models of land access discussed in this toolkit. For example, a traditional sale can be combined with other land access tools discussed in this toolkit, such as conservation easements, affirmative agricultural easements, options to purchase at agricultural value (OPAVs), collaborative farming arrangements, leasing, and partnerships with land trusts.
The Temple-Wilton Community Farm has been operating a year-round CSA since 1986, making it the oldest continually-running CSA in the country.
Traditional farm sales between a farm owner (seller) and a farm buyer are similar to residential real estate transactions. A traditional farm sale generally involves a buyer paying the seller a cash down payment (and potentially paying cash for closing costs) combined with bank financing in the form of a bank mortgage loan taken out by the buyer. Farm buyers may have difficulty accessing a bank mortgage loan because banks want to make sure that if they loan money to a new farmer, the new farmer will be able to make regular mortgage payments over time. The farm buyer must have a high enough credit score (combined with evidence of future income) to be able to qualify for a bank loan. This can be a barrier for new farmers, especially considering the high cost of farmland.
In a traditional sale, the farm seller (landowner) has immediate access to the money from the sale, but has no control over the farmland after the sale is complete. The farm buyer must immediately pay for the property (in the form of cash or a cash/loan combination) and in return obtains total control over the farm after the sale is complete.
Compare a traditional sale to other methods of farm transfer, like a contract for deed, with the toolkit’s farm transfer methods comparison chart. Additionally, legal tools like conservation easements can sometimes be used to lower the cost of purchasing farmland.
There are a variety of U.S. Department of Agriculture (USDA) programs that help support farmers interested in purchasing a new farm. These programs help provide farmers with access to farm-related loan money (either directly or indirectly through a network of private banks), and are often run through the USDA Farm Service Agency (FSA).
Farmers who meet specific requirements can get help accessing credit (loans) via the FSA Farm Loan Programs. According to the FSA Farm Loan Programs website, by providing access to credit, FSA helps family-sized farmers and ranchers:
In order to qualify for each different type of federal farm loan program, farmers must meet varying requirements regarding their planned use of the loan money. Additionally, some programs give priority consideration to farmers within certain groups, such as beginning, minority, and/or women farmers. For example, FSA makes and guarantees loans to beginning farmers who are not financially ready to obtain financing from commercial lenders. Each fiscal year, FSA targets a portion of its direct and guaranteed farm ownership and operating loan funds to beginning farmers. For an overview of FSA farm loan programs, click here, and learn more about federal farm programs here.
Note that applying to participate in a federal farm loan program requires significant farmer time spent on business planning, gathering information, and completing paperwork. It can be helpful to find out in advance what type of information mortgage lenders (banks) and government agencies (FSA) need from you in order to evaluate whether you can access a loan, and to start collecting that information as soon as possible.
See the Additional Resources section below for a list of resources related to government farm credit programs and land link programs.
The following section contains a list of considerations that prospective farm buyers should keep in mind when thinking about purchasing a particular piece of farm property. Farms are unique with respect to soils, farm buildings, water access, prior use, easements, neighboring land use, access to markets (both for sale of farm products and job markets for off-farm employment), and fitness for the particular type of farming operation new farmers envision. It pays to do your homework before committing to purchasing a farm property.
It’s not an attorney’s job to make decisions for farmers or to set farm transfer goals. Instead, attorneys can provide information about pros and cons of different options, advice about what is common versus unusual, fair versus unfair, etc. Attorneys can help farmers understand the universe of possible farm transfer goals and help narrow down individual options so that farmers can make final decisions.
The Center for Agriculture and Food Systems is an initiative of Vermont Law School, and this toolkit provides general legal information for educational purposes only. It is not meant to substitute, and should not be relied upon, for legal advice. Each farmer’s circumstances are unique, state laws vary, and the information contained herein is specific to the time of publication. Accordingly, for legal advice, please consult an attorney licensed in your state.