Considerations

E - Auction Sale: Sell at an auction?

                   QUICK OVERVIEW:

An auction eliminates showings, appointments and most aspects of the selling process.         

It tends to attract bargain hunters, so sellers seeking top dollar rarely use them. On occasion it is more profitable than traditional forms of selling. It is a quick way to get rid of property.   

Pros and cons:

Auctions reduce the selling hassles, offer a fast sale and an end to ongoing costs, including maintenance, utilities and taxes. In theory, an auction creates competition among buyers and can magnify excitement, interest, and hopefully the price. 

The attendees are representative of low-price hopefuls. The actual bidders are comprised primarily of seasoned bargain shoppers. In order to avoid selling too low, you can always specify a minimum price (called a “reserve”) must be reached before you’ll agree to accept the highest offer. If you insist on too high of a minimum acceptable bid, you may have to search for a willing auctioneer.

An “absolute” auction refers to having the property sold to the highest bidder regardless of how low the final bid price is. 

Some auctioneers require that you pay for any classified advertising. This helps them eliminate sellers who want too high of a reserve.

It’s rather questionable as to whether you’ll make more or less using an auction. If it were common to net more, you would find many, many more sellers using this approach.

Commission savings:

Auctions don’t really provide a commission savings. Some of them tell you that you don't have to pay a commission since the buyer pays it. That’s true. They’ll charge five, 10 and even 15 percent to the winning bidder.

When the buyer pays a commission on top of the sale price, this is referred to as a “buyer premium.” Buyers make their bid according to what their total payment will be and obviously bid less than if the seller paid the commission. So how much will you net, and is it worth eliminating the selling hassle?

Find out more:

Go to auctions.org. This provides infomation of the auction arena as presented by the National Auctioneers Association. It includes a link to over 6000 member auctioneers. It allows you to specify a search for your state and the auctioneer specialty (residential real estate). In addition, at realtor.org there are various articles about the different types of auctions and their benefits.

Look for house auctions in the classifieds. Attending several will either solidify or shake your comfort level with this approach. It will educate you as to the abilities and approaches of local auctioneers.

With the excessive number of foreclosures on the market, many lenders are using auctions to quickly and systematically get these "liabilities" off their books.  

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