The Farm that Abe Lincoln Owned
A 30-acre farm in Coles County, Illinois once owned by Abraham Lincoln recently sold at auction. The big question going into the sale was whether or not there would be a premium paid for that connection. Local farm appraisers and brokers had mixed thoughts going into the sale varying from no premium or possibly a slightly premium due to the increased interest.
The farm was well marketed and had several articles in local newspapers about the Lincoln connection leading up to the sale. The sale date of February 12, the 16th U.S. President’s birthday no less, was a nice touch. But did it matter to the buyers in the market? The answer is it did, and it did more than anyone would have predicted. With a sales price of $10,000 per acre, this tract sold at a 43% premium to the remaining tracts that sold at the sale that same day.
So why would a farm that was once owned by Abraham Lincoln bring such a substantial premium? From an appraisal standpoint, there is no economic reason to believe this farm should be worth more than other farms in the area. The yields will be the same, the cash rents level will likely be the same, so what is the economic advantage of this particular tract of land? The truth is there is none.
The answer to why a premium was paid is an important lesson for all farmland owners, buyers, and sellers. Emotions matter. It is the same reason buyers will pay a premium for a farm touching land they already own or a farm they have been farming for many years as the farm tenant. Humans often use emotion to make decisions, even economic ones.
I’ve seen two neighbors bid against each other for a farm with a final bid of $14,700 per acre when other similar farms were selling for $12,500 per acre. Why so high? Simple, the two bidders didn’t like each other. At another sale, I once asked a farmer why he paid so much for a particular farm and he said that is was across the road from his house and he wasn’t going to watch someone else farm it for the rest of his life. Similar things like this happen all the time, these are not rare occasions.
It is these factors that make valuing farmland unique. If buyers and sellers dealt strictly on economics, appraising farmland would be simple. It could be done using computer algorithms based on raw sales data. But buyers, seller, landowners, and farmers all make decisions based with some level of emotion which makes using that raw data more difficult. In addition to buying and selling, cash rent decisions are often made with emotion as well.
Having a professional assist with the buying, selling and managing of farmland can help increase the accurate information available and decrease mistakes made due to inaccurate data. A professional appraiser, farm broker, and/or farm manager can help take the emotion out of the decision-making process. Or, if you are selling, a broker can put emotion into the equation like in the case of the 30-acre Lincoln farm.
Good information and professional advice can assist anyone with an interest in farmland to make the best decision possible. It can help even if you are planning to make a decision based partially on emotion. It is hard to go wrong with good, reliable information. Like Lincoln, himself, said, “Give me six hours to chop down a tree and I will spend the first four sharpening the ax.”