By Marc Jensen, Vice President, Marshall Office
Are you ready to maximize your chances of success at a land auction? Whether you're experienced or a first-time buyer, having a solid strategy in place is crucial. In this fast-paced and competitive market, it's essential to be fully prepared and equipped with the right tools to secure the property of your dreams. Listed below are three proven steps that will help you navigate the journey from wanting to purchase to successfully buying at a land auction.
Step 1: Research the farm itself
To begin your journey towards a successful land auction, the first step is to conduct thorough research and analysis. How does the farm fit into your current and long-term operation plans? Here are some essential questions you can ask yourself:
- Does the location make sense for my operation?
- Is the size of the farm manageable? Is it large enough?
- Does the quality make sense for my goals?
- What does this purchase do to my Cash Flow? What if yields decrease by 15% and prices decrease by 15% from projections? Are there other farms that may be coming up for sale that I should be considering over this one?
While it is rare for a farm for sale to “check” all the boxes, it is up to each operation to evaluate the advantages and disadvantages of the farm to determine their overall level of interest. By investing time and effort into research and due diligence, you will be well-prepared to make informed decisions at the auction and avoid any unpleasant surprises down the road.
Step 2: Understand the auction process
Before you start waving down the auctioneer, it's crucial to understand the process of an auction. A land auction is a public sale where properties are sold to the highest bidder. These auctions provide a unique opportunity for buyers to acquire land at competitive prices.
Many land auctions offer pre-auction inspections, allowing potential buyers to visit the property and assess its condition. Take advantage of these opportunities to inspect the land thoroughly and ask questions. Compare the property with the local market conditions, including the current trends and prices of land in the area.
It is important to familiarize yourself with the auction terms and conditions. Ensure you have all the necessary documentation prepared and readily available for the auction including down payment funds or a preapproval letter.
Step 3: Create a plan for the purchase
It's crucial to have your finances in order before attending a land auction. That means being prepared for an auction starts months, or even years, before by keeping good financial records including updated balance sheets, cash flow projections and actual production results. If your purchase will be supported by financed capital, start the conversation early with your loan officer. Your FCS Financial loan officer will work with you to create a customized plan that makes sense long-term for you. By setting clear objectives, you can stay calm and confident throughout the auction process and avoid getting caught up in the excitement of the auction.
Success at a land auction requires research, strategic planning and setting yourself up for success. By positioning yourself as a credible buyer, you will maximize your chances of securing the property of your dreams.
