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Why Do Auction Transactions Close More Often Than Listings?

By Jason Smith, CAI Auctioneer | Land Broker | Published March 24, 2015

In proposing our services to farmland sellers I often quote the fact that real estate sold at auction has a 99% closing rate while farmland real estate sold by listing has a much lower closing rate at 71%.

There is one reason that may not be easy to see but once you understand the differences in the methods of marketing you quickly realize why there is a such a gap between the two.  With an auction the buyers "due diligence" is prior to the sale while with a listing the buyers due diligence happens after the offer is made.

The fact that auction buyers bid with no contingency and pay a non-refundable cash earnest deposit reduces failed closings greatly.  With listings earnest deposits are almost always refundable and buyers will not begin to do most due diligence until after an offer is made.  Often with listings new information comes to light after the offer is made forcing the buyer to withdraw and refund of earnest deposit.

While many feel an auction puts them outside their comfort zone its actually a much more seller friendly method and produces prices above that of listings in most cases.  I always ask the question "Have you ever heard of a record price being set by private sale"  Its almost always auctions that are setting record prices as well as a much more dependable closing rate.

Auctions are not always a match for the resources but we do believe they are a superior marketing method in most cases.  If you are interested in selling farmland real estate let us help you evaluate the marketing methods that are right for your farm.  Give us a call to learn more and get a free no obligation proposal for marketing services.

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