Land Auctions? Helpful Information for First-Time Real Estate Investors

22 June 2021
 Categories: Real Estate, Blog


Investing in real estate is a time-tested way of building wealth. While many successful investors have built profitable portfolios on residential or commercial properties, others prefer the relative simplicity of purchasing and holding tracts of land. 

Land auctions, often held online, have further simplified the process of buying land. While land auctions can be used for any size parcel of land, with or without improvement, many are held for the purpose of selling larger tracts, often composed of hundreds of thousands of acres. 

New real estate investors who are interested in land auctions can use the following information to help them better understand the process and enjoy more success in their quest to invest in land. 

Types of land auctions

The concept of a land auction is most often encountered in three forms, so it is important for real estate investors to understand the basic information about each one. Land auctions, billed as "absolute auctions", allow bidding to continue until the auction time limit is reached with no limitations. At the end of an absolute auction, the highest bidder will have the winning bid and be able to move ahead with the purchase transaction. 

As the name suggests, land auctions that use the term "minimum bid" in their terms of sale do include restrictions on price. In a minimum bid land auction, the seller reserves the right to specify that the bidding must reach a certain preset point before a final bid is accepted.

The third type, called a "reserve auction", allows the seller to retain maximum control over the final selling price. When the seller offers land for sale through a reserve auction, they reserve the right to accept or refuse the final bid at the conclusion of the auction process, no matter how high or low it may be.

Preparing to bid

New real estate investors who plan to bid during any type of land auction will want to begin planning well before bidding is scheduled to begin. Bidders typically must register on the auction site and be able to provide acceptable proof of their financial ability to complete the purchase, either with documents that show sufficient cash resources or pre-approval for a mortgage. 

Investors planning to bid on land in any type of auction should always do their due diligence before placing their first bid. In addition to studying the documents provided by the land auction service, prospective bidders may also want to discuss their intentions with a reputable real estate professional to gain insight into area land prices and any other factors that could influence the potential value of the property up for bid.

For more information about land auctions, contact a local real estate business to learn more.