We’ve all looked at the advertisements in the paper, saw the signs posted as we drove by, noticed a flyer hanging in the bank or local coffee shop, and the majority of us have even attended an auction or two. But for many people, they have never registered and actually bid at auction.
In today’s market and with today’s technology we have discovered the power of online land auctions. The ability for buyers to sit in the comfort of their living room and bid on farms. The traditional auction still has a place, and in certain circumstances may be the correct way to go, but online land auctions have proven effective. I could probably write a whole blog on the differences between auction types and the pro’s and con’s but I’ll save that for another day. Today’s focus is on the online auction.
Many calls I get leading up to auction week are from interested bidders who simply want to know how to navigate the online auction and how the process works. How do I bid? Where do I register? How long is the auction? How will I know if I won?
So I wanted to cover a basic checklist bidders can do leading up to the auction time to ensure they are ready to roll when the bidding opens.
- Get Pre-Qualified.
– The time leading up to auction is usually 45 days or so. This is to allow ample time for potential bidders to get their finances ready. Whether they are cash buyers, plan to get a loan, or a combination of both. In order to run an honest auction we ask all bidders to provide a pre-qualification letter or proof of funds. This is to ensure that everyone bidding is a qualified bidder capable of completing the purchase. In many circumstances an email from a buyers lender is sufficient.
- Get Registered.
– Use the time leading up to auction to get fully registered. To many this sounds like a lot of work and I’ve received a lot of questions about the registration process. But really after you have your pre-qualification it’s as simple as filling out your basic contact information and clicking “register”. We provide numerous links to the auction site and directions on where to find the registration page. After you submit your registration information you will be notified that your application to register has been approved. When you log into the auction bidding site you should see “registration approved”. This is how you know you are good to go!
- Do Your Homework.
– Many auctions are not contingent. Meaning that you are buying a property “as is” free of inspection contingencies, financing contingencies, sight unseen contingencies, etc. You should use the time before the auction to inspect the property, ask questions, review leases on the property, review FSA documents, etc. The last thing anybody wants is to have a surprise after buying a property, so use this time to do your homework and ask us any questions you may have ahead of the bidding.
- Review Terms and Conditions.
– As the auction bidding is nearing a start you’ll want to review the terms and conditions of the auction. This is probably the most important step of the pre-auction process. The terms and conditions vary for each auction and spell out the sellers and the auction companies terms for the upcoming auction. You will want to have a full understanding of the terms and conditions before bidding. We have all been guilty of just clicking “accept” on those 275 page terms and conditions pages, but this one is not near as long, and should definitely be reviewed!
- Understand Bidding Increments.
– Unlike a traditional auction where the bidding increment is determined based on how the bidders are bidding and may change as the auction goes. The online auctions have set bidding increments that in some instances are made available ahead of time. You will want to understand how much you are bidding as the auction proceeds and the dollar amount increases. Here is an example of bidding increments for an upcoming auction of mine in July. Bidding Increments:
– Opening Bid: $75,000
– $75,000-$299,999 – $5,000
– $300,000- $399,999- $2,500
– $400,000-$499,999- $1,000
– $500,000+ – $500
This particular auction is a per dollar $ bid. Many of our land auctions will also be a per acre bid. ($1,000 x 100 acres= $100,000) where in this instance you are bidding $1,000 per acre but the actual dollar amount would be $100,000. Understanding the bid increments can help you understand how much you are bidding at any particular point in the auction.
– I always recommend when the bidding opens to go ahead and submit a bid. The auction always starts well below market value and this is a good time to practice a bid and make sure it works correctly. Once you submit a bid you will see it post and you know that you are bidding correctly. This will help you become confident that the system is working correctly and that you understand how to operate it.
- Monitor The Auction.
– As the auction progresses be sure to actively check the auction site as well as your email. You will want to know if you are the current high bidder or if someone has out bid you. In many instances the final day of the auction is usually the busiest right up until the end of the auction. If someone bids in the final minutes of the auction it will usually extend the ending time by a few minutes. You will want to be sitting on your computer actively watching the conclusion of the auction to be able to bid as necessary.
- Enjoy The Auction!
Hopefully this helps with some of the steps of the online auction process and answers some of the frequently asked questions. It really is an extremely simple and effective format for everyone involved. If you need help with anything auction related do not hesitate to reach out to Dennis or myself. We are always here to help! Good luck bidding!
Toby Prussman- 816-385-7802
Dennis Prussman- 816-262-6178