The Absolute Best Way to Sell Farmland
Whether your farm has been handed down by family members for generations or you have put in your own hard work on the land throughout your life, you likely have a deep attachment to it. So deciding to sell your farmland can be a tough and emotional decision.
What can seem more confusing is that the sale of farmland is not always cut and dried. Whether you’ve inherited the land and have no interest in it, or you’ve worked the land your entire life and are ready to retire, you need to know how to get the best price for the real estate.
The two main selling options when it comes to selling farm real estate are auction sales and traditional brokerage sales. There are pros and cons to each option, but your decision on which route to go will primarily be based on three elements:
- Timing - How quick does a sale need to occur.
- The number of parties involved in the ownership structure - oftentimes multiple parties cannot agree on the best method of sale or even the price.
- The local agricultural land market - is the market appreciating, steady, or even declining. Changing market conditions can often dictate the best method of sale.
Regarding auctions and brokerage sales, there are some key differences that are crucial to understanding.
Auctions are often thought of as synonymous with bargains. However, that is not the case when it comes to farmland auctions. Auction sales are highly accepted and a standard way of selling farmland due to the auction creating high-quality competition. Also, most farmers and investors in farmland are accustomed to buying at auction. Buyers will come prepared to purchase land for market value prices or prices that exceed market value. Lowball offers are eliminated quickly in the auction setting, and direct competition between buyers in this setting often drives the price beyond market value.
One of the perceived main benefits of a brokerage sale is that it gives you more control over the final price of your farmland. But this comes with a tradeoff. Though a brokerage sale gives you the ability to negotiate with potential buyers about the purchase price, there is no rush for buyers to put in the best offers as buyers or attempting to negotiate the price down. In comparison, an auction provides a set date, setting a time defined period when offers or bids will be placed in a competitive manner. Quite often the final sale price may end up being higher than the initial asking price. If you don’t want to or can't afford to have your farmland sit on the market for months, then a brokerage sale will not be your best option for selling farmland.
Regardless of which way you go about selling the property, it's always wise to work with a professional. Professionals will already have a firm understanding of what the current local land values are and what the existing pool of buyers consists of. Working with someone who thoroughly understands the local farmland industry is essential when it comes to getting the best price for your property. Many land brokers are actually landowners themselves, many having grown up on family farms.
Why You Should Consider Auctions
So, why should you consider an auction for selling your farmland? Auctions are often the best option when it comes to selling a farm because land auctions are red-letter events among those in the farming community. Holding a land auction allows you to reach a wide pool of buyers at once, ensuring you obtain the best possible price.
If you need to quickly sell your farmland because of a complicated ownership structure of the land or other reasons, a farmland auction will be your best-case scenario. Land auctions create a sense of urgency, while also creating maximum exposure for the property you're selling.
Ultimately, an auction setting gives you more control as a seller. You will be able to set a specific date, time, and conditions for the sale of your property, You can also set a price reserve on your farmland before the auction commences. A price reserve, coupled with competitive buyers, will ensure that you obtain a premium price for your land.
How to Sell a Farm at Auction
Should you decide to sell a farm at auction, there are various auction formats to consider. Each of the options below offers you the chance to sell your property within a reasonable amount of time, while still obtaining top dollar and remaining in full control of the sale terms and conditions.
At a reserve auction, the seller and auction company agree on an acceptable minimum bid or reserve price. However, this price is undisclosed to the public and is generally confidential between the seller and the auction group. Quite simply, you, as the seller, “reserve” the right to accept or reject the highest bid made. The reserve auction is the most common form of the auction as it provides the highest level of protection for the seller.
At an absolute auction, there is no minimum bid or reserve price. At the conclusion of the auction, the property will sell to the highest bidder. While some people see absolute auctions as risky, most auction companies and sellers realize that absolute auctions often result in higher final sales prices. This is primarily because potential buyers know that if they are the highest bidder, the property is going to sell.
Sealed Bid Auction
In sealed bid auctions, bidders give their best offer in a controlled competitive bid setting. These bids can either be given orally or through writing. Bidders in a sealed bid auction generally don’t know who the other bidders are, and they don’t see the bids. Theoretically, everyone is bidding their highest and best offer, and they won’t have the opportunity to raise their bids. Sealed bids auctions are the least popular way to sell farmland and are generally only used when interest may be low, there could be a wide range of values, or you’re trying to get a high value out of someone.
A multi-parcel or multi-tract auction is used to divide larger properties into multiple bidding units. This allows bidders to either submit bids on an individual tract of land, a combination of tracts, or the whole farm property. The multi-parcel method of selling larger tracts allows competition among more bidders resulting in higher sales prices.
Live Outcry Auctions
Live outcry auctions are what many people think about when they hear the word auction. Typically these auctions are conducted on the property or at a central location with an auctioneer leading the auction by “calling” or “crying” bids out to an audience. While this is the way auctions have traditionally been done for generations, this format is losing popularity with the advent of technology.
The final and often most preferred farmland auction format is an online auction. Online auctions are becoming much more popular as competitive bidders can place offers through a secure internet site. In recent years with the advent of technology, online auctions for the sale of farmland have experienced tremendous growth. Bidders can complete their due diligence and place their bids from a much more comfortable setting than at live outcry auctions. A huge advantage of an online auction is the anonymity of the bidders. Many times, especially in rural communities, bidders like to keep a low profile when bidding. For the sellers, the anonymity offers a tremendous opportunity for higher prices as interested neighbors sometimes will not bid against each other at live outcry auctions.
Weeks Auction Group Can Help
Regardless of how or when you decide to sell your farmland, you need to get in touch with a professional auctioneer or professional land broker before making any major decisions. Preferably, it would be best if you got in touch with both types of professionals to learn the pros and cons of listing your farmland for sale and selling it at auction. A professional can help you understand the process and will have insider knowledge about the local land prices and potential buyers.
Selling your farmland is not something you want to go into alone. Many meticulous details go into selling property that can quickly become frustrating and overwhelming to someone who doesn't thoroughly understand the process. If you want to get the premium price during your farmland sale, then you'll want to consider working with an expert within the industry.
If you're looking to sell farmland in the southeastern United States, a great first step would be to contact the professionals at Weeks Auction Group. Our team has over 60 years of experience in the land selling process. We've continually helped sellers and buyers get the results they want without any of the hassles or headaches that can come along with selling property. The farmland selling process can feel overwhelming, but by working with Weeks Auction Group, it doesn't have to be. Contact Weeks Auction Group today to get started on your farmland selling process.