From Appraisal to Auction Block: Finding the True Value of Your Farmland
What Is Your Farm Really Worth? How do you really know the true value of your crop land?
These are some of the questions we ask landowners when we consult with them. The truth is none of us really know the exact value of the farm ground we own and if anyone tells you they do, they likely have an educated guess but do not know the exact value. This is coming from a guy that works on real estate appraisals weekly and is licensed to do so. I always let my clients know that an appraisal is just an educated guess based on old information and that the market really determines the true fair market value of the asset. Just like God made each one of us differently, he also made each farm differently and no one farm is like the next. The biggest determining factor for your farm’s value is its location, but other factors include soil types, slope, drainage, and is it in close proximity to grain marketing facilities. The point being, if you have four appraisers come out and appraise your farm you will receive four different outcomes. Those outcomes may be all pretty close in price because chances are they are using the same comparable sales, but they will be different. If you are looking to sell your farm the only true way to achieve the absolute fair market value for the land is by selling it at auction. A well-advertised auction will attract every farmer or investor that has interest in the farm and allow the competitive bidding process determine the fair price.
Some landowners choose the private sales method believing they will save on fees. This approach could cost them thousands of dollars. Selling privately often limits competition, while public auctions bring together motivated buyers who are willing to pay a premium. For example, last spring we met with a family who had a couple large tracts of farm ground in a great location. A neighbor offered them the appraised price of the ground which was based on past comparable sales but was a strong price. A little bit later in the year there were a couple land auctions nearby that sold for much higher sales prices. We believe they may have left upwards of a couple thousand dollars per acre on the table and missed out on having a home run sale. Hiring a professional to help them with the sale could have netted them more money. Unfortunately, we see this all the time and it has happened more recently since 2021 when we’ve seen the increase in farm land values happen so rapidly. When it comes to commission fees we are very competitive and we always appreciate the opportunity to submit a proposal to you with that fee structure and marketing plan.
Auctions do not guess at market value—they force the market to reveal it.
The strongest prices—and record-setting sales— always happen in an auction environment. When you are at the coffee shop and you hear about the farm that just sold for the high price it is always a farm that sold at auction. In an auction, all interested buyers compete at the same time. Buyers see they are not alone, which confirms demand. Competitive pressure pushes bidders to reveal their maximum willingness to pay. Momentum builds as each bid validates the land’s value. Compared to a private sale, buyers negotiate one-on-one and naturally try to pay as little as possible, often well below their true budget. Auctions are unmatched at price discovery! There is no guesswork about “What the market might pay.” The final price reflects actual buyer behavior, not opinions. If demand is strong, the price moves quickly past expectations. Private sales rely on asking prices and appraisals, which can cap upside if the land is underpriced—or stall the sale if overpriced.
Auctions Eliminate Price Ceilings
In an auction:
There is no ceiling—only demand.
Bidding can exceed expectations rapidly if multiple buyers want the land for different reasons (expansion, legacy, investment, tax planning).
This is why record prices are almost always set at auctions. With a private sale or
traditional listing, a price ceiling is set with list price.
If you have any questions about any of this information in this article or are interested in partnering with us please give us a call. Our team has that agricultural background because we are also farmers as well as auctioneers and real estate professionals. Due to that we are uniquely positioned to help achieve your goals compared to other competitors in the industry and very passionate about the service we provide. Call us today if you are interested in an appraisal or to have that conversation about what your farm is worth in today’s market, not the market of yesterday.
-Jerrett D. Flesher