Why Sell By Auction?

When the subject of “Auction” comes up in conversation, there are many questions that come to mind to those that are not familiar with Auctions. Many times I have been asked:What sells best at auction ?

Answer: That which is in demand.

For quick results sell your real estate at auction!

An auction usually will out perform any other marketing methods for whatever is being sold. The excitement level is high throughout the gathered crowd, because only one person will be the buyer that day.
Several people are confident they will be the buyer, but they are in competition with each other.

Auctions will work for you if…

>You need to sell your property NOW!
>You want to obtain a TRUE market price.
>You want a NON-CONTINGENT / AS-IS sale.
>You don’t like to pay COMMISSIONS.
>You want to significantly REDUCE HOLDING COSTS.
>You have a DEADLINE to sell your property.
>You want to sell QUICKLY.
>You want to receive CASH for your equity.

The purpose of this page is to address questions that you may have as you ponder the idea of an auction for your personal or real property. Should you have any questions, please feel free to call us.

1. If I sell at auction, am I not just giving it away?


Answer: 
NO, not at all. While some people think of auction as a bargain, or a distressed situation, Auctioneers understand this psychology and use it to the seller’s advantage.

While there certainly are many good buying opportunities at an auction, the best articles in the world are sold at auction. How do you put a price on some things? Only at auction.

Through auction, the seller is in control. The seller controls the timing and the terms of the sale and all but guarantees a marketplace by creating one if necessary. During the times of a very strong real estate market, you may have heard of situations where a property was sold at above the original listing price.

That is in essence an auction except that these home shoppers who found the listed property at the same time were making offers blindly, not knowing what the other offer was. What price could be achieved if they were bidding head to head?

2. Why would I sell my home at auction?


Answer: 
 The answer is easier than you think. Of course, getting the most money is important. Very important to both you and me, your auctioneer.

But you can’t sell a property through a traditional listing and the auction process at the same time, so you need to look at other information to help make the choice.

Information such as “is the property currently being gainfully used by you at this time?” If it is, you may want to get a certain price or otherwise remain in the property.

If not, then every day the property remains unsold is a net cost against your bottom line. Costs such as heat, utilities, taxes, insurance, maintenance, security, depreciation, and loss of return on the money invested otherwise are ongoing and mean that the longer it takes to sell, the less you ultimately put in your pocket.


Another reason that you may choose auction is that you are selling the property for an estate or a friend, and you do not live close to where the property is. You are concerned about having the property on the market for an indefinite period of time while it sits vacant.

An auction will give you firm control of the time line and ensure you are able to sell it and move on. In these situations the risk of listing the property is higher than the risk of auction because you give up more in a listing.


3. What if I have more than one property to sell?


Answer: 
 Even Better. Through the auction process, more than one property can be sold in a single timeline; you could enjoy the benefits of buyers bidding on them as individual parcels by choice, (highest bid selecting the property they want) and if the properties are connected, in various combinations ( multi-par).

This added dimension is impossible to achieve in a traditional listing. Auction methods excel at maximizing the pricing of multiple investment properties, income properties and tracts of land.


4. What advantage does auction have over listing?


Answer: 
 The advantages are different for different sellers, but generally think of it this way. There are 3 elements of a real estate sale. (1) The price you get, (2) the time it takes to sell it, and (3) the terms of the sale.

In a traditional listing you control NONE of these. You can’t predict how long it will take to sell, whatconditions will be in the offer. You feel like you control price, but you really only control the right to say no and then keep the property. The buyer always decides the price. You merely accept or reject it.

In an auction, you control both the time and terms because you set them. And the price is controlled to the same extent seen in the traditional listing with the sellers ability to say no and refuse to sell.


The fundamental difference with auction is that you are going to employ an aggressive marketing campaign to generate the highest degree of interest and use the competition and the professional skills of the master auctioneer to drive the offer to its highest level. So the primary advantage of the auction is control.


5. Will I get a good price?


Answer: 
 The truth is that whether you offer your property at auction or by traditional real estate listing, the buyer is the one who is spending the money and therefore controls the price. In both cases you have the right to refuse any offer, but you can’t spend the buyers money for them. The decision to auction or not to auction should depend on criteria other than getting the most money.


6. What is more important than getting the most money possible?


Answer: First: Time. Very often it is the money you fail to lose rather than the money you make that is the difference. The longer a property sits, the more it costs, the more is lost. In a falling market, time on the market can be a serious issue. In a rising market, it can equate to money left on the table. In any real estate transaction, Time is of the Essence.  

Secondly: Contingencies. An auction contract is a non contingent sale and therefore has not only a greater certainty of closing, it is transparent. Property is sold as is, where is, with all faults. No need to invest in a property to make it marketable. No surprises at settlement.


7. Is auction a good method to sell investment or commercial real estate, or just estate homes?


Answer: Auction marketing excels at marketing commercial, multi-family or any property with a documented income stream. It has been said that what sells best at auction is that which is in demand. Open land, developable properties and farm land are in strong demand. Investors will compete for a proven income producer or an opportunity to develop.


8. How often do properties sell below appraised value?


Answer: 
 This is a difficult question to answer because it suggests that listed properties typically bring their appraised price which is just not true.

An  Auctioneer, has a good deal of training and experience in appraisal of both personal property and real estate. An appraisal, while a helpful tool in the decision making process is at best an imperfect science.

It stands as a prediction, an opinion only, of what a property should bring and is usually based on the best available past comparable sales in the marketplace.

[In today’s falling price market, you can not take a sales comparative that is four to six months old or older and use it as a guide to today’s value.]

If there are an abundance of sales of very similar properties, then the appraisal is probably an excellent prediction of price. At least for that time, place and the current market conditions.

If there are few sales of similar properties, then the appraisal may be very high or very low compared to actual sale price. This holds true in both traditionally listed properties, and for auction properties.

We have seen properties sell for substantially more than appraisal, and for substantially less. In all cases, the seller agreed to the price, and the appraisals were in error by the amount they differed from the actual sale price.

9. When is an auction not the recommended method?


Answer: 
 I love the auction process, but there are circumstances where it may not be the best path for a client.

We do not recommend an auction if you are very satisfied with your home, and you want to sell it only if a certain price is met. (Passive seller vs. motivated seller.)

The reason we don’t advocate an auction in this situation is that an auction does cost some money for marketing in the aggressive manner required for this method. You, the seller who pays for marketing,  risk this cost whether or not you get the price you want.
While in a traditional listing, there is typically no marketing charge. In this situation the auction may be more risky. Only in a hot seller market, would this type seller stand to really benefit from the auction method.


REMEMBER: in the end, the market sets the value, not the seller or a Realtor, not even the auctioneer.