Using Absolute Auctions – A Landowner’s Question

By Tom Brickman on May 6, 2014

Landowner Question:

I subscribe to emails from Cyprus Partners about land for sale in Alabama. I do so because I have farm/timber land which obviously has downvalued in recent years. It is out of your network but even so I wondered if you have any figures on what percentage an absolute auction might bring relative to an appraised price or a listed price via a real estate firm?

Cyprus Answer:

Good question you ask.

Just last week we sold a 130 acre property in central Alabama by absolute auction.  It brought almost exactly the same amount per acre as the other properties we have sold by “private treaty” in the same county over the past 12 months. 

Our experience is that if you decide to use auction, make sure it is absolute (you’re wasting your time otherwise) and make sure it is “multi-par” (the property is broken into pieces and offered in multiple “rounds” where high bids are “temporary” because any piece can be brought back up for sale by paying a % premium).

As you note, prices for rural land are down significantly.  In central Alabama this is probably about a 30% reduction from 2008.

But the market today is active, and many sellers understand the “new normal”.  For example, we’ve sold 11 properties this year.  But, all at reduced prices relative to 2008 prices.

Our experience is that today properly conducted appraisals and “private treaty” negotiated sales will reflect the “new normal”.  Consequently, an absolute auction, like any other form of marketing, should capture full fair market value. 

But, understand that fair market value today is going to be 30% less than in 2008.  Any landowner hoping for something different will likely be very disappointed. In fact, some landowners still refuse to accept the new reality.  This is why my company list only about half the properties we are asked to list.

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