If you ever wondered how to buy or sell property at a real estate auction house, then keep reading…
Real estate auctions are not a new type of real estate sale. They have been around for many years.
Auctions and the real estate agent
Real estate agents may sometimes recommend a property be placed for auction rather then listing it in a local Multiple Listing Service, typically referred to as the MLS
Many agents are not aware that when recommending a property be sold at auction, they can continue to maintain a working relationship with the seller. A real estate agent can continue to assist a seller by:
- Being present during meetings with the seller and auction house
- With draw the listing and receive a referral from the auction house
- Provide the auction house with property, mortgage and seller information
Typically, the real estate agent will retain the seller as a long term customer by assisting to sell the property quickly and provide advice through out the campaign.
In addition, buyer representatives can receive a commission on the sale of an auctioned property by submitting a Brokers Participation Agreement to the auction house.
There may be many benefits of selling a property at auction which may include:
Properties sold with clear title
When properties are sold, a title search is performed to verify and validate that there are no outstanding liens, judgments or other issues that can “cloud” a title.
Selling or purchasing property quickly
Sometimes, a property may be sold quicker then placing it for sale with a real estate agent. Many factors affect the time to sell a property, which may include: market conditions, property condition, urgency, probate and others.
Selling a property “As Is”
When a property is sold through auction, it is considered an “As is” sale. This means the sale will occur with no contingencies or negotiations. No repairs will be done, simply sold “As is”.
Seller sets the terms of the sale
The seller of a property available for auction sets the terms of the sale. These terms include the auction being an Absolute or Reserve Price sale.
Absolute – An absolute auction is one where a property is sold to the highest bidder, no matter the price. Sometimes sellers may benefit from receiving more then they were hoping; other times they may receive less.
Reserve Price – A reserve price auction is one where the seller places a reserve price on the sale of the property. If no bids meet the reserve price, the seller may not sell the property.
The seller is motivated
Buyers know that when a property is available for Absolute sale, the seller is motivate. This may work in both the seller and buyer’s favor.
The buyers are qualified and committed
Sellers know that when a buyer attends an auction, they are ready to buy. Many auctions require buyers present a buyers fee prior to the auction taking place. Only attendees who have paid the buyers fee, may actually bid on a property.
Buyers control the price they pay
Buyers may receive benefit from an auction by purchasing a property for less then an appraised value.
The Auction Process
The process begins by making the decision to auction the property. Next, either a real estate agent or the seller contacts an auction house. An auction representative will interview the seller and gather and present information regarding the ability to auction the property.
Some decisions made during this time include:
Marketing Fee – This fee is typically paid by the seller as an up front cost and may be based on analysis by a specialized marketing team.
Auction type – Either an Absolute or Reserve price auction decision must be made.
Sellers’ expectations – Terms and conditions of the sale, Sellers expected price, time frames and fees.
Once all agree the property is a valid auction candidate and the type of auction is decided, the auction date is established. The auction house will then begin to market the property which may take 4-6 weeks.
During the marketing campaign and before the auction, buyers are able to perform their due diligence. They can schedule inspections, appraisals as well as view the property.
Summary
While real estate auctions may not be for everyone, they do provide alternative methods which may benefit both buyers and sellers.
When a Real estate agent recommends a property for sale, they can remain involved in the process, receive referral fees and continue to provide quality customer service to their customers and clients