Generations of land specialists

Generations of land specialists

Selling via Auctions

So, you are now ready to sell your farmland. With today’s land prices so strong, that should be easy enough. Your next thought might be, I’ll just go over and see the neighbor. Yes, you could do that, but what should the price be? How will you be certain that you will receive all of the dollars you deserve from the sale? After all, you only have the opportunity to sell the farm one time. Obtaining the maximum price the market will bear can be elusive. Can you really be sure that you have tested today’s true market for your farm if you handle the sale yourself?

Sales statistics say no. Terra Firma, the newsletter of the REALTORSŪ Land Institute, recently had an article from an Iowa farmland appraiser where he noted that he had recently studied land records that were exposed to the open market by a professional land broker or auctioneer and those sales were $1,000.00 - $1,500.00 per acre above the sales made individual to individual. Other appraisers have confirmed similar results. We have recently reviewed several farm land sales in Minnesota and found that the dollar differential sellers received by engaging a land sales professional were even greater than the Iowa study indicated.

Farmers are notorious do-it-yourself activists, and they should be commended for that independent attitude. Today’s farmers must have a terrific range of skills in order to be successful producers, but to be truly knowledgeable about today’s land market is a really daunting challenge.

Market knowledge is a critical factor in selling farmland today and it is an ever moving target. Volatile commodity prices, global demand and local land demand dynamics along with numerous other factors make land pricing predictions within any precise range a real challenge. The land marketing professionals, the true land professionals will spend many hours every week studying land trends, and why one tract is more desirable in the marketplace than another, even in a given neighborhood.

Those facts are the main reasons that we feel so strongly that a "well-managed" public auction is the best "price-discovery" mechanism that a land seller can employ. What could work better than assembling all the interested buyers together in one room, with the bidders competing openly with one another for the ownership of the farm?
 
When we say a "well-managed" public auction, we are speaking of the total process from the auction booking through the closing of the sale. To achieve optimum results, the professional marketers that know how to package a farm, advertise for maximum exposure and conduct an auction to achieve truly spirited competitive bidding, combine in what the industry calls a well managed auction process, leading to the best result for the seller.
 
Why do sellers chose to sell the farms themselves or perhaps hire their attorney to sell the family farm?

1. The first reason would obviously be the fact that their knowledge of the land market and the psychology of marketing isn’t present. 

Marketing farmland to achieve top dollar is a great deal more than running a few ads in the local newspaper. Marketing professionals devote their lives to honing their skills and employing the most effective techniques. They strive to reach the maximum number of qualified potential buyers, both farmers and investors to provide genuine competitive bidding for each farm sale.

That ag land professional will invest days doing their own due diligence on each property the represent. They know that if they can remove uncertainties and accentuate the positives about the property, the buyer will have confidence to pay more for the property. If we contrast that with the lack of information available to a buyer for the sale by owner and or local attorney, then we see another reason why the ag land broker/auctioneer obtains better prices for their clients.

2. The second reason that we see for sale by owners could be their feelings about the fees or costs involved in engaging a farm REALTORŪ /or Auctioneer. Perhaps they look at fees as an expense rather than looking at it as an investment.
 
Virtually, all farmers today understand that applying the recommended amount of fertilizer is a good investment that produces a positive cost/benefit ratio. Isn’t hiring a professional marketer the same concept? Of course, it is.

If you could invest $1.00 and receive $4.00 or $5.00 in return, would you call that a good return on your investment? I think most of us would be delighted to achieve a 400 – 500 percent return on our investment.
 
Conservatively, these are the kinds of returns on investment that savvy sellers of farmland are earning today, when they engage the services of a true ag land professional marketer. The farm sales records tell the story.

Even more appealing for the seller is the utilization of the buyer’s premium in some auction markets. When that procedure can be used, it enhances the seller’s bottom line to the ultimate.
 
You are free to make the decision as to how to sell your farm, but if you really want to net top dollar, research how you can obtain the maximum advantage for that once in a lifetime event.