How Do You Sell Machinery In A Down Market?
CAI Auctioneer, Land Broker
Founder, Auctioneer, Broker, and Agent at DreamDirt, Jason Smith is a lead farm real estate professional in the Midwest. He has achieved the pinnacle of auction education earning the CAI designation and is one of only 11 CAI auctioneers in Iowa. Jason graduated from the World Wide College of Auctioneering, and has achieved the PRI designation from the Professional Ringmen Institute. Jason and his wife founded DreamDirt in 2005, and the company continues to be a leader in the farm auction space and prides itself in offering extensive land seller and buyer information.
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Farm Equipment Market Insights
Agriculture is experiencing a down market today and I want to perfect this blog post with a few thoughts and observations from inside here at DreamDirt. Ag had a good run for the last 5 years. Land prices exploded and factories pumped out new big iron like we’ve never seen. Today commodity prices are cut in half and a little more. Many farms upgraded machinery during the height of the market. Tax advantages and incentives along with record profits made it the perfect time to make those purchases.
Today we face a different situation and for those that can see into the future, those that can look forward and predict future market conditions and responses understand a few important things. First we are at the beginning of the downturn. Land prices are not far off record highs, machinery has lost some value but probably not what its going to lose.
I can still hear my old college professor saying “its a lot like climbing a mountain the rate of ascent is nothing compared to the rate of decent” In agriculture this happens to us all the time, we see changing market conditions all the time, its a part of the business. What we are seeing in 2015 isn’t unprecedented, but its on a bigger scale than typical market swings. Have you heard the saying the higher you go the longer the fall?
To visualize the situation I describe that upside down V chart of time versus money. Often times sellers believe if they just hold on they can find the right buyer that will pay top dollar, they can control the process more but I’ve yet to meet to many people that could “beat the market” Its like trying to make it rain, its just something you can not control, its going to happen regardless of how bad you want it.
99% of people selling something have the goal of getting the most money they possibly can for the asset. Lets talk about how to do that in a down market. You can pick a point on the red line above to be your sale date. Time moves from left to right and time is all you can control. The Money side represents Value and the only control you have over the value is time because its easy to see that as time moves on, value goes down. Its not permanent, the market will cycle and move upward but remember the climb up is slower than the fall down.
If you are in the position of needing to convert iron to cash in this market there are some bright spots. The livestock business is doing good, there is some demand there. Basis in different parts of the country means not everybody is in the same shape and different geographic regions differ on what they will pay for machinery. Some producers sat out record prices with the strategy to buy machinery on the way down to enjoy the discount.
So how will you sell your machinery? Should you go at it on your own and post it on Facebook groups? Post it to Craigslist? You can save the commission right? Wrong! Why is it wrong? We get so many new clients coming from attempting to sell this way with horror stories about posting items and buyers never showing up, or arriving only to try to negotiate the price lower, even sales that resulted in returned checks and people that have had to go repossess equipment from transactions where payments failed.
Understanding advertising as we do I always say to myself “what are your chances of finding the right buyer for one piece of equipment in a huge sea of people using social media and Craigslist” Its nearly impossible. Now I know some people read that and think “well I have already done it” and to that I say “either you got lucky, or you left money on the table and didn’t know it” Without competition for the assets you will never know which one.
So is the sky falling? Not at all, nor are we trying to paint that picture for anybody. Many people today are chasing the market to the bottom of this downturn despite their need to sell. We see this on a daily basis. They seem to be a step behind the market when they really need to leap frog it and cut the loss. You can not beat the red line, there is nothing you can do to stop time. Is your goal to make as much money as possible in selling your asset? If so read on….
We believe the best way to sell assets is via public auction. You get experienced auctioneers that understand the market, understand the demand, are insured against losses, bound by professional standards and the Auctioneers Code of Ethics, have a large crowd of buyers at their fingertips and can create competition for your assets. You get the absolute best marketing money can buy including TV commercials, newspaper ads, color fliers, website, Internet ads, email blasts, machinery websites, social media and more. Many of our sellers even share the auction their equipment is on furthering the auctions reach. When they all come together for the final event to sell the equipment you will get the highest market value that day PERIOD.
Today time is not on your side today and as we move forward today is your best value. If you are a gambler you may opt to hold on but if you are a savvy business person you understand that time is money and offering and selling your items quickly represents a greater value than holding on or “chasing the market to the bottom”
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