Farmland owners! Are you thinking of selling some farmland real estate and concerned about how much it will cost to sell? You can certainly try to do for sale by owner. I’m not stopping you from trying but there are some dangers that come with FSBO. Instead, try these 5 cost saving tips when choosing to sell by auction or listing! Save your money!
Want to save over half of commission costs? Hire an auctioneer instead of realtor!
I come from an auctioneer and realtor background. I’ll be the first to tell you that hiring auctioneers will save you thousands! Typically, realtors will charge you twice as much in commission costs compared to auctioneers! Realtors will often split commission with a buyers agent so you are paying 2 agents instead of 1. You are paying for your agent and also the buyers realtor! To compensate for the cost of the additional brokerage coming from the buyer’s side, a listing realtor will typically charge more than double! In-case they need to split the commission 50/50 with buyer’s side. This is why hiring an auctioneer can save you over half of commission!
At DreamDirt Farm and Ranch Real Estate where I work, we don’t offer cooperative brokerage for auctions in most cases. It’s not necessary and does not serve our client well. We are dedicated to finding buyers for your property. Since your auction is open to the public, and with our exceptional marketing and advertising, buyers are able to find your land auction and are welcome to bid! Realtors often ask us to share commissions on our auctions hoping to bring the buyer. However, we’ve found that with our advertising on Zillow and many other aggregation websites the buyers are already exposed to the listing. Buyers agents never serve to improve the outcome of your auction . This helps you save money on commission costs since you are only paying us and not the buyer’s agent. Our commission is typically 1-5% for land auctions, which is considerably low compared to 5-10% realtors charge.
Choosing an Auction over a Listing for Sale can save you money and time!
If the first money saving cost tip didn’t convince you to market your property by auction, here’s another reason!
Our auctions typically take 60 days to complete. This includes 30 days of having your auction open for bidding. Followed by 30 days following for closing process with new buyer. We have found 60 days to be extremely effective! The 30 days gives us time to get marketing and advertising out the door. This gives bidders plenty of time to arrange financing. When compared to a listing, auctions create a sense of speed and urgency to get bids in on the property.
Listings don’t have a date attached. This gives buyers more time to dwell on the idea if they want to put an offer in or not. Some buyers like to wait the seller out and wear them down. Some of our past sellers have even mentioned they have tried selling their land to neighbors. The neighbors said they had interest, but the sellers never got a clear answer or offer right away. Once they hired us to do the auction, then the neighbors saw the sellers were serious about selling! Bids were placed before time ran out for opportunity to purchase neighboring land.
The 60 day time frame is also a huge plus when it comes to costs and saving money!
When selling property, you need to keep in mind that you continue paying taxes, insurance, and maintenance in the time period of selling. With a 60 day auction process, you can save thousands when compared to if your listing took longer than 60 days. Imagine if it took an extra 6-12 months to receive an offer. You’d be done paying on taxes, insurance, and extra costs months ago if you did an auction! Not only do you save that money, you put it to use earlier on something which contributes to more saving.
One last tip for choosing the auction method, is to have an online only timed auction! Live auctions where bidders come to hear an auctioneer chant are typically more expensive to the seller. This is because you’re incurring more costs for more peoples time, costs of the venue, travel, refreshments for the crowd, printed items, insurance, and set-up fees. Hint: Ask to have an online only auction to save more in commission and fees.
Choose the right marketing package! Do you need the whole works or just want a little advertising?
This is where you can save some GREEN! Advertising cost add up fast! At DreamDirt we charge no marketing and advertising fees for properties valued over $250,000. If you’re curious of how much your property is worth contact me today! Other companies may charge you for newspaper ads, flyers, drone video, postcards, digital ads, etc.! If a company you are interested in charges for marketing, make sure you understand where exactly your money is being spent. Some of our past sellers who didn’t meet our free advertising offer have decided to have us use photos instead of a video, and digital ad instead of print advertising.
When deciding how much advertising you want done for your farm, also take into consideration the quality of the marketing. Does the company produce appealing flyers and videos? Do they make it all in house or hire a third party? DreamDirt’s advertising is done all in house which makes it more affordable for our sellers!
Commission costs still too high for you as a seller?
Have you heard of Buyer’s Premium? It’s a way you can save on commission cost by charging the buyer a percentage on top of his final bid. This helps pay for costs of the auction. The auction serves the buyer and seller both. With a 4% commission for example, you could pay for 2% and charge the buyer the other 2%. It’s completely up to you as a seller how you offer the property.
With an auction you set the rules and the buyers bid accordingly. The buyer’s premium may reflect in the amount bidders are willing to bid. Bidders know they’ll owe and additional percentage on top of their bid and some it may not. We see it some in Iowa but other states and areas it’s more common. We just finished this auction with a 2% BP in Buena Vista County, IA and have also sold land in Kansas with Buyers Fee of 5%.
Compare several companies and don’t be afraid to negotiate costs and fees!
Most landowners only get one shot at selling land in their lifetime. My biggest piece of advice is to become educated on the process! Also interview companies you are interested in hiring to sell your most valuable asset! If you’re nervous about paying commission don’t be afraid to negotiate! It may surprise you what we can come up with. I’ve had sellers choose less commission percent but pay for marketing up front. The have set up a commission scale depending on what the farm sells for. Most choose the no risk option of only paying commission once the land is sold. At the end of the day, I want you to be comfortable with hiring me as your auctioneer at a price we can both agree too. I offer a free consultation and proposal for interested sellers to get started with the land selling journey. Start here today!