How a Farmland Auction Works

Dad, Grandpa, my wife, and I went to a farm auction tonight.  We didn’t purchase the farm, but I thought I’d do a quick rundown of the auction process for all of you readers.

IMG_20130205_185409Farm land auctions work a little bit differently than a normal auction.  As you can see there are two tracts for sale.  Tract 1 consisted of the tillable acres and some wooded areas.  Tract two consisted of trees and a possible site to build upon.  The entire farm was about 76 acres with roughly 65 tillable and 10 in the second tract.  The rough figures are there because the land won’t be surveyed for exact numbers unless the buyer and/or seller think it needs to be.

When farms are divided into tracts the auction generally occurs in the following manner.  Each tract will be auctioned by itself.  Then all the tracts will be offered as one item.  At that point potential buyers will have the opportunity to bid up individual tracts or the combined lot.  Compared to a regular auction farm sales are slow.  Buyers are given plenty of time to make a decision.  Sometimes people need to call spouses or their bank.  This auction took just over half an hour.

The picture shows the farm was sold as a whole since that netted the highest price per acre.  If tracts 1 or 2 had been bid higher than $7,929/A the tracts would have sold separately.  The winning bid could also be thought of as selling for over $9,000 per tillable acre.

Why Didn’t We Buy?
This farm was of interest to us.  The first round of bidding ended at around $5,000/A.  In this day in age in our part of the world you’d better be writing a check at $5,000 if you want to buy farm ground.  You aren’t going to do much better than that right now.  Of course everyone else in the room knows the bids are going to get higher.

WolfeWe don’t have any other farms near this one.  The road to get there from our shop is long and winding and not in particularly great shape.  Driving equipment over there would take an hour at least.  The route we took a while ago to look at the farm had me questioning if I could even get the planter around some of the double right angle turns along the river.  The tillable acres were divided into three sections separated by a ditch and trees.  So it’s not really the most efficient 65 acres in the world.  If we had something over there already it would have been more tempting.  That’s not to say we couldn’t find something over there in the future.

The last reason?  At the end of this month about 130 acres of ground a mile from 250 acres we rent is coming up for sale.  It’s actually about as far from the shop as the farm that sold tonight, but it’s a pretty straight shot on nicer roads.  The soil isn’t quite as good, but I’d be pretty happy to get that ground.  Until I have to pay the mortgage anyway!




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