Step 1: Get Pre-Approved for a Loan

The first step is being realistic about your budget. If you’re a 100% cash buyer, skip this step. If not, can you afford the down payment? Can you secure the necessary loan?

If the answer to both questions is yes, take several important steps. First, determine how much is available for a down payment. Oftentimes, land loans require a downpayment of 20-40% of the purchase price at closing. That said, most banks land around that 25-35% range.

“If the last bid is lower than your max budget, even better,” said Luke Wallace, a Whitetail Properties land specialist in Nebraska. “However, don't scramble in the last round trying to talk to your banker.”

The auction terms generally require 10-15% down the day of the sale,” Wallace said. “So, you'll need to bring a checkbook.”

With the down payment situation prepped and ready, it’s time to get pre-approved for a loan. Oftentimes, a letter of intent (to loan) from the bank loan officer is required by the auction company.

Step 2: Attend Some “Practice” Auctions

Oftentimes, it’s good for someone to attend a “practice" auction. Of course, it’s a real auction, and you aren’t bidding, but you can “bid” in your head. Become familiar with the pace, cadence, and rhythm of the action. This helps get a better feel before going to an auction to be an actual bidder.

“The more you experience the more comfortable you will become,” said Jason Ziegler, a Whitetail Properties broker and land specialist in west-central Minnesota. “If you can't attend, watch them online, so you get the feel and prepare for them. The more you do this prior to an auction you plan on bidding at, the better you will be at controlling your emotions and coming up with a good strategy.”

Step 3: Study the Property of Interest (Via Maps and In Person)

With the first two steps complete, it’s time to find a property you’re interested in. Spend time studying that property. Also, look at the neighbors around it. That’s important, too.

“Do your due diligence well before the auction date,” Wallace said. “If you're truly interested in purchasing the parcel, get out there and do your research. Tour the property. Know the location of access and utility availability. Can you drill a well on the property? Is there a tenant on the property? Each property comes with its own set of unknowns. Don't take the agent's word for it. Remove the unknowns from the equation.”

Step 4: Inspect the Survey Status

Most properties sold at auction have a recent survey. That said, don’t take this for granted. Determine the status of it.

“Survey's aren't cheap,” said Dave Skinner, a Whitetail Properties land specialist in Kentucky. “Here in Kentucky, it's quite common to buy and sell properties without a survey. But if there isn't a survey, I want to know a few things.”

Survey questions to answer:

• Are the boundaries known or marked in some way? If not, then you need a survey.
• Are there any boundary disputes? If yes, then you need a survey.
• If you purchase a property per the acreage listed in the deed, but it hasn't been surveyed, it's very possible that the acreage listed isn't accurate. Typically, you'd be looking at a small discrepancy, but deeds can be off by as much as 50% both ways.

Step 5: Ask About Easements

Oftentimes, auctions split properties into multiple tracts. Usually, that leads to some without road frontage. Therefore, easements come into play. Auction attendees should be aware of the factors.

“Most properties have direct access to a public road or road frontage,” said Mark Williams, a Whitetail Properties land specialist in Kentucky and Illinois. “This is the preferred choice by most land buyers, because it usually provides easy access to utilities. Properties can also be accessed by easements for ingress and egress. This option gives you more security and makes the property more private. However, it does turn a decent percentage of buyers off due to the lack of public road access.”

Easement questions to answer:

• Is the easement recorded?
• Is the easement transferable to heirs, assigns, and successors of the property? Or is it valid just for the current landowner?
• How wide is the easement? Important to know if you plan on moving a mobile or modular home in or simply moving large equipment. Not all easements are the same width, however, 20-30 feet wide are common.
• Who is responsible for maintenance? Usually, the entity that has the easement is responsible for road maintenance.
• Does the easement also have rights for utilities? Some easements are just for ingress and egress and do not cover utilities. If that is the case, you would have to acquire a utility easement to run power and/or water to the property.

“If a property does not have road frontage on a public road or an easement for ingress or egress, then it is landlocked,” Williams said. In Kentucky, it is not legal to landlock a property but that doesn’t mean that you will not spend thousands of dollars getting access if there is not any. Verbal or handshake agreements are not easements and can be stopped anytime, so make sure the easement is recorded and is transferable to heirs, assigns, and successors if you are looking to buy a property without public road access.”

Step 6: Gauge Tax Liabilities

Taxes are often overlooked when budgeting for a property. But it’s an expensive component of a land purchase. Jeff Propst, a Whitetail Properties land specialist in Iowa and Missouri, goes into more detail.

“It’s very important to find out what the real estate taxes are,” Propst said. “When budgeting for a farm, this could be a significant amount of money to the new landowner. Depending on the area the farm is located, real estate taxes will also be affected by any improvements on the farm, such as a home, cabin, barns, etc. that may be added to the property.”

To Do:

• Ask the agent you are working with to provide you copies of the taxes from the county collector on the property.
• Have a clear understanding of how much you will have to pay each year.

Step 7: Inquire About Property Income, Soil Quality, Timber Value, Mineral Rights, Utilities, Etc.

There are numerous points to consider when buying land. It’s crucial to inquire about important factors that impact property revenue and costs.

Potential property income and resale value factors:

• Farm rent (tillable crop ground, pasture ground, etc.)
• Conservation programs (i.e.: CRP)
• Soil quality
• Timber value
• Mineral rights
• Utilities
• Etc.

This is an important question to ask, because depending on the acreage and the type of income, it can help the property pay for itself. Regardless of how much income the property produces, any amount is helpful. This income could help with the down payment of the property, the monthly loan payment, or just be added to your annual earnings.

Of course, timber is a very valuable thing. If there is any standing timber with some age to it on the property, you could be looking at a very lucrative piece of land.

Depending on the timber value of the property, and if it has been timbered, can greatly affect the price per acre the farm should be purchased for. A lot of variables play into timber value. What kind of timber is on the property? How was it cut last? When was it cut? All these things play a factor.

For example, if the timber was thinned, it could possibly be thinned again in another 10 years or so. If a heavy cutting was done, it could be 20 to 30 years before the full timber value could be realized again. Whatever the situation of the timber on a piece of property you may be interested in, consult a forester for the most accurate assessment.

Another thing to consider is utilities. Utilities increase the value of the property. Depending on your specific needs, utilities might or might not be a necessary component.

“If utilities are not available on a particular property you are looking at, it would be important to inquire about potential costs to get them run into the property should you desire to build a house, cabin, or have an RV hookup,” Propst said. “I frequently contact utility companies for my clients to get a quote in writing on potential costs to get water and electricity ran into a property. Also, having utilities on the property is a very good feature if/when you elect to sell the property in the future.”

Step 8: Read the Property Disclosure

Another important step is reading the property disclosure. Bob Stalberger, a land specialist in Minnesota and Wisconsin, says that many clients look at a property and see what they want to see, and if they like it, they are ready to purchase. That said, pump the breaks.

“Make sure the seller provides you with a property disclosure, so you know what they already know about the land,” he said. “A property disclosure can reveal a lot that you won’t learn when walking the property. You might find out about an old dump site, buried waste, half the property floods yearly, or worse, hazardous waste buried. This disclosure can help you determine the value of the property, for better or worse.”

Stalberger also says it can reveal things about easements, current rental contracts, rights of first refusals, tenant contracts and more.

“It is very important to read these disclosures very carefully,” he said. “If you find a property that you like and the seller has not filled out one of these, you can ask for it.”

Step 9: Understand the Bidding Factors

On the day of the auction, several things come into play. First, arrive plenty early. Hopefully you’ve already walked the property. If not, do so now.

Understand that the weather means nothing. Great weather doesn’t always equal a great turnout. Poor weather doesn’t always keep people at home. One thing is for certain, people who want that land will be bidding on it.

Likewise, don’t assume a large crowd will equal high bidding. Also, don’t assume a small crowd will equal low bidding. The crowd means nothing.

“Understand that you might be bidding against folks who are online bidding or bidding by phone,” Ziegler said. “So, if you show up to an auction that offers online and in-person bidding, and the in-person crowd is small, that doesn't mean anything. There could be countless online bidders. Ask how many folks are online so you know how many folks you are competing against.”

Step 10: Check the Terms and Conditions

Before, or upon arrival, ask the auctioneer how the property will be sold. The way in which a property is sold might vary from one to the next.

“Each auction may be different,” Ziegler said. “For example, there might be several tracts for sale on a bidder’s choice auction, meaning the top bidder can take one or all the tracts. So, you must set your strategy differently than if each tract was getting auctioned off separately.

Also, ask about terms and conditions. “Know the auction terms,” Wallace said. “Common terms like Absolute, Reserve, Buyers Choice, and Seller's Confirmation are all things you need to know as they can affect you contractually,” Wallace said. “Removing the unknowns of the property, your budget, and the auction terms will help you bid with utmost confidence.”

Step 11: Develop a Game Plan

When going to an auction, it’s important to have a purpose. Know why you want to buy that land. Wait for the right property. When you find it, have a purpose and strategy.

“Have a strategy going into the auction,” Ziegler said. “Play out several scenarios in your mind before they happen. Be prepared to adjust your strategy based on how the auction is going. Most importantly, if you set your limit on what you want to pay for something, stick to that limit. Having a sound strategy going into an auction will help with your nerves and your emotions.”

Step 12: Maintain Your Composure

Once the bidding begins, maintain your composure. Don’t let emotions get to you. “Do your absolute best to not let your emotions get the best of you,” Ziegler said. “During an auction — especially a live auction — the atmosphere can be electric. You can easily get caught up in the roller coaster of emotions that go along with these types of auctions. They are fun, and they are meant to be fun. But it's hard to keep in control when the bidding is fast and furious.

“Remember to breathe, and if you need to, don't be afraid to take a break,” Ziegler continued. “If you are one of the top bidders, and you need to think about it, most auctions will allow you to pause the action. They won't stop early in the bidding process, as they like to keep it rolling until the bidding slows. But if you are still in the game at the end, and are starting to feel the pressure, or you are unsure, stop and take a break.”

Step 13: Follow Through

Finally, follow through. Once you buy the property at auction, even more details begin. Work with the auction company, loan officer, and seller to complete the process. Do that, and you just might end up with your dream property.