I need some strategy on bidding on an estate auction for property

58 Replies

Hey all,

I am hoping to hear from experienced auction bidders here, especially those experienced with estate auctions, but certainly anyone feel free to chime in.

There is an auction that is happening in a couple of weeks. One of my neighbors passed away (old age). I've lived in the same house for many years, and we had a gentleman's agreement that if he ever wanted to sell any land off he'd give me a shot at it. Well, he died and his kids have the property, and they are having an auction house auction everything off - the house with some land, another chunk of land separate from the house (which borders my house), personal property, etc. 

I really want this property. It borders my property on two sides, and virtually anything short of it staying the way it is (wooded) is going to severely derail my quality of life - and I'd rather not have to move. 

As best as I can tell (unless anyone has any ideas on how I might purchase something before it actually gets to auction), I will have to be the winning bidder here. I suspect there will be some interest from others, but maybe not a ton as the land is steep and rocky. There is some harvestable timber, but my neighbor had removed some of that before so I don't think it's worth a ton. Beyond that, there's no water, electricity or sewer on the property; water and electric is nearby but there's no sewer at all. 

I'm hoping to get some good strategy tips on how to play this at auction. I attended one of this company's auctions last weekend just to get a feel for how these private estate auctions go, and it kind of went like this: auctioneer asked for an opening amount, no one bid, one of the auctioneer helpers bid it lower, then some people started chiming in, and it went back and forth between a few people before finally ending about 25% higher than the number the auctioneer started at. 

So if you've ever done one of these auctions, what kind of strategy should I employ? I've heard some people say just come big at the beginning to wipe out the bottom feeders, and I've also heard some people say that doing that sets an anchor price that leads others to believe a number just a little higher than that is not a bad deal. I've heard of doing nothing until the end and then sniping the last bidder, and I've heard continually bid so everyone knows you're serious. I've never bid an estate auction before, in a situation where there's really no floor (i.e. the bank is going to bid what they're owed), so I'm not really sure what should be the way to go about this - and I personally have a lot riding on being the winning bidder.

I'm open to hear anything and everything. Thanks.

The best advice I could give is to do your research beforehand and as with any RE investment, run the numbers beforehand and know exactly what you are willing to pay. Don't get caught up in the frenzy at auction day, or you may end up paying well above market value. You'll have to determine what it is worth to you. Since it is adjacent to your property, you might have to be willing to pay above "market value" to keep it.

Check the records to determine if there are any liens or judgements against the property.

Check the auctioneer's website to see what type auction it is. Find out if it is a reserve (minimum acceptable bid) auction or absolute (no minimum) auction. If it's an absolute auction, it will sell regardless of the high bid. It is possible that the real estate portion will have a minimum bid, and would not sell if that minimum isn't met, in which you might still be able to deal with the owners directly after the auction.

Keep in mind that most auction companies add their percentage to the high bid, so you'll have to have that figured into your price. Most of the companies here in Ga charge 15% commissions/fees on personal property, which is added to the high bid. I would imagine the commission on land is lower, and might even be paid by the seller, but check the auctioneer's website or call them to be sure.

You mentioned marketable timber on the property-how large is this tract?

I don't know which style is best, as there will likely be multiple bidders there using each style. I personally prefer to bid on the "going twice" call if I'm still below my minimum. I've bought some nice guns and furniture pieces, but have never bid on real estate that way.

Bottom line: know what you are willing to pay beforehand and stick to your plan.

Another thing. If you haven't already done so, talk to the owners before the auction and let them know of your interest in the property. They are probably contractually bound with the auction company to carry out the auction, but it would at least put you in the front of their mind if the property doesn't sell at auction.

Originally posted by @David Torbert :

Another thing. If you haven't already done so, talk to the owners before the auction and let them know of your interest in the property. They are probably contractually bound with the auction company to carry out the auction, but it would at least put you in the front of their mind if the property doesn't sell at auction.

 Hi David, thanks for that info. I did in fact try to go that route but was told that the property is locked into the auction and that's that. I have a secondary strategy, if I don't win, of approaching the winner and trying to peel off at least some of the property around me at a premium to them, but I am hoping to avoid that scenario altogether. 

Originally posted by @David Torbert :

The best advice I could give is to do your research beforehand and as with any RE investment, run the numbers beforehand and know exactly what you are willing to pay. Don't get caught up in the frenzy at auction day, or you may end up paying well above market value. You'll have to determine what it is worth to you. Since it is adjacent to your property, you might have to be willing to pay above "market value" to keep it.

Check the records to determine if there are any liens or judgements against the property.

Check the auctioneer's website to see what type auction it is. Find out if it is a reserve (minimum acceptable bid) auction or absolute (no minimum) auction. If it's an absolute auction, it will sell regardless of the high bid. It is possible that the real estate portion will have a minimum bid, and would not sell if that minimum isn't met, in which you might still be able to deal with the owners directly after the auction.

Keep in mind that most auction companies add their percentage to the high bid, so you'll have to have that figured into your price. Most of the companies here in Ga charge 15% commissions/fees on personal property, which is added to the high bid. I would imagine the commission on land is lower, and might even be paid by the seller, but check the auctioneer's website or call them to be sure.

You mentioned marketable timber on the property-how large is this tract?

I don't know which style is best, as there will likely be multiple bidders there using each style. I personally prefer to bid on the "going twice" call if I'm still below my minimum. I've bought some nice guns and furniture pieces, but have never bid on real estate that way.

Bottom line: know what you are willing to pay beforehand and stick to your plan.

 Thanks for that. It is an absolute auction, according to the auction house. It is subject to probate court confirmation but the auction house says that that is just a formality, there's no real sign off and what it goes for is what it goes for. On the timber, the total size of the property is 12 acres, and I'd guess around 8-9 acres of that has timber. Mostly hardwood (oak and maple, some hickory some beech) I would guess but not a lot of big stuff, I would say the biggest trees are probably about 2 feet in diameter with maybe a few 3 foot trees in there. Any idea what that stuff is worth?

I hope it works out for you. It's always a little disconcerting when adjacent property goes up for sale, especially if it is undeveloped. Maybe you can get it for a good price.

Is it an absolute auction?

Originally posted by @David Torbert :

I hope it works out for you. It's always a little disconcerting when adjacent property goes up for sale, especially if it is undeveloped. Maybe you can get it for a good price.

Is it an absolute auction?

 Hi David, it is an absolute auction. 

Also I'm going to link to some friends and folks that I know might be able to be helpful:

@Jay Hinrichs because I know he knows about timber and what it might be worth.

@Steve Vaughan @Joe Splitrock @Brie Schmidt @Shiloh Lundahl @Austin Fruechting @Ryan Murdock @Mindy Jensen @Brandon Turner @James Wise . And anyone you guys may know. I need to call out the big guns here because I get one chance at not screwing this up. 

Thanks all :)

Sorry, I didn't see your longer reply about the auction type. I'm still trying to figure out how to reply to specific posts :-/

It sounds like there's probably not a large volume of timber on the property, based on your description. Hardwood timber values can be significant if the species, size and grade are there, but a large part of timber value is determined by the volume present. Logging companies have pretty high operating costs and usually require a certain amount of volume on a tract to make it worth moving equipment to the site. The local markets, distance to the mills and terrain also have an impact on stumpage (value the landowner receives after logging/hauling/administrative costs are removed) and those values can vary significantly in different markets.

Your best bet on the timber value would be to talk to a local forester who is familiar with the area markets.

Good luck on the auction, I hope you can grab it!

12 acres of hard wood if that is what it is has negligible value from a commercial timber stand point

Originally posted by @Jay Hinrichs :

12 acres of hard wood if that is what it is has negligible value from a commercial timber stand point

 Jay, that's excellent - thank you so much for that. I knew you would know the answer to that question. I called a sawmill to pick his brain as well and he thought it might bring a few hundred bucks per acre based on my description but that only small guys (hobbyists he called them) would probably do it and they would do it on a percentage, i.e. they would pay 40-50% of what the sawmill would give them, so if there was $10k of timber they'd pay $4-5k after harvesting. 

Originally posted by @JD Martin :
Originally posted by @Jay Hinrichs:

12 acres of hard wood if that is what it is has negligible value from a commercial timber stand point

 Jay, that's excellent - thank you so much for that. I knew you would know the answer to that question. I called a sawmill to pick his brain as well and he thought it might bring a few hundred bucks per acre based on my description but that only small guys (hobbyists he called them) would probably do it and they would do it on a percentage, i.e. they would pay 40-50% of what the sawmill would give them, so if there was $10k of timber they'd pay $4-5k after harvesting. 

 that's about right and you could do more esthetic damage than good with a logging operation..   what I did with some on my hard woods on a few of my properties I traded logs for finished flooring and had some really cool custom oak flooring made for my personal residence.  that was a better trade then straight away logging it.. and I ended up with as stated one of a kind flooring that you simply cant buy on the open market.

timber in some areas can be quite valuable but that is generally larger softwoods that yo can make dimensional lumber out of .. and there is a lot of it in one tree and the trees are stacked in there every few feet.

I have taken 500k in timber off one 10 acre tract in Oregon .. but that was an awesome stand 

2 export grade 40s beautiful cylinders and a domestic top.. and there were no knots or limbs for the first two logs..

That is true. I get asked all the time what "these trees" are worth and I have to tell them that unless the trees in question are very valuable (large diameter, great form, high grade, etc.), they are worth far more from an aesthetic standpoint.

Usually when someone asks that "what are these worth?" question, they are trying to get rid of several large yard trees without having to pay a tree surgeon for the removal :-)

Originally posted by @Jay Hinrichs :

timber in some areas can be quite valuable but that is generally larger softwoods that yo can make dimensional lumber out of .. and there is a lot of it in one tree and the trees are stacked in there every few feet.

I have taken 500k in timber off one 10 acre tract in Oregon .. but that was an awesome stand 

2 export grade 40s beautiful cylinders and a domestic top.. and there were no knots or limbs for the first two logs..

 Funny, I always thought there was more money in hardwoods than softwoods. Shows what I know about logging. 

Originally posted by @JD Martin :
Originally posted by @Jay Hinrichs:

timber in some areas can be quite valuable but that is generally larger softwoods that yo can make dimensional lumber out of .. and there is a lot of it in one tree and the trees are stacked in there every few feet.

I have taken 500k in timber off one 10 acre tract in Oregon .. but that was an awesome stand 

2 export grade 40s beautiful cylinders and a domestic top.. and there were no knots or limbs for the first two logs..

 Funny, I always thought there was more money in hardwoods than softwoods. Shows what I know about logging. 

I don't know about your forests but in the Northwest Cedar is really high  then fir  then Hemlock then spruce .. saw log alder can bring good money occasionally.. but then you have the grand daddy of them all REDWOOD but that is a CA product.

and you had big runs on Port Orford cedar that was used in Music instruments..  

The highest values I've seen here in the southeast on southern yellow pine were back in the late 90s/early 00s. I saw a few tracts bring $5000 - $6500/acre , but they were few and far between. I saw a few high grade hardwood stands bring closer to $10,000 acre.

I have heard of maple logs in the NE bringing $10/board foot. They were selling the veneer for Birdseye paneling to Lexus and Infinity if I remember correctly. Some of those logs were bringing up to $10,000 apiece.

On a different note, how do you link a post to an individual? I'm new to BP and haven't been able to figure out how to do that yet.

The hardwoods that are on this property are Oak, Maple, Hickory and Beech. Maybe a few Poplars. The maples are really small, probably 12" or smaller most of them. Some of the oaks and hickory trees are 24"-36", as well as some of the beech trees. The sawmill guy told me beech has no real value and the maples were too small. 

Originally posted by @David Torbert :

The highest values I've seen here in the southeast on southern yellow pine were back in the late 90s/early 00s. I saw a few tracts bring $5000 - $6500/acre , but they were few and far between. I saw a few high grade hardwood stands bring closer to $10,000 acre.

I have heard of maple logs in the NE bringing $10/board foot. They were selling the veneer for Birdseye paneling to Lexus and Infinity if I remember correctly. Some of those logs were bringing up to $10,000 apiece.

On a different note, how do you link a post to an individual? I'm new to BP and haven't been able to figure out how to do that yet.

 Hi David, if you are connected with them or if they are in the thread you hit @and their name and you'll see it turn up in blue. Like @JD Martin

@JD Martin I don't have any magical answers here but I'm curious: How do you think the market value compares to what you are willing to pay? I have a similar piece of property next to my house that might be worth $20k but I'd happily pay twice that just to protect it.  In fact, I've already done that with another lot on the opposite side of my property. If this other abutting lot should ever go up for auction no doubt I'd be willing to throw down more cash for it than it'd be worth to anyone else.

I've bought a ton of stuff at auctions too but never a property. Depending on the crowd and my gut feelings I've been the first bidder, the last bidder, and every strategy in between.  Unlike auto, surplus, or junk auctions a real estate auctioneer will usually let you stop the show and take a time out to step outside and "make a phone call" or whatever. Don't get caught up in the frenzy and don't be afraid to make people wait if you want to call a time out.  

My guess is you're going to show up with a max price in mind and won't need the time out. Figure out what it's worth to you, stick to that price, and pray you're the only guy that shows up so you can buy for half that number.

Originally posted by @JD Martin :

Hey all,

I am hoping to hear from experienced auction bidders here, especially those experienced with estate auctions, but certainly anyone feel free to chime in.

There is an auction that is happening in a couple of weeks. One of my neighbors passed away (old age). I've lived in the same house for many years, and we had a gentleman's agreement that if he ever wanted to sell any land off he'd give me a shot at it. Well, he died and his kids have the property, and they are having an auction house auction everything off - the house with some land, another chunk of land separate from the house (which borders my house), personal property, etc. 

I really want this property. It borders my property on two sides, and virtually anything short of it staying the way it is (wooded) is going to severely derail my quality of life - and I'd rather not have to move. 

As best as I can tell (unless anyone has any ideas on how I might purchase something before it actually gets to auction), I will have to be the winning bidder here. I suspect there will be some interest from others, but maybe not a ton as the land is steep and rocky. There is some harvestable timber, but my neighbor had removed some of that before so I don't think it's worth a ton. Beyond that, there's no water, electricity or sewer on the property; water and electric is nearby but there's no sewer at all. 

I'm hoping to get some good strategy tips on how to play this at auction. I attended one of this company's auctions last weekend just to get a feel for how these private estate auctions go, and it kind of went like this: auctioneer asked for an opening amount, no one bid, one of the auctioneer helpers bid it lower, then some people started chiming in, and it went back and forth between a few people before finally ending about 25% higher than the number the auctioneer started at. 

So if you've ever done one of these auctions, what kind of strategy should I employ? I've heard some people say just come big at the beginning to wipe out the bottom feeders, and I've also heard some people say that doing that sets an anchor price that leads others to believe a number just a little higher than that is not a bad deal. I've heard of doing nothing until the end and then sniping the last bidder, and I've heard continually bid so everyone knows you're serious. I've never bid an estate auction before, in a situation where there's really no floor (i.e. the bank is going to bid what they're owed), so I'm not really sure what should be the way to go about this - and I personally have a lot riding on being the winning bidder.

I'm open to hear anything and everything. Thanks.

 Auctions are simple dawg. Pay more than everyone else, lol no other way to cut it than that. 

@JD Martin based on what you described, you are probably the one who wants it most. You just want to avoid unnecessarily bidding it higher. The auctioneer is going to work hard to get two or more bidders to play off each other. If they can get you and someone else in a competition with each other, it can drive the price higher than either of you may normally pay. If I was you, I would want to win the bid at almost any cost. I used to live in the country and 6 acres went for sale on my property line. Although I consider myself a good negotiator, in that case I dropped the full asking price two days after it was listed. You don't want someone to setup a dirt bike track next door (I had that happen to a friend) or worse. Although we talk about not getting emotional when investing, it is hard when it is next door to your little slice of heaven.

Lower starting price can actually drive it higher in the end. It can attract more bidders who get emotionally involved. If people sense from the beginning that this isn't going to be a "steal", they will just stay out of the bidding.

The auctioneer wants you and everyone to continually bid. Their goal is to create a frenzy that drives prices up. I would avoid the tiny back and fourth bids. When you put a bid in, raise the level a larger amount. In other words if two people are going back and fourth at $500 increments, drop a $5000 increase on it. You want other people to feel like bidding against you isn't worth it. Get people to drop out, because the more they bid, the more they get invested in winning the bid. It can become more about beating other bidders than getting the property. 

Don't feel bad if you pay a bit of a premium. A crappy neighbor can make your life horrible. The reason we all own rental properties is to have the money to NOT have to deal with crappy neighbors. 

Good luck, keep us updated.

Personally I don'tlike to start earlly in an auction. I think waiting until it relly slows down then jump the bid at a larger increment. When people are going up slowly at $500 at a time, if you jump quickly $2000 usuallly they get discouraged and know they are not going to outbid you.  

When you are the one going up at $500 at a time, the other bidder is thinking maybe just another $500 will do it. That can keep going a long time. 

That said make an offer pre auction.  I always consider pre auction offers when I am selling. The seller has no guarantee you will even show up and bid, or that anyone will bid aganist you and they may get a lower price.

I appreciate being invited, JD, but my only auction experience is from an old TV show with drama that may have staged treasures in the units. Yuup!

I like Joe and Ned' s advice. Wait...then hit hard.

I'm in a similarly uncertain situation with my primary neighbor. He's old, angry and selling soon, but extended his fence my access easement lies on down to 10ft. (It was 8'3" before the city made him widen for safety) I'd love to just buy his place and adjust lot lines, but he's putting it on the market and will ask the moon no doubt.  Sue or sit? Thank you, sir, may I have another?

 I'm thinking of declaring a boundary dispute and suing several times for this and that to make sure he's still here shovelling snow this winter and tending his acre for many years. He's 86 and I'm bored.  First I'll play nice and see if I can buy it for less than 400. Ouch. 

Good luck and keep us posted my friend!

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