Auctions are one of the hottest trends in rural land sales now, and for good reason. If you're selling land, an auction means one marketing budget and a quick sale for real-time market value. Carl Carter with J.P. King Auction Co. in Gadsden, Ala., says land auctions are increasing every year. J.P. King specializes in large-acreage sales around the country—most ringing in well over the million-dollar mark. Carter says as the demand for rural land continues to grow, auctions will keep growing in popularity.
If You're the Seller...
Find the right auctioneer.
Find an auctioneer that specializes in the type of property you're selling. Make sure they are licensed both as an auctioneer and as a real estate broker. They should be affiliated with the National Auctioneers Association and have the Certified Auctioneers Institute designation. Lastly, check references on sales the company has handled.
Negotiate a commission.
The amount of a commission on an auction is often negotiated from sale to sale. Average is around 10%.
Consider marketing costs.
One of the reasons auctions work is the advance marketing companies do to get as many bidders as possible to the sale. You can ask to lower the marketing budget, but think twice.
Types of auctions.
Auctions can be "absolute" or "reserve." Absolute sales mean you commit to sell regardless of price. Reserve sales may be "published" with bidders knowing up front that the property will sell only if it gets above a designated price; or "unpublished," where the final decision of whether to sell is left to the seller's discretion on the day of the auction.
If You're the Buyer...
Ask for a title commitment.
Many auction companies routinely provide title information. In some cases, though, you'll have to ask. If you're interested in bidding on a property, ask the auctioneer for a title commitment. This will show the property is clear of liens and any outstanding debts.
Ask for land specifics.
Make sure you are aware of anything that could affect your future use of the land. Ask in advance about easements, zoning or homeowners association rules for the area.
Be clear on access.
If there are any questions about how to access the property, get those cleared up ahead of time. Landlocked property is a common complaint and can lead to future legal bills.
Be prepared to buy.
If you offer the winning bid you will typically be asked to pay 10% of the cost of your purchase at the auction—half with a cashier's check, the rest with a personal check. This money is nonrefundable. If you are the high bidder and later learn you cannot get financing, you will lose your deposit. So be prepared; there are no contingencies.
Don't be afraid to ask for help.
Auctions can be intimidating for the inexperienced. There are auction assistants around prior to bidding who can answer your questions. And the auctioneer will usually explain what is going to happen, and what his "chant" means prior to the sale.