4 Farm Auction Myths Debunked


In recent times, the majority of farmland is sold through real estate auctions, with very few farms being listed privately for sale. However, there remains a significant misunderstanding regarding the effectiveness and rationale behind farm real estate auctions.

Unfortunately, numerous myths and misconceptions persist regarding farm real estate auctions. Some people still believe that a farm goes to auction only when the seller is experiencing financial distress or is on the verge of losing the property. This perception couldn't be further from the truth.

 

Nonetheless, it is understandable that sellers have questions and concerns.

 

  1. Competition is a driving force that often leads individuals to pay more for an item than they initially intended. The sale of farmland is no exception to this phenomenon. Over the past six months, every farm real estate auction I conducted resulted in at least a 10% increase in the final sale price compared to what we would have asked for if the property had been listed traditionally.
  2. What happens if the top bid falls short of the expected price? It's important to note that in Indiana, auctions are typically conducted with a reserve unless stated otherwise, granting the seller the right to decline the sale if the price does not meet their expectations. In my four decades of selling properties at auction, I have encountered this situation only twice, and both instances involved small tracts or residential properties. Large pieces of land have consistently fetched prices in line with our projections.
  1. How can we count on the top bidder to follow thru? Most farmland real estate auctions require a 10% nonrefundable earnest money deposit within 24 hours of signing a purchase agreement. Once the title company has received this deposit, the transaction becomes secure, as no buyer wants to forfeit a substantial sum of money by defaulting. In my 40 years of selling farm real estate, I have never encountered a situation where a buyer failed to follow through after submitting the earnest money deposit.
  1. Who will be bidding on my farm? Interested buyers range from neighboring farmers to distant investors and everyone in between. The auction attracts a diverse pool of interested parties.

 

These are just a few examples of the common misconceptions and questions sellers often have when considering selling their farms through an auction. However, once the process is adequately explained, it becomes evident that creating more competition through an auction can yield the highest possible return for a once-in-a-lifetime opportunity like selling your farm.

 

If you would like to discuss your farm, please feel free to contact me at 765-427-5052.

Brad Neihouser

bneihouser@shook.com

Comments

Post a Comment

Popular posts from this blog

A Listening Ear.

Image
  Compassion is a helpful quality in many professions; however, when you think about commercial real estate, compassion may not come to mind.  Let me tell you a story. I was recently asked to visit with a potential seller to discuss a property they were considering putting on the market. Prior to our meeting, I had been briefed on the situation, did some preliminary research, and felt confident I would get the listing and make the sale. When I arrived, the prospect had a different idea. She had just lost her husband, who, according to her, was the face of the business. The conversation centered mostly around the man her husband was, what he meant to her, how much she missed him, and everything he had poured into their business. This woman was looking for a friendly ear, so I listened. How could I not? Towards the end of our visit, we did transition to why I was there and got down to the business of it all. I left with the hope that I was able to provide her with good, dependabl
Read more

A Commercial Building Sale from Soup to Nuts

Image
  Selling a commercial building is not something that is done spur of the moment. There are only a few reasons why an owner would choose to sell a valuable commercial building. #1 Retirement. The owner retired and sold their business and no longer needs the building. #2 Expansion. The owner may have outgrown the building and is purchasing another building. There is an immense about of thought and tax planning that goes into selling an established commercial building. But, once the decision is made to sell, the owner selects a commercial broker to handle the marketing and sale of the property. The next step is to d etermine the asking price with your broker. This is where it gets really interesting… The asking price is crucial for attracting potential buyers. Some brokers may suggest a pie-in-the-sky value just so they can secure the listing (A horrible idea ). However, a more prudent approach is to price the property approximately 15% above the market value to maximize the return. Th
Read more

Prospecting: The Thoughtful Way

Image
Prospecting: The Thoughtful Way In any kind of sales, especially commercial real estate, you will most likely need to do some kind of prospecting for new clients. An old mentor of mine once said that new business doesn’t just walk in the door all the time, and wow, is that true. When you think of prospecting, the first thing to come to mind is probably the dreaded “cold call”. Everyone knows what I’m talking about, whether you’ve received them or done them yourself. The pitch for the latest service, investment, or product always seems to be the same and generally ends the same as well, without commitment. Instead of blind, cold prospecting, what about taking the time to research potential clients, obtain a base level understanding of their property, and make a “warm call”? What would that look like? Try sending an introductory letter or other mailed version of outreach. Perhaps include a photo or map of their property, including comparable sales, other current listings, and/o
Read more