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January 31, 2022
The number of land auctions escalated this past year in which more farmland was sold via a competitive bidding process than was seen the last six or seven years. Sellers and brokers turned more to the auction method and away from a private treaty listing when selling farmland. Along with more auction sales of land, the type of auction methods utilized also expanded. There are now more ways to have a competitive bidding process when selling than in the past. So, what is the best auction method?
Like all good answers, it depends. The best auction method to use depends on an understanding of multiple factors. A seller needs to know their land: quality, condition, yield potential or rentability, and how it compares to other farms in the neighborhood. One also needs to know the local land market: is the region accustomed to land auctions or do most farms sell quietly or by a traditional listing, how much land has been selling, who is buying, are buyers aggressive or laid back in bidding for additional land, lender support, and the recent selling price of comparable land. Also, the decision on what auction method to use depends on the seller's goals, comfort level, and openness to the widest number of potential bidders. At this point, most sellers turn to a land broker to guide them through the decision process.
Taking all of the above into consideration should lead to the best land auction method to use at that time in the specific area for the specific situation. This could be a traditional public outcry auction where bidders are present following the auctioneer's chant. In the past two years, the option of a completely online timed auction has become more familiar. Think of an e-bay style auction where a bidder puts in their bids online and the auction closes at a set time. Some auction firms are calling auctions live, but with no audience. The auctioneer's chant is broadcast to an online audience and people place their bids online similar to the online only auction.
Farmers National Company has had great success in many areas bringing the most potential bidders to an auction and achieving the best sales price for sellers by utilizing our simulcast auctions. This broadcasts an auctioneer chanting in front of an audience in a venue to an online audience. Bids are simultaneously taken from the in-person audience and from online bidders. All bid amounts are transparently displayed for both audiences. Bidding continues until online and in-person bidders have reached the final bid at which point the auctioneer closes the auction.
Ultimately, the best auction method has to fit the seller's goals and the situation as discussed above. In today's land market, a broker cannot offer just one or two methods to sell land because all options have to be available so that the seller can achieve the best-selling price for their land.
Senior Vice President - Real Estate Operations
|Category: Agricultural Real Estate News|