LIVE AUCTION STRUCTURE
I have been in the real estate and auction business going on 44 years. Many times, it has been a difficult decision as to how to structure the auctions so we can generate the most money for our clients and allow all the buyers to be able to participate in the auction. Sometimes, this can be accomplished by how the farm is divided or the auction structure itself. The following is a glance at some different methods. Many times, it depends on the number of acres being sold or how the farm lays.
Basic Auction: This method is usually the simplest way to successfully auction off a farm property. This method offers just a straightforward bidding process on one parcel or multiple parcels. Each parcel is offered for sale individually and taken in order of how the property was advertised. Usually, we take a break after each property has been offered, and after the break, we restart the auction to attain the highest price. This allows the sellers to digest the prices and what is happening with their farm, and at the same time, gives the buyers a chance to recalculate their bidding potential and or call a banker or partner to review what their top bid may be. This method is understood by most buyers and sellers and does not usually confuse buyers and sellers alike. This allows all buyers to participate and, in most cases, will generate the price closest to what the market price is for that farm or farms.
Sealed Bid Auction: This type of auction occurs when information is sent out to the public or a select few, allowing them the option of filling out a bid form. In most cases, the top five offers are accepted, and those five potential buyers are invited to a private auction to determine the market price of the farm. This auction type can result in a low price, as people's wants, desires, or plans about buying the parcel may change before the auction, even after they have submitted a bid. As a result, they may not show up at the private auction, leaving you with only one to three potential buyers. Some owners view this as a beneficial approach, as it is cheaper, generates less publicity, and is somewhat of a “Quiet Deal." People will find out who bought it relatively soon after the sealed bid auction, especially if it becomes a disaster. Essentially, you get what you pay for.
One Chance Sealed Bid: This is somewhat of a new way of selling farm real estate. Basically, you get one chance to bid on the farm and that is it. That previous statement is somewhat false, as several times, I have heard of this type of auction and the bids were under what the owners wanted for the far. The real estate agent started calling the other bidders and asked if they were interested in raising their bid. I have never used this type of sale of real estate, as I do not feel that you get the optimum price for the property.
Public Auction with Buyers Choice: This is where you hold a regular public auction, but the bidder that ends up in the first round with the high bid gets to pick any of the parcels being offered or can take all the parcels. In my opinion, this is somewhat detrimental to the person who may only be able to afford, say, 80 acres, with several parcels being offered. That bidder knows that if he does not get the bid at the end of the first round, the top bidder may take them all or the one he wants. Based on this assumption, he may not even show up because he knows that his checkbook is not as big as the other bidders, and it may be a waste of time. This may not allow the property to get to the market price it should.
In future blogs, I will talk more about types of auctions and the pros and cons of each of those.
April 4, 2025, will be a big day for land sales in the Iowa Falls area. We have the Douglas J. Musson Estate auction with 387 acres being offered for sale in three different parcels: 153 acres, 160 acres, and 74 acres. The CSR run from a low of 81.5 to a high of 88.1. This land has had extensive tiling done over the years and produces well. Please see our website for yield information: www.thedirtdealer.com
We also have 400+ acres coming up south of Hampton, Iowa, in June. Very well-maintained farms of 53, 147, 114, and 109 acres will be sold. These will not have any combinations and are all basically unimproved. In addition, we have 69 acres m/l of timbered land for sale south of Alden, Iowa, which is great hunting ground. There is some tillable land that may be purchased with it as well. If you are looking for smaller parcels, we have 20 acres in Shell Rock, Iowa, and 24 acres north of New Providence for sale. Give us a call or go to our website for additional information.