Everything You Need To Know About Land Auctions
Posted on: 3 March 2021
Vacant land is typically sold the same way as a house. It is listed with a licensed real estate agent, placed on the MLS (multi-listing service database), and interested parties submit an offer in writing. While most vacant land sells in this format, some sellers choose to sell by land auction. The end result is the same; the piece of property is sold. The process, however, is quite different.
What is a land auction?
A land auction is run the same way a fine art auction or a luxury car auction is. Bidders are given time before the event to inspect the property. This may be allowed for several weeks or limited to an hour or two prior to the auction itself. Once the auctioneer signals the start of the auction, authorized bidders raise their hand or their bidding paddle when they want to bid or raise the bid. Like a traditional auction, the highest bid wins a land auction.
Will the land sell for really cheap?
Part of the fun of attending an auction is not knowing what the winning bid will be. Some sellers have a reserve on their property. This means that the winning bid must be at the reserve price or higher for the sale to go through. If the reserve price is not met, the property is not sold at land auction that day. The seller may try again at a later date, or they may choose to sell their land with a licensed real estate agent.
If a piece of property is promoted as "no reserve" in the auction materials, it means that the seller is selling to the highest bidder regardless of the bid. This is also sometimes called an absolute bid. The land could sell for as little as one dollar. While uncommon, this does happen in rural areas and in the inner city. You may have to pay back taxes and any unpaid assessments, like a sewer assessment.
Do you need to get pre-approved to bid?
Every auction operates differently depending on the seller's needs, the auction house's rules, and the value of the property. Generally speaking, you will be expected to pay cash on the spot for smaller land auctions.
For land at higher price points, you may need to come with a cashier's check for a pre-announced amount, like $10,000, and be expected to pay in full within a few days. You will be required to provide proof of either funds or bank financing before you receive a bidder's paddle.
Buying land at a land auction can be a fun and educational experience. You just may walk away with a new piece of property at the end of the day.
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