What’s the Best Land Sales Method?

October 16, 2019

After reaching the decision to sell your land, your next question is likely, “should I list it, or auction it?” Without professional input, the answer to that question is often clear as mud. Many factors determine the best land sales method, but to keep things simple, let’s focus on three main influences.

Motivation – Starting with the end in mind is good advice in general, and more specifically when selling land. Evaluating your motivation in selling is an important first step. These main areas should be considered:

1. Timing – Many factors impact the desired timing of a land transaction, such as using a 1031 exchange, needing to sell quickly so you can purchase a different property that’s available, the settling of an estate – the list goes on. In short, an auction (either public or sealed bid) defines a contained timeframe in which potential buyers must act on their interest and close the sale. Conversely, traditional listings allow the seller the luxury of time to attract a broad range of interested buyers, react to offers, consult with family members (if more than one decision-maker is involved), and more. Traditional listings are typically not slow by any means, but they do provide room to breathe.
2. Risk Tolerance – Traditional listings are the lower risk option for selling land. The seller is always in control of timelines and reviewing offers, and there is far less pressure compared to a public auction. But for the right type of property, a less conservative approach that capitalizes on the emotionalism of potential buyers has the opportunity to yield great results.
3. Publicity – Sometimes, a discrete sale that stays largely out of the public eye is an attractive option. For example, when a shortage of working capital or pressures from a lender force a sale, a private listing keeps the circle small of those who know the land is for sale. If a seller desires to keep the sale local, a private listing or sealed bid auction could help accomplish that goal. When discretion is less important than attracting a broad range of buyers, a traditional listing or public auction are both great options.

Neighborhood – Location, location, location. If I’ve heard it once in regards to the land market, I’ve heard it a million times. But few factors carry more significance when determining the best sales method for a particular land tract. When a farm is situated in a highly-competitive farming neighborhood with multiple aggressive buyers, public auction often delivers the best results. Without at least two aggressive parties, a public auction is simply an awkward opportunity to hear an auctioneer practice. It’s worth noting, though, that some neighbors are fiercely loyal to one another and prefer not to go head-to-head at public auction, in which case one of the other sales methods is a better option. When we recommend a particular marketing method to a landowner, we’ve done our due diligence in determining the neighborhood climate.

Land Market Climate – What a property is worth at any given time is dictated by the market. So much goes into analyzing the land market – studying historical and current sales trends, weighing the role of commodity prices, global impacts, and more. The natural temptation for landowners is to view their land in isolation; even more difficult is when the sentimental value of the land outpaces the market value. Our Land Brokers have the advantage of taking a step back to look at the bigger picture land market when helping sellers navigate the various sales methods. An 80-acre tract of low-quality timber that’s overgrown and located in an area that lacks buyer interest is the recipe for disaster at public auction. Conversely, a 40-acre all tillable tract with good farmability, drainage and access that is comprised of highly-productive soils typically makes for an auctioneer’s dream scenario. While those are obviously on opposite ends of an extreme continuum, the point is that not all types of properties are suited for the same marketing approach.

Suffice it to say, one size does NOT fit all when it comes to selling land! It’s a complex decision that requires a close look at motivation, neighboring interest and overall land market conditions. If this all sounds overwhelming, have no fear. Allow me to say with the utmost humility that you’ve come to the right place for receiving guidance throughout the sales process from professionals who live and breathe the land market.

This article originally posted on October 16, 2018. As landowners are making decisions this fall about selling, we thought it might be a helpful article to republish. Author: Luke Worrell – Managing Broker, Accredited Land Consultant, Accredited Farm Manager