Real Estate Auctions Feel At Home
The changing real estate market finds buyers have regained an upper hand and sellers have started to sweat. If you feel that the market is in a decline, if you feel you should sell quickly, rather than letting prices drop further, then you may want to consider selling by auction.
Many people think property auctions are only for distressed properties or really bad houses. Not so. $14.2 billion dollars of real estate was sold by auction in 2005, up 24% from 2004, both years “hot” sellers markets. So, what happens at a property auction and how do they work for buyers and sellers?
Three Methods for Determining the Final Auction Price:
1. Absolute Auction: Going Going Gone. The highest bidder wins, regardless of the final price.
2. Minimum or Published Reserve: Going Going If. Seller and auctioneer have agreed to accept the published minimum bid or higher.
3. Unpublished Reserve: Going Going Maybe. The high bid is subject to the sellers approval.
Four popular options for Bidding on your Dream Homes:
1. “Open Outcry”: The auctioneer calls out bids to the public. Buyer Bidding begins. Final sales price is determined by one of the Methods listed above. Bidding is usually permitted in person, by phone, proxy or webcast.
2. Sealed-Bid: All bidders submit their offer to the auctioneer, on the same day, without knowing the bids of other buyers.
3. Round Robin: Buyers submit bids on a sign-in sheet at the property site. After bidding closes, the auctioneer calls each person who made a bid, asking if he or she wants to make a higher offer. The process is repeated until there is only one bidder left. Usually this minimum bid process in nonbinding to both parties, until the final price is agreed upon in writing.
4. Online Auction: Bidding takes place against the clock with the sales price determined by one of the Methods outlined above. Usually bigger than a live auction because bids come from anywhere in the world, any time, day or night for two weeks. It’s an adrenaline rush in the last hours and minutes.
Auction Tips for the Buyer/Bidder: Buyers love the transparency of auctions, which allow them to do their homework, including walk thru’s and inspections, before the sale. The downside for buyers is that they must spend time and money without a guarantee of winning the bid for the property. To avoid auction fever, do your homework and due diligence, arrive early the day of the sale and have a definite maximum bid in mind. Remember that a “Buyers Premium” of 7-10% will be added to your final bid, which can usually be rolled into your mortgage. Do not allow your bid and premium to exceed your approved loan amount, or you may face stiff financial penalties.
In the case of Foreclosure Auctions, which take place on the property or the courthouse steps, you must pay in full with cash or a cashiers check at the close of the auction. Also, these sales are complicated, making a potential bargin iffy. Throughly inspect any foreclosure for extensive defects and verify all liens against the property before bidding.
Auction Tips for Sellers: Typically auction companies allow 45 – 60 days for buyers to attend open houses and bring their own inspectors. Owners can sell their properties without financial, cosmetic or termite contingencies. On the downside, property that is not aggressively marketed by the auction company may result in low attendance and only a few, low-ball offers. Make sure the company you choose utilizes virtual tours, newpaper and trade publications and your local MLS. Hire the auction company which has a lot of experience selling properties such as yours, inquire about their final price results and get references. Sellers usually pay some of the marketing and advertising fee’s, but the buyer provides the commissions.
Good luck on the sale of your home and thank you for visiting the InfoTube real estate blog.