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Ask Dave

Parents Have Big Farm ... Auction It Off?

Chuck's retired parents have a large farm land that the family would like to auction off.

QUESTION: Chuck’s parents are retired and they have a 170-acre farm with three rental houses.  The family is interested in auctioning off the property.  Should they have an auction or list the property with a real estate agent?

ANSWER: You’ll probably net more profit if you separate the land into three plots, each with a house on it.

With the amount of land you’re talking about, you should not do an absolute auction.  With an absolute auction, if someone bids one dollar on the property and no one else comes to the auction, that person gets the land.  You should do a reserve, which means you will not accept offers below a set amount.  The house will only sell for your lowest acceptable offer or more.

So, if you choose to do an auction, track the land and do a reserve auction.  It’s a quick way to liquidate property and could bring more than with a real estate agent.  Just make sure you go through a consulting firm and extensively interview potential auctioneers.

Finally, make sure you get this land appraised.