We are 52 years old. We own a home in town but want to buy a hobby farm. We are afraid this wonderful deal is going to get bought before we can sell our home. Can we take out all our money in 401K and just pay the penalties?

You can if your plan permits, but I would look into a bridge loan. It will probably be cheaper in the long run.

In addition to the penalty, you will have to pay federal taxes on any money withdrawn unless it is after tax money you added to your 401k.
I agree with ScottGem on taking out a bridge loan.