WHAT IS A REAL ESTATE AUCTION?
A real estate auction is an innovative and effective method of selling real estate. It is an intense, accelerated real estate marketing process that involves the public sale of any property -- most certainly including those that are nondistressed -- through open cry, competitive bidding.
Auctions Create Urgency and Competition
Auctions are exciting events, forcing qualified buyers to a single moment of decision. Buyers must seize the opportunity on auction day. Competitive bidding increases interest and prices. Most importantly, real estate sales are confirmed within minutes - sales that could have otherwise taken months or even years to generate and finalize.
Why auction? Property owners have begun to recognize the advantages of the auction alternative - among them, speed, increase in price through competitive bidding, reduction in the cost of carrying a property, immediate attention focused on a specific property, and creation of a sense of urgency to buy.
What are Online Only Auctions?
Online Only Auctions provide a virtual platform that brings qualified buyers and motivated sellers together. The convenience of bidding over the internet is very attractive to buyers due to temporal and monetary savings. The structure of Online Only Auctions is very similar to Onsite Real Estate Auctions methods. Each of the methods has the same basic elements: sellers trading property, buyers bidding competitively, a sale being defined by preset terms and conditions as well as a defined time period.
Seller Advantages of Selling Property at Auction
Auction Sales Reduce Time on the Market. Once the promotion begins, the auction sale takes place in a few weeks. Sellers like knowing their property will be sold on a certain date. Auctions avoid drawn-out negotiations and unnecessary contingencies because terms and conditions are preset by the seller.
- The Buyers come prepared to buy
- The Seller pays No Commission
- The Auction process allows you to liquidate your real estate
- Seller will set the Terms & Conditions of the Sale properties and eliminates long-term carrying costs, including taxes & maintenance
- The Auction process lets the seller know that the property will be sold at true market value
- Creates competition among potential buyers – An Auction price of a property can exceed the price of a negotiated sale price of a property
- All potential buyers are pre-qualified upon registering to bid at the Auction
- Eliminates numerous and unscheduled showings
- Takes the seller out of the negotiation process
- Ensures an aggressive marketing program that increases interest and visibility
- Exposes property to a large number of prospects
- Accelerates closing
Q. What are the different types of Real Estate Auctions available to me?
A. Essentially there are three types of auctions:
1. Absolute Auction (or auction without reserve)
The property is sold to the highest bidder, regardless of the price.
Since a sale is guaranteed, buyer excitement and participation are heightened.
Generates maximum response from the market place.
Many sellers, including financial institutions and government agencies have begun to use this method more frequently.
2. Minimum Bid Auction
The auctioneer will accept bids at or above a published minimum price. This minimum price is always stated in the brochure and advertisements and is announced at the auction.
Reduced risk for seller as the sales price must be above a minimum acceptable level.
Buyers know they will be able to buy at or above the minimum.
The seller may, however, limit interest in the auction to only those buyers willing to pay the minimum bid price, and therefore it must be low enough to act as an inducement rather than a hindrance.
3. Reserve Auction (an auction subject to Confirmation)
In this scenario, the high bid is reduced, in effect to an offer not a sale. A minimum bid is not published, and the seller reserves the right to accept or reject the highest bid within a specified
time -- anywhere from immediately following the auction up to 72 hours after the auction concludes. Sellers predetermine the price at which the property will be sold and are not obligated to
confirm a sale other than at a price that is entirely acceptable to them. The main disadvantage of a Reserve Auction is that prospective buyers may not invest the time and expense of due
diligence when there is no certainty