Here are 5 things you should know before selling a farm at an auction to achieve the maximum price for your farm.
1. Talk to the Auctioneer as soon as possible
Just this last week I took a day to drive around the state of Iowa and update all the photos on my auction listings. Most of what I had on there had been taken just shortly after the crop emerged, it was short, you could see the dirt but in just a short time the crop has progressed to where the soybeans are about to canopy and the corn is head height. It made sense to spend a day updating the marketing photos to ensure the best possible photos were on the website. July, August and September photos are always a great fit for auction marketing, there is a beautiful full crop, the leaves are green and the photos are just more pleasant. In the Fall, Winter and Spring farmland can be really featureless and we have to be more creative with photos to help them stand out. Getting your photos taken during the Summer will at the very least make your marketing materials more attractive to the eye and I always encourage sellers where possible to get signed up during this time period even if they do not intend to sell the farm until the next Winter. At least we can get the photos and start documenting the progression of the farm and have it available. In the absence of that if you do know you might consider just snapping a new good photos yourself to have to provide us. Its always best to take the photos with the sun to your back and be sure to get good wide shots that show the most impressive views of the farm.
2. Don’t talk to anybody that doesn’t need to know and never discuss price
There is one person that knows how to get the most money for your farm but it won’t stop people from offering you all kinds of suggestions that can send you down the wrong path. This can be one of our biggest challenges at times where a person has been told something by a trusted source but its unfortunately just flat wrong or could actually hurt them. I have had clients insist we do something that “Uncle Bob said we have to do this”. We certainly understand having input, we collaborate with our clients to ensure they get the experience they want with the understanding that they are also engaging us to help them make the best decisions to achieve the best possible result. Discussing your potential upcoming farmland auction with people that really don’t need to know can also cause you headaches you don’t really want too. For example we have had clients come to us where they had let the cat out of the bag a little early only to find out they had attracted the attention of some people that had the intentions of trying to buy the farm at a deep discount and using tactics that range from overly aggressive almost bully like tactics to sad stories and guilt tripping them. The more it gets out that you intend to sell a farm before its officially announced by the auction company the more unwanted attention you may get and at times it can start controversy that you don’t really want to deal with or that can hurt the reputation of your upcoming sale. We know how to handle these things and we know how to put you in the best position to sell the farm so limit conversations ahead of time to people that need to know only such as accountants, family members, lawyer and the auctioneer and by all means, never discuss price with anybody. That could be the absolute #1 sin committed by auction sellers of farmland. If you tell somebody you will take $5000 for a farm that we believe will bring $7000 it can limit bidding of critical bidders because of the mental mind block it creates.
3. Not all Auctioneers are licensed to sell real estate but all can sell real estate.
It might seem odd but in Iowa you are required to have a real estate license to sell real estate, unless you are an auctioneer. An auctioneer can sell real estate without having a real estate license but it would seem that its a better choice to sell using a an auctioneer that does have a real estate license as well. The state of Iowa puts very strict guidelines on auctioneers that do not have a real estate license and restricts them from certain activities such as showing the property, answering buyers questions, accepting and holding earnest deposits, completing contracts or being involved in the closing process. Auctioneers that are not licensed are not required to provide any type of disclosure that they are not licensed, they are not required to carry insurance, they are not required to keep records, they are not required to submit to records or financial audits either. As a licensed real estate broker we are required to do all of the above and oddly we are required to disclose we are licensed which would actually seem like the safer choice to me. Our company carries Errors and Omissions insurance as required by law as do our agents along with liability insurance that covers you as a seller. In addition there are absolutely no educational requirements for auctioneers, but as real estate brokers we’ve had to take over 168 hours of classes in Iowa plus 32 additional hours of continuing education that relates to real estate sales, real estate laws, ethics and legal updates. When you are choosing an auctioneer to sell your farm it sure makes sense to me that selling with an auctioneer that has a real estate license is good insurance against a bad result or potential legal hiccup for a seller using an auctioneer that didn’t have insurance or was not aware of something because they had never participated in education to learn the ins and outs of selling real estate. There are many small details that need to be taken care of.
4. Now is the perfect time of year to sell a farm.
We get this question all of the time, “when is the best time of year to sell a farm”. The truth is, when it fits for you. You can sell a farm that is leased, the tenant will become the tenant of the new buyer, nothing will change about that lease and it does happen very often.
Each part of the year will mean a difference in your terms and conditions but there is no bad time of year to sell a farm. The majority of the differences come with how the income will be split. For example if you sell a farm on March 1st and have the entire crop year ahead its probably best to let the new buyer have the income or possession for that crop year. If you sell on July 1 you might split the income with the buyer but if you sell on December 1 with possession on March 1 its more likely to be an auction with no split of the income. More and more farmland is becoming a popular long term safe investment by people that are not typical landowners. For them the purchase is a business decision with long and short term considerations and they have money to invest 12 months per year as an investor. As a neighboring farmer or a farmer in the neighborhood the purchase is also a business decision and at some points of the year for them it would mean buying a farm but not being able to farm it for up to 18 months. In that case they will still be making at the least interest payments to a bank and splitting the income for their first year of ownership makes it easier for them to make the deal happen. The final price of your farm will be a correlation of how you set the auction up to fit the buyers needs. As a seller investing in that income split for the first year has always been a good decision for our clients so they get full market value for their farms when its sold during the crop cycle.
5. Paying a commission will result in your getting more money, not less and it will save you time and liability.
Many people try to avoid paying a commission and I understand that but coming from inside the industry with over 200 farm sales under my belt I can see the value we can bring you as well as the protection by shielding you from the negotiations. Doing this day in and day out we just have more resources and experience coupled with fresh market knowledge we can achieve a better price in a shorter period of time. Some people avoid a farmland auction for other reasons and among them is they do not want the attention of a live public auction. Our company is heavily involved with moving the needle on farmland auctions and bringing technology to the market. Did you know you don’t have to have a live public auction where everybody comes in one room, we can sell your farm using an online only auction and we have done this very successfully for sellers that didn’t want the attention. From the network of people we know, to our accumulated customer lists spanning the entire US, our very precise targeting methods, our education and experience the commission you pay will be less than the value we brought to the transaction and that doesn’t account for the time and burden you did not have to go through to complete the sale at a discounted price.
Are you thinking of selling a farm? We will provide you with a FREE Farmland Market Analysis of your farm quickly by providing just a few details about the farm. This includes an estimate of the farms value at auction or listing as well as marketing recommendations for your farm. Its free and there is no obligation of any kind to get one.