Why A Farmland Auction Might Be Right For You

March 01, 2012

Recently, Schroeder/Huber LLC has conducted two successful land auctions. This February we conducted an auction of 50 acres near Taylorville, resulting in a record high value for Illinois farmland of $14,600 per acre. Our auction in September, 2011, brought new record high prices for southwestern Illinois.

Farmland auctions have been increasing in numbers and success. Fewer farms are being sold private treaty, while the number of auction sales continues to grow. Why, you might ask? Farmland prices have been increasing so quickly, it is difficult to place an asking price on a property. There have been numerous auctions that have sold for more than recent prices in the area would suggest, none more famous than the Iowa auction that brought $20,000 per acre.

There are pros and cons to any method of sale. Following are some of the pros and cons to a farmland auction:

Pros for an Auction

  • Definitive auction date and marketing period
  • Creates a sense of urgency among interested buyers of farmland
  • Promotes competition that can result in a higher price
  • No pre-set price ceiling
  • No contingencies in sales contract
  • Eliminates negotiations between the buyer and seller

Cons for an Auction

  • At the mercy of external forces; less than ideal economic news immediately before an auction can dampen enthusiasm
  • Could be a very limited market pool for a particular property being sold
  • May not obtain desired price level

After considering the pros and cons to a farmland auction, consideration needs to be given to the area and type of property being sold. Not all properties are good auction candidates.

Good Auction Candidates

  • High quality farmland
  • Well located farmland (state highway, county road, etc.)
  • Low sales activity in area (pent up demand)
  • Well maintained property
  • Anticipate numerous interested parties

Questionable Auction Candidates

  • Lower quality farmland (mixed use, pasture, etc.)
  • Poor location (dirt road, easement, etc.)
  • High sales activity in area (market over saturated)
  • Poorly maintained property (eroded waterways, brush in fence line, drainage issues, etc.)
  • Anticipate limited interested parties

Auctions work very well with the right circumstances. Farmland values remain elevated and most auctions have been maximizing the return to landowners.

We can assist you with evaluating your property and individual circumstances in recommending a farmland sale method. We have been active in both auction and private treaty farmland sales. With present volatile farmland real estate values, the correct sale method can make a substantial difference in obtaining maximum sale price. Please give us a call if you would like to learn more about what Schroeder/Huber LLC can do for you.

We keep abreast on many of the current issues facing rural landowners, these trends and topics are highlighted in our “Field Notes” newsletter. Below are some key topics for owners and farmers.