Whether selling farmland or a complete farm the decision over which method of sale to choose is usually determined by the type of property being offered, preferred timescales, market conditions and overall sale objectives. Choosing the right method of sale is essential.
Associate Tom Parker outlines the four principal methods below;
A private treaty sale allows greatest flexibility and control over the sale process and is the most common method of sale. Interested parties are invited to confirm interest and offers in a timely manner following which the vendor may accept any offer at any stage.
Vendors will often be advised to allow a sufficient period of marketing to fully test the marketplace.
If a party offers a significant premium over the guide price early on in the process the vendor has the ability to agree a sale immediately. If numerous offers are received at a similar level, the vendor may decide to bring the sale to a conclusion through negotiation or through best and final offers, or similar.
This method allows for negotiation throughout the process which can result is greater sale receipts. For example, a vendor may be prepared to pay more if vacant possession can be provided immediately.
Where timing is a greater priority, a sale by informal tender may be considered. A specified date for offers is set with the property openly marketed. Tenders are opened and the vendor will compare offers received. Some may be subject to conditions and these can be factored into the decision-making process. Further negotiation is possible and the vendor is not obliged to accept any offer, allowing them to control the process and timescales.
The informal tender process provides a defined timescale for receipt of offers and encourages interested parties to act swiftly. There are disadvantages to this method including parties having insufficient time to arrange lending facilities for example.
A sale by formal tender follows a similar process to the informal tender method, however, interested parties must sign a sale contract and provide the necessary deposit when placing their tender. If a tender is selected, the deposit is accepted, and contracts are exchanged, legally binding both parties.
The formal tender process is rarely seen but can be a very efficient and effective method of sale. The disadvantages mirror those of the informal tender process.
The auction sale method on the other hand can be much simpler and is often the most transparent method of sale. Properties are marketed for a set period of time and a legal pack containing all relevant documents is made available to interested parties. The auction is held, and pre-registered parties submit bids until the highest bid is achieved. On the fall of the hammer, parties enter into a binding contract and a deposit is made with completion set, usually 28 days later.
Improvements in technology in recent years has bolstered the demand for online auctions of property. These platforms keep the advantages of the conventional auction but offer a new level of flexibility to both buyers and sellers whilst retaining transparency and certainty.
Over the last 12 months, Fisher German have seen some spectacular sales results through their online auction platform. Demand for sales using this platform is likely to grow further as buyers recognise the convenience of bidding on a property from the comfort of their own home.
A version of this article was originally published in Farmers Guardian.