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.
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Benefits of the Real Estate
Auction
Types of Real Estate
Auctions
Is your Property
well-suited for an Auction?
Contact
our Auction Division for more information concerning Auction
opportunities for your property!
WIN/WIN
Situation:
BENEFITS TO THE SELLER:
- Buyers come prepared to buy
- Quick disposal reduces long-term carrying costs, including
taxes & maintenance
- Assurance that property will be sold at true market
value
- Exposes the property to a large number of pre-qualified
prospects
- Accelerates the sale
- Creates competition among buyers - auction price can
exceed the price of a negotiated sale
- Requires potential buyers to pre-qualify for financing
- The seller knows exactly when the property will sell
- Eliminates numerous and unscheduled showings
- Takes the seller out of the negotiation process
- Ensures an aggressive marketing program that increases
interest and visibility
BENEFITS TO THE BUYER:
- Smart investments are made as properties are usually
purchased at fair market value through competitive bidding
- The buyer knows the seller is committed to sell
- In multi-property auctions the buyer sees many offerings
in the same place at the same time
- Buyers determine the purchase price
- Auctions eliminate long negotiation periods
- Auctions reduce time to purchase property
- Purchasing and closing dates are known
- Buyers know they are competing fairly and on the same
terms as all other buyers
- Buyers receive comprehensive information on property
via due diligence packet
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TYPES OF
AUCTIONS
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.
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.
RESERVE AUCTION (or 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 they will be able to buy the property
even if they are the highest bidder.
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Is an
Auction your best marketing strategy: The Two-Thirds Rule
One method to determine if auction is the best marketing
strategy is the Two-Thirds Rule. This involves analysis
of the market, property and seller situation. Generally,
if two of the three parts (market, seller, property) lean
towards auction, then auction should be considered by the
seller as a sales option.
Market (Buyers) -- A good auction
situation is one where the market is:
- A changing market
- A dull market; too much product but buyer interest
is expressed
- Not enough of the property type (unique, lake front,
etc.)
- An emerging market -- new developments could kick
off a sales program, once some of the properties were
auctioned
- A seller's market where there is known high demand
and a lot of competition can take place
Seller -- A good auction situation is one
where the seller:
- Needs immediate cash
- Has a partnership or marriage break-up
- Is moving out of the state
- Wants to liquidate an estate
- Is retiring
- Is an auction-minded seller
- Has a listing that is about to expire
- Has already purchased another house
- Knows the auction will bring a fair market price
- Has financial problems
- Has high carrying costs on the property
Property -- A good auction property is one
that:
- Has a lot of equity (25% or more)
- Is unique -- there is enough buyer/market interest
to encourage competition (unique properties are difficult
to appraise)
- Has a lot of high carrying costs for the owner
- Is vacant -- vacant properties may encourage vandalism
- Is difficult to appraise
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Contact
our Auction Division today for more information on how
a Real Estate Auction may be the perfect tool to get your
property SOLD!
