Going once, going twice, sold! Things to consider when selling property

by Perry Thessen

So you think you want to sell the farm after all of these years and move to town? Whether you are thinking about it for health reasons or are getting to an age where it’s too hard, and farming is hard work, there are many decisions to be made. There are two options to sell your farm – a private sale or a public auction.

Private sale benefits

1. Less intimidating for buyers – For many buyers, the thought of an auction can be overwhelming and intimidating. Private sales give the seller more time to consider offers, and vise versa.
2. Take your time – Private sales are good for sellers who do not have an urgency to sell.
3. Cost – Advertising costs for a private sale are usually paid for by the listing agent.
4. Privacy – This enables you to keep the details out of the public eye.

Private sale limitations

1. Sale length – A private sale can take much longer than an auction. There is no end date to give the buyer a sense of urgency.
2. Maximizing the sales price – A key limitation of a private sale is that the price is negotiated down compared to an auction where the bids increase. This means your property may sell for less than the asking price.
3. Fewer buyers: There will be fewer buyers who can afford an entire farm, which will drive your asking price way down.

Auction benefits

1. A sense of urgency – Auctions generate a sense of urgency amongst buyers due to a set “end date” and compel them to make a decision on that day.
2. Competition amongst buyers – At an auction, competitive bidding amongst potential buyers means that you can maximize the sale price for the seller.
3. Reserve price protection – This means that your property will not sell unless bidding reaches a pre-agreed upon level. Also, there is no ceiling, so you have a chance to get a price well above your expectations, especially with a competitive crowd.
4. Set terms – Auctions are good when the owner wants an unconditional sale, such as a closing date, and a non-refundable down payment.

Auction limitations

1. Cost – There will be the cost of more advertising for an auction.
2. Special conditions of sale – Auctions are usually not suited to buyers who wish to buy subject to finance, as often bids are unconditional. This may limit your number of buyers.

Tips for a successful auction

1. Select an auctioneer – This person will play a key role in the success of your sale. Ask your auctioneer their plan for maximizing your sale, and only choose one with a proven track record, and knowledge of the local area.
2. Set a reserve price – This is the lowest price that you will accept. Don’t discuss the price with anyone but your auctioneer. This can be decided as late as right before the auction.
3. Discuss the sale of your farm with a CPA so you can avoid a capital gains tax.
4. Accept market value – Be prepared to accept market value the day of the auction. This is why you need to set a reserve price.

About the Author:

Auctioneer Perry Thessen is a native of Bowling Green, attended Western Kentucky University, is married, lives in Alvaton, enjoys WKU basketball and formerly owned a concrete construction company which traveled the Southeast for 38 years.