WHAT IS THE BEST WAY TO SELL FARMLAND?
When selling a tract of land, there are generally two methods of sale to consider. One is the Traditional Land Listing, and the other is the Auction method.
A traditional land listing is the method of sale in which a property is offered to the public at a fixed price, and each potential buyer will submit offers to the owner for consideration, along with the terms of the deal. A Land Auction is the method of sale by which the seller sets the terms and day of sale, and the market (public) show up to offer the price they are willing to pay.
When simply defined, it may not be immediately obvious why one method would be preferred over the other. However, for most tracts of land, there is generally one method that will yield the best results.
Stepping back from the details of the property for a minute, the first factor we at KILOTERRA often consider when making a recommendation, is the landowner’s personal circumstances. For example, there have been cases where a landowner’s financial situation required they sell a tract of land to avoid foreclosure. In another, a landowner wanted to buy a particular piece of property that adjoined their larger farm but needed to unlock some capital by first selling off another tract of land. In both cases, the timeline of the sale was very important, and a public auction was recommended. If the property is unique, a traditional listing can take longer to close, and would not have worked well in those situations.
If urgency is not a consideration, then we generally look to the features of the property to determine the best method of sale.
If the landowner knows the price they are willing to accept for the land, has flexibility in the final terms of the sale, the sale is not urgent, and/or the property requires a personal presence during the selling process, we often recommend Listing the property for sale on the open market.
Leisure or Recreational type properties are perfect candidates for Listings. They require that the potential buyer fully understand all the characteristics that make the land suitable to their needs. This personal touch is hard to obtain through an auction. Also, there is a limited buyer pool for these type properties, and the value one places on certain characteristics of the property may differ greatly between potential buyers. With this approach, the seller can negotiate with each interested party until an acceptable deal is obtained.
When a property is highly desirable and a fair market price is difficult to estimate, a Land Auction is the best option. The owner outlines the terms and day of sale, and the buyers make offers of the price they are willing to pay on that day. This works absolutely the best when there are multiple interested properties with a strong desire to own the land. As you can imagine, an Auction does not work well when there is only one bidder. Depending on whether potential buyers are mostly all local, or on a larger regional or national scale would dictate the specific type of Auction (Live On-Site, Online, Sealed-bid).
Row crop farms and commercial land are excellent candidates for a Public Auction, especially when a Live and Online Auction are combined, because bidders from the local area as well as across the country can bid to purchase the land. Pasture land in a strong pasture area can also sell well at Auction, but generally it is of most interest to only the local area unless it is a substantial sized tract that will be sold all together.
There are several variables to consider when trying to decide whether a Traditional Listing or Land Auction is right for your land sale. This brief overview should help you to understand that there are many considerations that should be weighed, but also understand these are not the only factors that may dictate which direction is right for your situation.
If you would like assistance in determining the best method of sale for your future farm sale, please contact the team at KILOTERRA. One of our Land Specialists will be happy to assist you with your Land Sale and Auction needs. Please call us at 515-442-7709 or email: firstname.lastname@example.org
If you’re planning to use a Land Auction, this article here will help you prepare for that process.