When it comes to selling land, you have three potential options for disposal depending on your circumstances and why you are selling the land. A good agency will quickly evaluate all the varying factors to guide you of the best method to dispose of your asset. Garry Best, MD of Best Property Services outlines the options.
As Land Agents when offering land for sale by Tender we are often asked the question, why are you using that method of land disposal as opposed to the more traditional private treaty method?
The answer is that not all assets or vendors or even the reasons for disposal are the same. One of our roles as Land Agents is to be able to advise our client on what is the most appropriate method to best dispose of their asset, taking all those varying factors into consideration.
Within a Northern Ireland context, the three main routes to sale are Private Treaty, Public Auction and by Private Tender.
Private Treaty – where a property or piece of land is being sold by one party to another without the help of an auction. The seller has more time to decide whether they will accept the offer made by the buyer, through the agent. Often the agent will negotiate both price and conditions with the buyer to achieve a satisfactory outcome for both parties.
Public Auction – where various intending buyers offer bids for the property and try to outbid each other. Ultimately the property is sold to the highest bidder.
Private Tender – where interested parties submit a written offer to the agents for a property, on the basis that the offer amount is their best and final offer.
Whilst historically, Private Treaty was the most popular and common form of sale for land in Northern Ireland, public auction would have been the preferred option used in the south of Ireland.
Tense Public Auctions
I recall in my early years in the land business during the 1980’s receiving an instruction from a local solicitor to offer a farm in south Armagh for sale by Public Auction -a rare occurrence.
The sale was of a 45-acre farm which we had been letting in Conacre for several years on at the request of an overseas landowner who had died. In their Will, they had insisted on disposal by Public Auction.
When the word was out locally that the farm was to be auctioned, there was great speculation - not as to who might buy this farm - but whether the successful buyer would be Catholic or Protestant - such was the landscape at the time.
The auction conducted on the farm by my Father was a tense affair, with two groups bidding, clearly divided by religion and the final price of over £3,000/acre was at least 50% higher than the average price for land in that locality at that time.
The method of Private Tender is sometimes preferred in distressed debt sales for banks or other lending institutions. It allows intending purchasers to decide their maximum offer for the land, provided in a written tender format. If the bidder is unsuccessful then they have the reassurance of confidentiality, as only the agent is aware of the identity of all the offers received.
Some buyers may object to the Tender process because they know they only have one opportunity to make an offer and often they find it difficult to establish what “their value” is.
We often respond by suggesting they need to bring the decision makers together, put some figures on paper and decide is this too much? What level can we afford? What figure can we go to, to ensure we do not miss this opportunity?
By having a discussion around these types of questions they can eventually reach a level that they are comfortable to submit a figure indicating what the land is worth to them.
A Unique Sale Strategy
As a fifth-generation land agency, Best Property Services has long been witness to and a participant in evolving land sale methods down through the years.
My grandfather would have predominantly used the Private Treaty sale process between 1920 and 1960 until my father refined the model slightly by setting a final date for the sale to be concluded in our offices.
He was always of the opinion that two or three neighbouring landowners would feel uncomfortable bidding against each other, so bidders were kept in separate private rooms and bidding progressed until a highest bidder was established. He also believed that a contract had to be signed by both buyer and seller at the point of sale to create a binding commitment from both parties.
Having experienced ten years of this process, I preferred the transparency of all bidders in the same room and if neighbours felt uncomfortable about bidding against each other, that was fine with me - although in reality neighbours will often have had their discussion during the sale process long before they reach our Auction room.
The process of controlling the timing of the marketing period by use of a closing date for offers, followed by auction with signed contract has evolved over the generations and is unique to our agency, being a hybrid somewhere between Private Treaty and Public Auction.
Advantages of Closing Date
For our vendors, we feel that one of the advantages this process has (over a public auction) is that by the closing date, the potential buyers have often influenced what lots the land holding should be subdivided into, ahead of the conclusion of bidding by auction. We as agents can then instruct the vendor’s solicitor to prepare contracts based on the permutations of most demand.
The other advantage is that of ‘certainty’ - for both vendor and purchaser, reassuring the purchaser that they cannot be gazumped and offers the vendor the comfort of knowing their deal will be completed on a specified date.
More recently with Covid-19 restrictions we have been able to continue with our Closing Date for Offers/Private Auction process, making a few minor alterations and replacing our Auction room with the ‘virtual auction’ utilising Zoom.
So far, these have progressed without any hitches and bidders have chosen whether they prefer to be visible on screen or otherwise.
As in an Auction room scenario, some bidders have been represented by a Solicitor or third party, where they prefer to be anonymous or are not familiar with the technology.
One recent land auction in January by Zoom had three of the four bidders visible on screen with the fourth where only their name was visible to the others. The ‘invisible’ bidder could be clearly heard and was successful in acquiring the land.
When the three under bidders had ‘left the room’, the buyer presented himself on screen as we made arrangements to email the contract. He was clearly in a hospital bed and declared he had only been admitted the previous day for a straightforward procedure but did not want to miss the opportunity to acquire this particular land. Thankfully the operation was a success and the land purchase was completed on time.
We have in the past sometimes received the odd ‘grumble’ from a bidder’s solicitor, complaining that their client has only given them a days’ notice before the Auction to check the Title deeds and they needed more time, etc.
However when the shoe is on the other foot, and they are acting for a vendor and receive their contract back signed unconditionally with confirmation that a 10% deposit has been paid, the ‘grumbles’ from a previous transaction are long forgotten!
This article is part of a series of columns written for Farming Life.
About the Author: Garry Best is a Director of Best Property Services, a fifth generation family business which has evolved over 130 years, to provide a comprehensive range of expertise across a full range of property services.
Garry is primarily involved in the Land Division Comprising Valuation, Sale, Acquisition, Letting, and Negotiating Compensation etc. Garry has significant expertise in asset disposal.
Garry is a Member of Royal Institute of Chartered Surveyors, NI Rural Valuers & Auctioneers and The Central Association of Agricultural Valuers.