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

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