Yesterday Paul and I went to the land auction for 145 acres north of Iowa City.
Just to prepare for what we thought was folly, we studied the flier that explained there would be a 40-acre and a 105-acre parcel that local quarry-owner River Products would be selling.
- We talked with lenders
- Tried to pull in another investor
- Spent many hours working with our prospective farmer/future buyer Grant to prepare ourselves.
- We crunched numbers and figured out what we could afford.
- We met with our retirement fund guys over the phone and in person to see what we could pull off.
- We discussed it with our tax guy.
In the end, when our friend pulled out of the deal, we consigned ourselves to just bidding on the 40 acres, but we figured at least we had a respectable bid, something that could compete for a few minutes.
We didn’t expect anything but a good show. We’d never seen an auction before, and all I knew of them was the worst of auctions I’d seen on the news during the farm crisis of the 1980s. This wouldn’t be like that. Still, we figured we’d be out of the running within the first few minutes, especially if some developer wanted the land to build McMansions. (Johnson County passed an ordinance requiring a 40-acre minimum on ag ground to build a house, hoping to reduce the McMansion syndrome. Still, 3 real mansions could fit on this land.) We didn’t have the kind of money to compete with the big boys on today’s farm land prices.
About 40 guys hovered around the back of the Morse Community Center by the time the auction started. Most of them looked like farmers. One other woman walked in with her husband, talked to one of the Farmers National representatives about the land and sat down. I joked with Paul and Grant that I felt like I was in a giant barber shop.
The auctioneer explained the process. First he would auction 101 acres (reduced from 105 because of a utility easement required to get to the landlocked 40-acre parcel nearby). He’d get the best price and then put a hold on it and move on to the 40 acres. Then he’d put that on hold and move on to auctioning the two parcels together. He said he’d go around like that until he had the best price in the best combination for the seller.
So bidding began at $5,000 for the 101 acres. He asked and asked for $5,100… “Do I have 5100, 51, 51…I’ve got 5 do I have 5100?” and no one would answer. Bidding quit with bidder No. 13 at $5,000.
The auctioneer moved on to the 40. “We’ll start at $5,000, do I have 5100? 51? I have 51, do I have 5200, 52?” He asked the room if we didn’t want the parcels split up. A guy up front said, “split.” But when he was done, he still wasn’t at $7,000. He was frustrated. We couldn’t believe our eyes. Surely someone was playing games in the room. Maybe we all were. But the price just wasn’t there.
He moved on to the 145 total and couldn’t get a single bid for the first few minutes. Finally he put down his hands and reverted to his normal voice. “Folks, we have a reserve on this. (That meant the seller had set a minimum price.) We have to meet our reserve or this will be a no-sale. Now, does anybody want this 145? Should I continue?” I guess the room was noncommittal because then he took a break.
There were breaks after each parcel bidding to give people time to get together, but we must not have been doing a good job, because when they tried a second time through and still didn’t have $6,000 for the 101 or $7200 for the 40 acres, they stopped the auction, pulled the three or four of us together who had been bidding and encouraged us to talk.
Then one of the staff came over with a written number and said, “The average has to come to this. Any way you can do it. If the 40 goes for more per acre, then the 105 goes for less and you both get it.” So we talked with the other two guys. One was maxed out at his bid on the 40. The other still had some room to move on that and didn’t want the 105. We were pretty sure we could outbid him.
So we walked outside with Grant, who was doing most of the negotiating. The guy still in play went to his car, where his wife was sitting. It was drizzling outside but it was the only place we could get some privacy. WE had become the show!
Finally, Grant said at this price we were already approved for the whole thing. We mulled it over, and revisited conversations we’d had weeks early, and decided to go for it.
When it was all over, we owned 145 acres of decent farm land about 10 miles from Iowa City. No developers had it and we would radically change the way it is being farmed. We’ve spent all night talking about how we can assure that this land gets and stays in sustainable agriculture practices in perpetuity. We want to reverse the damage that’s been done there and instead build soil, build biodiversity, reduce erosion and provide economic opportunity for small farmers like Grant, who will buy most of this off of us some day..but we have to wait until Monday to talk to the experts!