Eight sound reasons to market your farm or timberland at auction!
1. A quicker sale and a complete control over the timing and terms of the sale
Action is immediate. Sales are held in 45 to 60 days, with subsequent closings in 30 to 45 days. You have the advantage of being able to set the day and time that your farm will be sold and establish the fixed terms and conditions of sale that are not negotiable. This eliminates the hassle of haggling over details, contingencies, and who pays closing costs.
2. Eliminate holding costs
You eliminate the carrying costs that are incurred on a day-to-day basis with continued ownership, such as interest, taxes, insurance, maintenance, and continued marketing. This can add up to 15% to 25% of the property’s value per year, depending on the type of property. Liability is also an important factor. The sooner the farm sells, the greater the bottom line dollar.
3. The market place sets true value
The market sets the right price so the seller doesn’t risk overpricing the farm and turning off buyers, or underpricing the farm and learning after the contract is signed that others would have paid more. Starting with the opening bid at the auction, the price is driven upward through competitive bidding, arriving at a true market value. Traditional sales set the price and bargain down. The auction process demonstrates the value and then “bargains up”. New sales price records are often established at auctions during the upside of the market trend; during the down side, the seller is able to catch the market and not risk missing it.
4. Advertising advantage
The seller is assured of dedicated attention to marketing the farm. This involves an intensive advertising, marketing, and public relations program that creates a market for the farm and makes the actual auction a “Media Event” generating additional excitement. The auction promotion is concentrated, intensive, and dominates the market place for 4 to 6 weeks before the sale. This “Freezes The Market” and makes it almost impossible for farms being conventionally marketed to compete with one being auctioned.
5. Creates micro-markets
Auctions reach “Micro-markets” by offering parcels and combinations of parcels that many different buyers can afford. This creates a new market for the farm that may pay more for it in a divided state than the traditional market would pay for it as a whole.
6. Creates urgency to buy
When the auction ads start and the signs and banners go up, people are convinced that the farm will be sold on auction day. This means they must buy now or it won’t be available later. This motivates a buyer to get ready to compete now. Buyers come to auctions mentally and financially prepared to buy that day. During the auction, buyers reinforce each other as to value during the bidding process, insuring higher prices for the seller. Auction marketing and bidding is also full of enthusiasm and emotion that often pushes buyers a couple of rounds beyond what they would have paid in a private negotiation.
An auction can help assure fairness among family members when the farm passes through an estate. The sale is conducted in a manner where there can be no criticism as to the price obtained. Courts, trustees, executors, and businessmen everywhere, in most cases, have held that an auction well advertised and well attended will determine true fair market value over all other methods.
8. You pay no real estate commission
When you sell your farm at auction, the real estate commission is paid by the purchaser through the use of the buyer’s premium.