Can I sell my farm land at auction for NO COMMISSION?
December 18, 2014
The simple answer is, "yes," but you were told there is no such thing as a free lunch, right?
That is still the case. A November farm auction in North Central Iowa brought a little over $4,000 per acre. Not very impressive. The land was tillable, and not a bad farm, at least not that bad. The CSR was over 50, making this a low sale even in todays slightly depressed market.
The Auctioneer charged the Seller Zero commission. That's right, the Buyer had to pay the Auctioneer a 5% "Buyers Premium." The contract signed at the auction was vague as to whether this was "added to the purchase price" or "paid" directly to the Auction Company by the Buyer.
Aside from the issues of whether this "Premium" is a taxable event to the seller, or a basis establishing event for the Buyer, OR whether this is a deductable expense to the Buyer, is not the subject of this post.
It looks to me like the Seller "paid" a cost at the sale. Many buyers don't like these premiums; they generally are more than the going rate of a sales commission. In this area, sales commissions are anywhere from 1% to 2%, never are they 5%.
It did not look like this auction company had a great following at this auction.
Lesson for Sellers: There is no such thing as a free lunch.
Also, Auction commissions really "come from" Buyers at closing, anyway.
Lesson for Auctioneers: Don't bite the hand that fees you.