Just as every property is different, so are the ways farmland can be effectively sold at auction. When landowners elect to sell their real estate, they must decide which auction methods will be used to conduct the sale.
As a potential buyer, the type of auction selected will provide you with early clues about current market conditions, property characteristics and the extent of the landowner’s motivation to sell. Each auction type has its own unique structure and bidding requirements.
Here are some of the different auction types you might run across as you’re looking to purchase ag real estate.
Land Auction Site
One of the first ways auctions are distinguished from one another is the site in which the sale takes place. While open outcry land auctions have traditionally been held in person, online auctions are becoming increasingly popular.
- Live In-Person Auction – Bidders attend the auction at the predetermined location and time. As the auctioneer cries the sale, buyers place their bids by holding up their hand or a card for the auctioneer or bidder assistants to see. Buyers compete until the highest winning bid is placed.
- Online Only Auction – With online only auctions, both the auctioneer and bidders participate remotely. Using a webcast platform, the auctioneer cries the sale live and potential buyers place their bids online as they follow along with the livestream. Like in-person auctions, the land will go to the highest bidder.
- Timed Online Auction – The format for timed online auctions is similar to bidding on eBay. Potential buyers have equal opportunity to submit their highest bids against a running countdown. The sale concludes once the highest bid is reached at the set closing time and date.
- Hybrid Auctions – Hybrid auctions are combination auctions that can be attended virtually or in-person. The auction is conducted live and potential buyers have the option to bid at the sale or from an off-site location online. As the auctioneer cries the sale, updates are shared with all participants on the latest bids whether they are made in-person or online.
Methods of Bidding at Auction
Another way auctions can be differentiated from one another is the methods of bidding. There are several types of bidding methods that can be utilized to benefit the seller and create competition among buyers.
- Traditional Bidding – In an auction with traditional bidding methods, tracts of land are sold individually in a consecutive manner. The auctioneer begins the auction by asking for an opening bid and offers escalate until the highest bid is reached.
- High Bidder’s Choice – With this method of bidding, similar properties are grouped and potential buyers compete to select the tract or tracts of their choice. The highest bidder’s selection is then removed, and another round of bidding begins if all the tracts have not already been claimed.
- Sealed Bid – There are two types of sealed bidding scenarios. In a one chance sealed bid, all bidders submit their offers to the auctioneer in a sealed envelope so that no one knows how much other auction participants have bid. The highest offer is accepted or countered. Alternatively, the seller might opt to invite the top bidders with the highest offers to resubmit open bids to net better results. This may occur if the initial offers do not meet the seller’s needs or expectations.
- Multi-Parcel Bidding – Multi-parcel bidding allows buyers to place bids on any combination of tracts or parcels that best fit their needs. This is a benefit to both buyers and sellers because each individual tract can bring fair market value versus one buyer purchasing the entire portfolio.
It’s natural to be concerned about overspending on land at auction. By understanding the type of auction taking place and the methods of bidding, you can feel more comfortable with your decision to participate in the sale in-person or online and more confident in your overall bidding strategy.
