Auction firms scrambled to adjust during shutdown

BLOOMINGTON, Ill. — The auction business was forced to pivot quickly in its methods of selling farmland when the pandemic hit in 2020.

“The auction industry has evolved and changed significantly, probably never to go back to a methodology that we were used to. It may be more a blending of online and in person, in some cases,” said David Klein, First Mid Ag Services designated managing broker and auctioneer.

“It was a drastic shift from a marketing perspective, and if you’re not willing to change, you’re going to become obsolete pretty quick in this marketplace from an auction perspective,” added Spencer Smith, Hertz Farm Management farm manager and real estate broker.

Klein and Smith teamed up to look back on the evolution of the auction business over the past 24 months during the Illinois Society of Professional Farm Manager and Rural Appraisers’ land values conference March 17.

First Mid Ag Services’ last in-person auction prior to the close of public gatherings was March 12, 2020.

“By March 25, 2020, we were holding the auctions outside to finish them out for the spring. We were putting bids on a whiteboard where people could see it from their vehicles. We had guys honking horns and raising cards from their trucks, anything we could do to get it done. That was one of the oddest experiences I think I ever had, but it worked,” Klein said.

“After that, we were shut down. We did not have an online presence at that point. We had no methodology to conduct auctions. We had started the process of exploring that, but we hadn’t jumped into it yet.”

Small Steps

Auction services had to figure out ways to get better and adapt during those early months of shutdowns of large public gatherings.

Timed, online-only auctions without the presence of a live auctioneer were among the first approaches using software that was already in the marketplace.

“Early on in the pandemic just from an auction industry standpoint, I saw people selling on Facebook Live, I saw people selling on Zoom calls, I saw people selling on FaceTime calls, you name it. It was just the Wild West all of a sudden, and the structure was there, it’s just we had to adapt to it and take on this technology,” Smith said.

Learn On Fly

With an online bid platform came many challenges.

“It was almost you had to learn as you go. We had to learn to educate buyers better. We had to learn how to take questions from people. We weren’t meeting at a conference center or the VFW or Legion Hall where somebody could ask a question to a bid assistant or talk to an auctioneer beforehand about the farm,” Smith said.

“We couldn’t interact with bidders. Ways we were able to combat that is utilizing phone numbers for people to reach out to us during the sale, using technology, making sure we get title commitments, purchase contracts, all of those things posted to the website prior to the auction day where traditionally we’d have that on a bulletin board in the back of the room.”

Combination

First Mid Ag Services shifted to a combination of in-person, with social distancing guidelines, and online bidding in the summer of 2020 for land auctions.

“We added a camera and some software at that point. We were posting the bids on a whiteboard in front of a machine shed so people could be there. What we did in the case of a Sept. 22, 2020, auction, for example, is we allowed people to pre-bid with sealed bids and the top 12 bidders could participate in person or online,” Klein said. “Shortly thereafter we went to completely online-only auctions.”

During this transition in the way farmland was auctioned, Smith noticed that farmer buyers who continued to be active in the marketplace adapted to this new auction method very quickly.

“Guys have been buying machinery online for years and for them to buy something through an app on the phone or clicking a button on the computer, they weren’t necessarily afraid to do that,” Smith said.

“I think it was maybe some of the investors and maybe even we as brokers were a little bit scared of that because of the whole thought process of we’re selling farms online now as opposed to sitting down and signing a contract or doing it in person. So, how do we verify those bidders, how do we do all of those things?”

Broadband Challenge

Using online bidding at any level also brings up another potential challenge — broadband width capabilities in rural areas.

“One of our concerns which our company was are we going to be able to communicate properly if they can’t hear us, or they can still get video, but they can’t hear us, and we can’t see them or hear them,” Klein said.

“One of the things that Hertz did that I thought was fantastic was they put a countdown clock in at the end, that way you knew, even if you were online and didn’t have audio, if you wanted to bid again, you needed to click a button or it’s going to be over.

“So, figuring out ways to communicate to the buyers was a whole new experience because we’re not interacting in person.

“We’ve evolved to the live in person with online bidding and we have people both far away and people close-by bidding. That’s a hybrid approach that some have enacted, as well, and in some cases that works well, in other cases just doing the straight online works well.”

Buyers Adapt

First Mid Ag Services documented the land auction prices during the transition from what was the norm to the online/in-person combinations.

During 2020, land sale prices at live in-person auctions were higher than those sold online only.

Buyers began to adapt to the new approach as time went on. Farmland sale prices via a virtual/in-person combination auctions were higher than the in-person only auction sale prices from January through March 2021.

“We started getting the results that we hoped we would see with the online bidding platforms. Buyers started to adapt. Our prices were going up. We were seeing the results that made sense and we were trying find ways to improve how we did it,” Klein said.

Smith has seen other advantages to an in-person/online combination with its broader reach into the buyer profile.

“No longer as a buyer do I have to coordinate with that broker, disclose that I’m interested. Some people want to be very discrete when they go to buy a farm. I can sit wherever I’m at and bid from the phone. Some will stand in the room and bid on the phone,” Smith said.

“The big thing is your reach is so much broader having an online piece and that’s why from a personal standpoint I don’t think it’s going anywhere. I think it’s here to stay and you’re going to have to adapt to it and we’re going to have to overcome it.”