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Everything You Ever Wanted to Know About Land Auctions– And Then Some

Farm property

Buying and selling farms and ranch land through the auction process is advantageous for all parties involved. Auctions of farms and ranch land benefit the seller for the following reasons:

  • Ranch land auctions attract serious buyers. In order to participate in an auction of a farm or ranch land, the buyers typically have to be able to pre-qualify with a 10% or 20% down payment on their bid, if they win. Window shoppers are not going to put this sort of investment on the line.
  • The “We’re selling this property now” aspect of farm and ranch land auctions brings prospective buyers to a decision point on the spot. The property isn’t going to sit and collect dust while buyers take their sweet time making a buying decision.
  • Ranch and farm land auctions attract more interest than the property would get if it was just put on the traditional real estate market.
  • Because the property moves quickly, the seller doesn’t have to pay as much in maintenance and holding costs while they wait for the ranch and farm estate to move.
  • Farm and ranch auctions create a setting for high competition and that helps sale price to go up, greater than it would with the private bidding process of traditional real estate.
  • The seller has complete control over the terms of the real estate sale, rather than being subject to the terms that the buyer incorporates into their bid (for example, a traditional property bid might be contingent on the buyer’s current property selling first).

On the other hand, ranch and farm auctions benefit the buyers for the following reasons:

  • Once the seller initiates the auction process, there is no flaking out. The buyer can be confident that the seller is committed to letting their property go.
  • Having the terms of the sale put in a public market like an auction gives the seller confidence that the value and the details of the sale are fair.
  • The seller has complete control over his bid on the property, what he agrees to if he wins is what he pays for the property.
  • Winning a farm or ranch in an auction give the buyer ownership of the property faster than the traditional land-buying process.

Types of Ranch and Farm Auctions
Typically, the auction of ranches are farmland falls in the following three categories:

  • Absolute auctions. In this type of auction, the seller forgoes the right to decline the sale if the winning bid is below market value. Even though a absolute auction is riskier to the sellers, it is still beneficial because attracts more bidders. Surprisingly, this type of auction actually typically moves properties for 15% to 25% more than comparable property auctions where the bidders do not know if the seller will reject the winning offer.
  • Reserve auctions. In this type of auction, the seller has a chance to decline the final bid. Many times, reserve auctions start with a minimum bid so buyers have an idea of the kind of money the sellers trying to get. The advantage of this type of auction is the seller is protected from a losing their property for less than it is worth, but the disadvantage is that it typically draws fewer bidders.

  • Auctions with minimum bids. Some ranch and farm auctions will advertise a minimum amount for the sale of the property. This protects the seller from the auction closing for less then he his bottom dollar, and can generate interest if the minimum is set adequately. On the other hand, sometimes it attracts bidders who are only interested the bottom dollar that the seller wants to accept.

Tips for Finding a Great Ranch or Farm Auction
Most property auctioneers use a variety of marketing channels to get the word out and draw the greatest interest in their auction. You may hear about it through an ad in the mail, newspaper advertisement, magazines dedicated to this type of real estate, radio ads, signage in the area. The best way to keep your finger on the pulse of any land auctions you may be interested in is to get yourself on mailing list for companies who facilitate them.

Do you know your stuff about property auctions? Please contribute your sage wisdom in the comment section below.

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