FOR the majority of farmland sales that occur, it is a case of family farmers buying land from other family farmers.
This has been the case throughout Western Australia's farming history and has continued throughout this past selling season, despite there being fewer operators nowadays than previous generations.
The Australian Bureau of Agricultural and Resource Economics stated in its Snapshot of Australian Agriculture 2020 that the structure of Australian farms reflects market conditions, meaning that usually the best managers operate the largest farms.
"Farm sizes have increased over time, in terms of both total receipts and land area, as the number of farms has decreased," the bureau stated.
"Increased farm size has supported improved productivity."
With land prices at record highs across WA's agricultural region, for many family operators, purchasing a farm as a whole is simply not feasible, but buying a portion is well within their reach.
As such, many farms end up selling to multiple farming families.
This tends to happen in two ways.
Firstly, and more commonly is where a property is offered for tender or expressions of interest (EOI) with an indication on the different parcels available and prospective buyers will submit their offer on a single or multiple parcels.
Secondly, is when two or more parties will join forces and submit one offer as a syndicate and if successful, will divide the property among themselves.
Nutrien Harcourts WA sales representative Rex Luers handled two sales from this past selling season which reflected the first scenario.
"Farms have been selling in parcels and to syndicates for a long time," Mr Luers said.
"Generally speaking, if a farm is up for sale in my area, some or all of it will be purchased by family farmers.
"Family farmers tend to buy out family farmers."
One buyer or multiple buyers:
Whether or not a farm is more likely to be purchased by one buyer, multiple family buyers or an investor/ corporate depends on several variables.
There is no fixed formula.
However, depending on the region and the size of the property, there are some common scenarios.
Take the Central Wheatbelt for example, which is where Mr Luers operates, a farm up to 4000 hectares is quite substantial for that region and is likely to be divided up between different buyers as opposed to being purchased by one buyer, whereas a property of 6000-10,000ha plus is more likely to attract corporate interest.
Whether or not a farm is more likely to sell for a higher price by being broken up among buyers or sold as one also depends.
"In my area, history tells you the property is most likely to be split," Mr Luers said.
"But in other areas where the capital value of land and the lease demand varies then it may prove more advantageous to find an investor buyer, all this really depends on location and demand which the agent and seller can assess."
Selling method:
The most common selling method of a farm in WA in the current market is by tender or EOI, but when market conditions are strong enough, an auction can be the best option.
Both methods can facilitate the property being sold to multiple buyers, as evident in recent sales.
Mr Luers sold Innverness, South Wyalkatchem (4882ha) and Greyhome, Cunderdin (2172ha) by tender.
Both properties were divided up among multiple family buyers and set new benchmark prices for their respective regions.
Elders Real Estate sales representative Adrian Corker sold Maybenup, Kojonup (1479ha) to a syndicate of local farmers, this time at auction.
The key difference between the two methods is that the buyers of Maybenup had to be teamed up before the auction in order to bid as one buyer.
This meant there were legal complexities that had to be outlined beforehand.
Whereas with an EOI or tender process, buyers have much less interaction with one another and responsibility lies more with the agent to match parcels up with suited buyers.
Although more complex for buyers, the auction process did not deter the syndicate from being competitive bidders for Maybenup.
"Going to auction could possibly deter buyers who only want to buy a parcel, it just may mean they have to find one or multiple other buyers to make the deal happen and the agent can assist with that," Mr Corker said.
He facilitated the introduction of the three buyers, although in this case they already knew each other.
"When requested, buyers interested in parts of a property are able to be introduced to other parties interested in portions to allow them to work out a strategy to bid together on the day," he said.
On the other hand, Mr Luers received offers on individual parcels which covered the whole property.
While auctions can potentially deter buyers because of the task of having to form a syndicate, other buyers can find the tender process frustrating as they don't know what price point to place their offer at to be a top contender.
"The tender process can be frustrating for buyers, but in my view it is our job as the agent to give prospective buyers some idea of the price range and then they can work from there," Mr Luers said.
"The agent can also give the buyer an indication of the level of interest in the property."
But if multiple offers come through that are in the same vicinity of one another, Mr Luers said he does not disclose prices offered from other prospective buyers.
"If multiple people have put in a price, whether or not they get the opportunity to put in a second price, it is up to the seller," he said.
"If my seller wants me to go back to those three buyers to ask them to rethink their offer because they are competitive with other offers or there is another factor in play that is not price-related and would they like a chance to increase their offer, I will do that but I will not disclose the price.
"It's not always straightforward with price - because one buyer may offer a price on two different blocks, so the aim is to try keep the process as transparent and ethical as possible."
In some cases if a property is offered for auction but doesn't reach reserve as a whole, it could then be offered in parcels via auction.
Then there is no need for buyers to form a syndicate but they are not guaranteed to have a chance to bid.
Mr Corker said Maybenup was always going to be sold as a whole, whether or not that was at auction or it was passed in and sold afterwards, and whether or not it was a syndicate or one farming entity.
Neighbourly premium:
Neighbours tend to be the most likely buyers of farms.
This is because farmland is more valuable to a neighbour, with the main reason being it can give them greater economies of scale.
"I have always said that if you're a neighbour the land is worth more to you than anyone else, but they don't always see it that way," Mr Corker said.
"Purchasing a neighbouring property means you don't have to move machinery and stock, you can use the existing infrastructure that you have already on your farm, you don't have to buy, build or maintain another set of infrastructure."
Farmland has been said to be worth up to 20 per cent more for neighbours.
As well as increasing productivity and efficiency, Mr Luers said emotions can also be a factor.
"Sometimes it comes down to a bit of emotion - you might have been farming next to someone for two or three generations and you really want that farm that's right next door," he said.
Buying for an add-on:
What a buyer looks for in an add-on property simply depends on their needs.
For some, a house and sheds can be crucial and one of the key reasons of the purchase, but for others it can be a disadvantage for the sale.
"These buyers certainly won't pay a premium for properties with houses," Mr Luers said.
"In saying that, in some circumstances those buildings can be subdivided from the property and on-sold later into the lifestyle market."
A common reason for family farmers purchasing farmland to expand can be for part of a succession plan, in which case Mr Luers said a house and other infrastructure could be on the buyer's criteria.
