The first step in a land auction is the appraisal. At this stage, a licensed appraiser will evaluate the property itself, take some photographs, examine the comparable sales and statistics and will assign the land a value. The appraiser will consider land size, location and possible future uses. This is often the value the owner will want to obtain in the auction, but not necessarily. It is possible the land will sell for more, or even much less.
The next stage for the auctioneer company is to advertise the sale to the general public. The idea is to get the word out to as many people as possible. Advertising most often takes place via the Internet, direct mailings, newspaper advertisements and sometimes television and radio spots. The more people are made aware of the auction, the more potential buyers there may be. The more potential buyers, the better the chance of obtaining a higher price during bidding.
While the auctions themselves are generally held at the subject property, this is not always the case. Those interested in bidding must arrive early, register and obtain a number. While the auctioneer calls out prices, interested buyers will raise their number if they are willing to pay that price. When the price gets too high, a bidder must fall out, or stop raising their number. When everyone stops bidding, the last person who raised their number will win the auction.
The winner of the auction must now make a payment. Each auction house company has their own guidelines regarding this process, so research ahead of time is important. Generally speaking, 10 percent of purchase price is due at the auction itself, and the balance will need to be paid within 30 days. This allows time for financing if needed, and time to prepare closing and transfer documents.
Transfer of the property will be done at the title company or an attorney's office. A new deed will need to be drawn up, and all fees must be paid, such as auctioneer fees, back taxes and other fees that the first owner must pay off. This will come out of the proceeds to the owner. The buyer will have closing costs, often about 3 percent of the purchase price. This is an out-of-pocket expense to remember. After documents are all drafted and signed, they will be filed with the local courthouse and the property is considered transferred to the new owner.