The Pros and Cons of Selling Land at Auction

When it comes to selling your property through a real estate agent or yourself, it requires a lot of effort and time. Conversely, when you opt to sell land at auction, it can be a great opportunity for people who want to achieve maximum profit by selling their land. 

Auctions are usually held for large properties. There are mostly big organizations that participated in auctions and are looking for big parcels of land for new business projects. Auctions can be a good option for selling your land quicker, with transparency and fair value. However, every coin has two sides, so there are few disadvantages of auctioning your land too. We will be discussing each point so that you can make the decision that’s best for your situation.

The Pros of Selling Land at Auctions: 

There are multiple benefits of selling land at auctions. Some of them are: 

1. Hassle-Free Selling

These auctions provide greater convenience to the seller, as they don’t have to look for potential buyers and spend a lot of time dealing and negotiating with anyone. The process is quick and hassle-free; once you register your land at an auction, it will be presented to several buyers, and the one with the highest bidding offer will get the deal. 

2. Bidding War

The bidding war is a term which refers to the scenario when multiple buyers want win the bid for a specific parcel of land. This happens quite frequently when a buyer sees a parcel that really checks all of their boxes. This increases the property price and sells at more than the market value. 

3. Seller Dominance

When sellers auction their property, they are always in a control. They set the initial price of the land and then let it float at the auction. Buyers have a choice to put the first bid or skip it. Once the buyer agreed to the offer, they cannot draw back from it ornegotiate away from it. If they do so, there are financial and legal penalties surrounding them. 

In comparison to the real estate agents, auctions offer the land at a certain price, and the buyer can choose to bid on it or not.It’s a long and tiring process, and if the seller does not have firm knowledge about the market, people can easily outsmart them and win the property at a lower price. 

4. Reasonable Selling

If you decide to not sell through and auction and sell through a middleman, one of the drawbacks is that they can be non-trustworthy. Unfortunately, some agents deal in bad faith and finalize the offer at a lower price without prioritizing seller decision. Sometimes they may not not put effort into achieving the maximum profit, which can be costly for a seller. 

In comparison to the Auction, sellers can directly show their land at the event. The process is transparent, and all the information has been shared with the buyers. The process is completely clear. 

The Cons of Selling Land at Auction: 

While selling at auction has many pros, there are also some downsides to be aware of. , 

1. No Assurance of Sale

When sellers registered their property at an auction and received a fixed date for selling, there will always be a risk that buyers do not show any interest in your property. There can be many reasons for this. Maybe the auctioneer did not present your land properly, or the prices are much higher, which can upset the buyer.  

2. Unpredictable Sale Price

One of the disadvantages these auctions have once you set the initial price for your land, your land might sell on that price, or you may leave without a sale. When sellers set the lowest price to attract buyers, which can be risky if there’s no bidding war among them, it will be sold off at a lesser price. 

3. Excessive Commissions

Many sellers do not join auction houses because of their high-end fees. They set the entry fees for everyone before registering their land on the list. Sellers have to pay $200 to $300 in advance. If in case your property sold at the auction, they will take a 2.5% commission from the sale. These fees can eat into your profit  if you’re looking to sell the land strictly at fair market value. Fewer Buyers

Not all auction houses have potential buyers who are interested in buying your property. Sometimes due to less attendance of buyers or in case of any uncertain events, most buyers may not be able to attend these auctions. This can result in a lower sale offer, and once the deal is finalized, the seller is bound to transfer the ownership of their land to the other party. In comparison to the estate agent, you will still have the option to draw back from the deal if the buyer offers a low price.