Auctions have become a more visible, viable and frequent marketing option for ranches in the last few years, and it could be good for you. While many buyers view auctions as an opportunity to steal a good deal, they’re not that simple. The process could bite you badly if you’re unprepared for this style of transaction.

How do you guarantee a good result from a process in which the price isn’t predetermined? How do you insure you don’t pay too much during the rush of the sale? It’s simple, sort of: know the market.

The auction process is a short one, based on a definite date of sale and completion of both marketing (sellers) and diligence (you) prior to the sale. To take full advantage of an auction, you should have already been in the market, reviewed offerings and looked for what you want. You become aware of a property coming to auction that’s of the type, size and location you see. But there’s no price listed. How much should you be willing to pay? Are you ready to buy today? Have you seen everything in the market that fits your basic parameters already? Have you narrowed down your requirements enough to determine the property at auction is the right one for you?

If you decide you’re ready to buy today, you’ve seen enough of the market to know what you want and this ranch fits, it’s time to prepare for the auction and set your price conditions. Come up with a price you’re willing to pay that’s high enough to give you a shot at a fair price — one in which you won’t mind if someone bids higher and wins, but low enough you don’t overpay if you get the property. Answer the question: If you’re outbid, but it’s still a great value, will you be sad you didn’t bid higher? If so, you should have.

At a live auction, you’re in the room with the other bidders and can compete by raising the ante on the spot. But at a sealed bid auction at some remote location, the high bidder takes the prize with their best shot in the envelope. It’s not uncommon at auctions a sale doesn’t come from the bidding floor. In a sealed-bid auction, the sellers could get together with the top bidders after opening all bids and try to encourage higher bids to separate the high bidders after the fact. In all cases you must know the market value for the property before you get carried away bidding.

How? By analyzing every similar property on the market in terms of size, location, improvements, price per acre, access and amenities.  By analyzing every value zone and different categories, you’ll come up with a fair market price. Proper analytics are worth their weight in gold at this point. If you’ve seen everything on the market that’s close to what you want, you’ll know how to price your bid. Then offer the best price you can based on all that research about what else is available.

The goal could be a fair price or a steal. Regardless, you should be happy with the result of your bidding. Either you take it home at a price you chose and are comfortable with or someone else takes home the overpriced dog and you continue your hunt for value.

This column was provided by Brian Bray, managing broker of Bray Commercial in Grand Junction, and Michael Landreth of Landreth Ranch & Land Co. and a partner at www.TheRanchList.com.
Landreth is a nationally recognized expert on Colorado ranch properties who works with buyers only. For more information, visit www.braycommercial.com or www.TheRanchList.com.