Negotiating the price and terms of a ranch purchase is an important step towards making yourself a landowner. The art of negotiation is balancing the seller’s expectations (and motivation) with your plan to walk away with a deal that feels right. While it might sound straightforward, there are more factors to consider when buying a ranch than when you’re buying a home (and - spoiler alert - price isn’t always the biggest one).
Start with Research
Before stepping into negotiations, arm yourself with knowledge. Understand what properties in the area are selling for (not just what they’re listed for) and how those properties compare to the property you are interested in. Knowing the going rate for similar ranches provides a foundation for your offer and gives you confidence in what you’re willing to pay. We have found that it’s best to avoid “lowball” offers and instead be reasonable with your first offer.
Key Terms to Discuss
When negotiating, it’s not just about the price tag. Several terms can significantly impact the deal in addition to the purchase price:
1. Purchase Price
Start with a realistic but competitive offer based on market data. Be prepared for some back-and-forth with the seller before settling on a mutually agreeable number. Understand the most that you would be willing to pay for that property prior to beginning the negotiation.
2. Contingencies
Contingencies protect your interests. Common ones include:
• Option period: Texas is a buyer-friendly state, and buyers are given the opportunity to purchase an option period that will allow them to back out of the contract for any reason within a mutually agreed upon period of time. The option period allows you to assess the property for issues like water access, soil quality, and structures before finalizing the deal. Prior to submitting an offer, we recommend that you research and visit the property. The length of the option period tied to a task that you need to complete (e.g., hydro study for water access or reviewing the title commitment). • Oil & gas / surface leases: The Texas farm & ranch contract allows buyers to negotiate an opportunity to terminate a contract after the buyer receives natural resource and/or surface leases.
3. Closing Date
Work with the seller to establish a timeline for closing that suits both parties. For a seller that lives at the ranch, moving takes more than a month because they’re not just leaving their home - they’re leaving behind a lifestyle. All of their equipment, livestock, and other belongings either needs to be sold or moved. This takes time and is unpredictable due to weather.
4. Inclusions
Negotiate what comes with the ranch—equipment, livestock, or structures—and ensure these items are specified in the contract. This is where understanding the seller’s motivations is important - are they moving from one area to another? Or are they older and retiring? Sometimes avoiding the hassle of moving or selling equipment and livestock creates a win-win for buyer and seller.
5. Earnest Money Deposit
This upfront deposit demonstrates your commitment to the purchase. The amount is negotiable and often influences the seller’s perception of your seriousness along with your option money. $100 of option money for 180 day option period and $1000 of earnest money for a $10M property does not demonstrate strong motivation.
Tips for Smooth Negotiations
1. Stay Professional and Polite
A respectful tone goes a long way. You and the seller are working toward the same goal—a successful transaction. Take the time to mentally prepare for how you think the conversation might go. As Dwight Eisenhower said “Plans are worthless, but planning is everything.”
2. Hire an Experienced Agent
An agent who specializes in ranch sales can advocate for your interests, navigate local market norms, and handle the nitty-gritty details of negotiations. We also negotiate on our client’s behalf on a regular basis and provide you with the time and space to craft a proper response.
3. Know Your Limits
Set a firm maximum price and stick to it. It’s easy to get caught up in the moment, but the ability to walk away will keep you from buying a property at a bad price.
4. Be Open to Creative Solutions
If price negotiations stall, consider other concessions, like a longer closing period or covering specific closing costs, to reach an agreement. With interest rates around 8% for land & ranch properties right now, owner financing is an attractive option to some sellers. Creative solutions come from understanding what really matters to you and what really does not matter to you.
Why Contingencies Matter
Contingencies give you time to fully understand the property before committing. For example, an inspection contingency ensures you can evaluate water access, fencing conditions, or any potential repairs. A financing contingency protects you if your lender requires additional time for approval. These terms may seem like minor details, but they can make or break your experience with the property down the road. It’s also important to communicate with the seller during the option period. This helps to build trust and can be useful in the event something unexpected arises.
Closing the Deal
Once you and the seller agree on the price and terms, the property is under contract. From there, you’ll move into the due diligence phase, where inspections, surveys, and appraisals take place. It’s the final stretch before the property officially becomes yours. Negotiating a ranch purchase can be a smooth process with the right preparation and guidance. Stay focused on your goals, and don’t hesitate to lean on professionals for advice.
Contact Us
If you’re ready to find the ranch of your dreams, let us help you navigate the negotiation process. We’ll ensure you get a fair deal that aligns with your vision.
Jacob Story
Story Group Land & Ranches
📞 817 201 8352