The definition of a real estate auction is quite simple; “a method of selling real estate in a public forum through open and competitive bidding”. But beyond that, most consumers don’t know much about real estate auctions and how they can benefit as a seller.
Real estate auctions are a highly efficient and expeditious way to sell any type of real estate. Terms are straightforward and the competitive bidding generates market value.
The benefits of real estate auctions to sellers include…
1. Acceleration of the process of selling your property a. Typically the entire process can happen in as little as 30-60 days
2. When the selling process is accelerated, the holding costs are decreased a. The National Associated of Realtors (NAR) estimate that the holding costs can often exceed 2% of the property’s value each month
3. The auction process makes owning property a much more liquid investment a. Typically property is thought of as a low liquidity investment but that’s not the case when the property is sold by auction
4. The seller pays fewer costs in order to sell the property a. In most auctions, buyers pay most of the costs of an auction in the form of the buyer’s premium
5. The auction method takes the seller out of the negotiation process a. Once the seller determines the minimum price they’re willing to sell their property, their involvement is mostly complete
6. The real estate auction process allows the seller to receive fair market value for their property a. NAR defines fair market value as the price that a ready, willing and able buyer will pay assuming both parties are typically motivated, well informed, under no undue pressure and possess all relevant facts all of which are immediately determined on the date of the auction
7. The auction process allows the seller to include personal property to be sold at auction a. This can include home furnishings, equipment, vehicles, etc.
8. The seller is able to have showings of their property based on their scheduled – not the buyer’s schedule a. Showings are scheduled based upon the seller and are usually done several days before the auction
9. Auctions require potential buyers to pre-qualify for financing a. Any contingencies are handles prior to the sale – there’s no “subject to financing” clause in the contract – an auction is a cash sale (real estate sold by auction is “as is, where is”)
10. Auctions expand market reach a. The promotion of your property is what makes the auction method of marketing so effective (your property can be exposed to a regional, national or even international audience by itself or at most with a few other properties)
11. A sense of urgency is created in order to entice buyers a. Non-serious buyers are eliminated because of the pre-qualification requirement
12. Buyers come prepared to buy. Buyers are brought to a point of decision in a relatively short period of time
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