Land Auctions 101 Start To Finish
Written by Jason Smith
Yesterday I was asked the question again “tell me about a land auction, how does it work from start to finish” and it occurred to me that maybe it might be easier to write it down to help people understand the process of having an auction. First let me cover a question first. Whats the best way to sell farmland or recreational land? That depends on your situation, your farm and the timeline but as a general rule Auctions fit any farm. Places where we prefer to use listings over an auction are where tillable acres are smaller than 40% of the land mass or where special circumstances of ownership exist for a farm but the answer is generally land auction. Land auctions give sellers more control over the sale, they are date specific, they are competitive, they are inclusive of everybody rather than a few. The efficiency of a land auction is amazing compared to listing, waiting and starting a brand new negotiation with each and every buy and the method lacks any real sense of urgency or motivator to create action on a buyers part.
So lets talk about land auctions from start to finish, how does the process work? I am going to talk in general, some situations could be slightly different here and there but the process is for the most part the same from Step 1 forward.
Contact DreamDirt and take advantage of our free market analysis. During this step our Land Brokers will help you understand your farm, the inventory of soils and improvements, current demand for your assets and what marketing options exist and best fit your farm land or recreational land. You get to know the land broker a little in this process, can ask questions and have unlimited opportunity to visit by phone or email to ask questions. You will get a marketing timeline during this step and you’ll see what we are proposing to do for you. This step is very informal and with no obligation. We act as a free resource for you to get your bearings and get an understanding of the process.
In this step you have decided to move forward with selling your farm real estate and engage us to enter into a listing contract. We send you the listing contract by mail or email and you have an opportunity to read it, comment on it and possibly seek changes that make more sense. This step reduced everything from Step 1 to a legal contact that will guide our relationship and assign responsibilities to you or us. This process can last as long as it takes for all of us to be satisfied with the agreement between us but I find it usually takes about 1-2 days.
The listing agreement is signed and now we are going to work. We will start by completing all research, gathering documents, assigning tasks in our office and building your listing online. We will discuss your listing internally and consider all things of importance at this point. Signs will go up on the farm at the time when photos and video are collected for the marketing campaign.
Is where we launch advertising. The listing is built on the website first and all other advertising is built to drive attention to that page. All newspaper, radio, TV, direct mail, social media ads, external website ads are all designed to drive traffic to that central hub for your listing.
Advertising phase. During this timeframe we will communicate with you about what we are seeing and hearing. Behind the scenes we are monitoring all of your advertising. We are able to monitor the analytics of each individual listing and make adjustments where it is needed to fine tune your exposure. This stage may also generate some requests from us for additional information as buyers ask questions that we need your input to answer.
At the end of the advertising campaign we will conduct the auction. The auction will seem very simple from your perspective. You will need to be available to us during a 2-3 hour time frame either in person or by phone. We can broadcast the auction directly to you via internet to watch if you are not present. This is a benefit our sellers have really enjoyed since so many are often out of state and do not travel to the auction. For us the auction has hundreds of small moving parts we will manage. We will have 2 teams working the day of your auction. 1 team will be in charge of the live auction while the second team. The auction will be 4 stages. Welcoming, Terms and Conditions, Bid Calling, Contract Signing. The welcoming is when bidders arrive and are greeted by our staff. The Terms and Conditions will start at the advertised auction starting time and last 10-20 minutes. During this time the teams will explain to their bidders (onsite and online) the terms and conditions of this auction. Its essentially the rules for the day as everybody bids under the same conditions and plays by the same rules. Bidders can not change the rules or negotiate after the auction. We then moved to bid calling and call for bids. We will start low and go as high as we can go before we take a break in the bid calling. This isn’t the case with all auctions, but most are conducted that way. Each auction is unique. At break the seller will confirm or deny sale of the farm. If the seller confirms we will go back to bid calling for 1 last round of bidding to move the price to its top point. When we have assured every bid has ceased and every buyer has bid their top bid then we will hammer the farm sold and move to the collection of earnest deposit and contract signing.
Closing Upon a successful auction we will immediately begin the closing process to transfer title to the new owner. First we will deposit all earnest funds in our Trust Accounts and send Abstracts to the Abstractor to be updated. When the update is complete the buyers attorney will review it and render an opinion for the buyer or the buyers lender. If you do not have an abstract one can be created for you to replace it. The timelines are about the same either way. When this part of the closing is complete your attorney or closing company will create a settlement statement and prepare proposed deeds for the buyer to review. When everybody is in agreement on documents all signatures will be gathered, money collected from the buyer, distributed to the seller and all documents recorded at the county courthouse.
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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...