If you’re looking to buy or sell real estate in the near future, it’s important to learn how real estate auctions work. The three main segments of real estate auctions are listing, selling and closing.
The property listing for an auction sale is an exclusive arrangement with the auctioneer/broker and this exclusivity typically is from the time of the listing agreement signing until 60 days after the auction sale has been completed. During this time frame, the seller works with the auctioning broker with all the information about the property or listing that can be used to create a marketing program to attract buyers to the auction itself. The seller also needs to supply documents and information including any outstanding liens or mortgages on the property, tax assessments, deeds, surveys, certificates of occupancy and rental agreements (if applicable) and any other documents related to the property. The auctioneer will take photos of the listing to use in advertising materials and suggest what work may need to be done to the property (repairs, cleaning, landscaping, etc.) prior to the auction.
The next phase of the selling period begins with signage being placed on the property announcing an auction sale. During this time, photos of the property and property details will be posted on the auctioneer’s website. Advertising materials will also be created during this time. Typically an auctioneer will conduct 2 two-hour previews of the property (similar to an “open house”) but unlike a typical real estate sale, these will be the only two times during the process that potential buyers can look at the property until the day of the auction. Terms and conditions for bidding and purchasing the property are also created at this time and most auctioneers will allow potential buyers to pre-register online for the auction. Extensive phone marketing and internet marketing (press releases, blog posts, internet advertising) also happens during this period.
Once the auction day arrives, the auctioneer’s team will arrive and set up their registration, clerk and bookkeeping areas and then begin registering potential buyers as well as show the property. The auction itself usually only takes a few minutes and once the bidding is completed, two bidders are summoned by the closing clerk. These two bidders are the winning bidder and the successful under bidder (which is the person that bid the next highest amount). The sales contract is signed by the winning bidder. Additionally, the under bidder’s funds are retained until an additional 10% of the winning bid is received in the auctioneer’s escrow account within 24 hours. If those monies are received within 24 hours, the under bidder’s check is returned. If the monies aren’t received, then the under bidder will sign the sales contract and be held liable for their under bid.
The final period of the auction sales process is closing which goes according to a pre-determined schedule. The closing of a property sold at auction usually occurs within 30 days of the auction. Since the buyers are pre-qualified and the sale isn’t contingent, there are typically no delays in closing on the sale. The auction company makes sure that all property insurance and the condition of the property are maintained during the time between auction and closing. There is no final walk-through for the buyer and the buyer only has access to the property after the closing.
Now that you know more about the three steps of real estate auctions, you can make an informed decision to determine if your luxury property is right for a luxury real estate auction.
Contact Jeff with any questions: 917-932-5131