Safely Sell Farmland | Lessons Learned Through The Years

Nov 23, 2020

A Safe Option For Land Sellers

We’ve had several auctions over the past couple months where the sellers have mentioned that the results “changed their lives”, that they were “moved to tears”, or that they were “overjoyed” with the prices they achieved for their land. These testimonials are what drive me. When I talk about DreamDirt being a place where sellers can feel safe, these stories prove it time and time again.

Being a safe option for sellers was one of our guiding principles when we started building DreamDirt… but I’m not sure I’ve ever really explained where that desire came from:

 

My Experience with Brokers Taking Advantage of Sellers

Before my auctioneering career, I spent 22 years in law enforcement. Protecting the innocent was something that came naturally to me. Having a strong sense of good versus evil, fair versus unfair was very much a part of that career. While there are differences between law enforcement and raw capitalism, safety remains exactly the same in both.

My first taste of unfairness in real estate came very early in my land sales career. It was a “locker room” type conversation that included several land brokers and investors. I wasn’t an auctioneer yet, but I had my real estate sales licenses and had started selling farms. The foks in the room were celebrating a deal that had taken place that morning. An investor had gotten a seller to sign a purchase agreement with the help of one of the brokers who would be making a commission on the deal from the seller. That wasn’t the part that made me pay attention. The broker and investor had turned around and re-sold the contract for an $840,000 profit to another person in the same 24 hour period.

I wasn’t sure I understood the whole transaction correctly, and I didn’t want to look dumb, so I just listened but had a bad feeling about it. The next day I went to the broker in question. He was sitting in his office alone and I asked if he could help me understand what I’d heard the day before.

He explained to me that he often finds people willing to sell their farms at deep discounts. His buyer-clients purchase these farms then re-selling them to higher-end clients. He explained that taking these farms out of “farming” and selling them into “hunting” was very lucrative. He was able to make two commissions on each farm, making the transaction very profitable for him.

I couldn’t wrap my head around it still. How well was he really serving his first client when he knew there was so much value in the farm? That definitely went against what I understood to be a real estate broker or agent’s function. I thought we were supposed to keep people safe from that exact thing! I didn’t understand why he would “allow” his clients to sell so far below market value. Why not sell directly to the end user for the original seller, instead of allowing the investor in the middle to capture profit? He said, “Because we can make 2 commissions that way.” I walked away almost wishing I could go back into law enforcement. At least everybody there really understood what it meant to protect the innocent. It repulsed me to even be associated with a broker that thought this way.

 

Two people review a file together.
Fair and safe means to be upfront about the value of the property with the original seller, PERIOD. Let them compare the investor’s offer against a real evaluation of the farm’s value. If they then are willing to accept an offer so much lower than value – thats ok! Its their choice but they at least had the knowledge to make that choice.

 

While I never personally witnessed the conversations or negotiations on one of these “double” transactions, my suspicions led me to believe the client was being lied to about the value of their farm. Conversations years later with people this happened to would cement that feeling. Time marched on, I saw much more of this type of behavior in various situations where brokers, agents and investors were capturing huge profits from unsuspecting land owners. I saw transactions that routinely offered them between $200,000 and $600,000 profit in a 1-20 day timeframe. I saw situations where real estate brokerages would form separate entities or LLC’s to buy properties from their clients under a different name. Everybody was winning except the original land owners. I developed a very bad taste for this type of unfairness. I was even known to tussle at time with brokers about the integrity of a deal. To say I was laughed at and ostracized in a few groups would be an understatement.

 

DreamDirt | A Safe Option For Land Sellers

On accident, and for a completely different reason, I discovered auctioneering and the auction method. Upon finishing my studies to be an auctioneer, I saw the possibilities this selling method held to protect sellers of land. I really wanted to find a way to use my knowledge to provide a safe place where sellers could come and find a protective harbor. A place where they could find honest information, transparent communications, a complete lack of selfish personal interests. It took me years to fully wrap my head around this, but I finally was able to build what we have today.

At times it was slow and seemed like we were losing the battle. But also, at times we would be able to snatch somebody out of a bad deal and put that profit back in the sellers pocket. We began to discover ways to thwart these types of transactions, and each time we found a new tactic it became a part of our process. We had to learn about bidder collusion, intimidation, and social friction in the auction process but we found very effective ways to challenge those obstacles and completely overcome them with our new technology and online land auctions.

Today, we’ve developed a reputation. People have seen our work for over a decade. They see our results. They know and understand what we do and we’ve shined some light on the issues. Not everybody in the land space likes that. Some of them are competitors, and some of their lives have become more difficult as their lucrative revenue streams have been cut.

DreamDirt is a long ways from being done with this work. We will continue to build our offerings and tools, and work one seller at a time to ensure their interests are protected.

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You’ll find our E-books are jam-packed with dynamic information covering topics about selling land, online auctions, and everything in between. Whether you’re ready to start the land-sale process, or even toying with the idea, we hope this will help guide your thoughts on the next best steps for your land.

You only get one opportunity to sell land the right way, mistakes last forever! You should be as knowledgeable as you can be when you are selling something so valuable and important.

These are completely free to download and will help you avoid the pitfalls you can encounter when selling your land as well as how to navigate the fast paced world of technology now intertwined with it.

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Jason Smith

Jason Smith

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.

Email: jason@dreamdirt.com | Phone: (515) 537-6633