Why Sell Real Estate On Auction?

Over the last decade the auction market has been making waves in the real estate industry. For a long time the auction industry was considered a solution to move distressed or unwanted properties. This is no longer the case. You, as a real estate owner, owe it to yourself to understand that for the right property, auction could be your best choice.

Statistics show:
83% think auctions are an exciting way to get good deals.
51% think they offer a great value on items
65% think auctions offer exciting items they wouldn’t otherwise purchase
53% like the excitement of getting a good price

Table of Contents

  • 1

    What is a Real Estate Auction?

  • 2

    Selling Your House On Auction vs Traditional Realtor or FSBO

  • 3

    Why Sell Real Estate On Auction?

  • 4

    Pros & Cons of Selling Property On Auction

  • 5

    Qualifications for Real Estate Auction

  • 6

    Open or Reserved Auction

  • 7

    Auction Buyer Benefits

  • 8

    Auction FAQ

What is a Real Estate Auction?

A real estate auction is a quick and innovative method of selling real estate. It is a fast-paced, intense process that involves the sale of public property through the process of open, competitive bidding. It is by no means confined to properties such as foreclosures, abandoned buildings, etc.

Selling Your House On Auction vs Traditional Realtor or FSBO

When it comes to selling real estate you, as a seller, have three choices. Do you sell at auction, through a real estate agent, or for sale by owner (FSBO)? So, what is the best option for you? When deciding, there are a few things you need to take into consideration.

TIME: How much time do you have to invest, and how quickly do you want the sale to happen?

MARKETING: Do you have the means, finances, and skill for proper marketing?

PROPERTY: What is the best choice for you considering the condition and value of your home or property?

While For Sale By Owner (FSBO) may seem alluring with no realtor commission, it is by far the least efficient or effective method of sale. If you have plenty of time, have a flexible moving date, are experienced at marketing, and understand real estate regulations and restrictions, FSBO may be the right choice for you. However, most people do not fit this profile, so it’s not surprising that many of these listings don’t sell, and if they do many of them sell at a lower price than with other methods.

Selling property through a traditional realtor is a much more common method. While it definitely has its pros, such as not having to deal with marketing, it also has a few drawbacks. One of the biggest drawbacks is that you have no definite sale date. A sale may not take as long as an FSBO sale, but it typically takes longer than a sale by auction. There is also a high possibility that interested buyers may request additional work to be done to the property or expenses covered when they make an offer. If more than one buyer surfaces, those buyers don’t directly compete with each other or see each other’s offers.

Choosing to sell by auction is the most time efficient and hassle-free way of selling real estate. With auction not only do you have a set day of sale, but you can also sell it as is. This means no requests from the buyer to do additional work to the property or add conditions or contingencies. This does not mean that a high-value property will not sell at auction, simply that you do not need to worry about putting extra work for the buyer at the buyer’s request. What they see is what they get. Last but not least, all marketing services would be provided by yours truly, Bright Star Auctions.

Why Sell Real Estate On Auction?

So why should I choose to sell my real estate on auction? Will I get my money’s worth if I sell by land auction? Can I be guaranteed that my property will sell? These are probably just a few of the questions you are asking yourself.

An auction is a speedy process and a quick turnaround. An auction is immediate. It happens during a set time and is completed during that time. It is quick and efficient. You can rest assured that if you sell by auction your property WILL sell and it will sell during that set auction time. Unless you choose to put a reserve on it, of course.

You set the time and place of your sale. It is as simple as that. You work with us at Bright Star to schedule what works best for you. Then we will take care of all your marketing. Included in your specialized marketing strategy will be use of a comprehensive mailing list, social media advertising, print advertising, website presence, and visible signage. Our exhaustive advertising campaign is designed to reach everyone that might have interest. Selling property through auction marketing typically takes no more than 30 to 45 days, with the auction itself simply the conclusion of the process.

We gather all the interested parties together and find out who will pay the most - in a dynamic, exciting setting. Excitement and competition sometimes send prices much higher than expected. Statistic have shown that whether good or bad economy, auction remain a steady force. People love auctions, so no matter the economy if there is an auction people will still come. So, if you are worried about your property not going at market value, don’t be. Chances are your property will bring just as much, if not more, through auction than if sold through a traditional realtor or FSBO.

A definite sale date motivates buyers by giving them a goal and a deadline. With auction there is much less negotiation. There is little to no haggling over price or merchandise. The auction method is quick and efficient. When people bid, they make a commitment to buy the property at that price without discussion or debate. Also, properties are sold as-is auction day, encouraging buyers to do their research beforehand. Because of the above-mentioned things less time is wasted dealing with unqualified buyers. Buyers come prepared to buy. Auction-goers come with money in their wallets, purses, and hands and are prepared to go home with property. It is a seller’s delight. For real estate auctions, this is especially advantageous because buyers must qualify through a nonrefundable deposit if they are the winning bidder.

Pros & Cons of Selling A Home On Auction

Pros:

  1. Auctions enable you to sell land fast with a real estate professional.
  2. You set the date and time for the sale.
  3. A simpler process for you without all the negotiations between buyer and seller.
  4. You as a seller can choose to have the buyer pay all the real estate commission.
  5. The property is sold as is, with no inspections or appraisals.
  6. Competitive bidding helps you the landowner, receive true market value
  7. Realty executives handle all the marketing, paperwork, promotion, the auction event, the title work and handling the transaction all the way to closing.

Cons:

  1. Cash financing
  2. Buyer must buy your land or property as is.
  3. Some people still believe that real estate auctions are just for foreclosures, abandoned buildings, etc.

The National Association of Realtors suggest using the two-thirds rule to decide whether you are qualified to sell through auction. Assess the market, the property, and the seller. If two out of these three favor an auction, typically it’s the right choice for you.

The Real Estate Market

Do these market characteristics apply to you?
1. A changing market
2. A dull market, but buyer interest
3. A unique feature or custom architecture
4. In high demand
5. An emerging market (such as a development whose sales could take off once properties are auctioned)

The Property

Do these market characteristics apply to you?
1. Property carries a lot of equity
2. Has high carrying costs for the seller
3. Is unique with marketing interest to encourage competition
4. Has unique qualities that require marketing or more exposure to attract the right buyers

The Seller

Do these market characteristics apply to you?
1. Is downsizing
2. Needs immediate cash
3. Wants to liquidate an estate and possibly contents
4. Doesn’t want to do work on property
5. Is moving out of state
6. Is retiring
7. Isn’t interested in negotiations or other direct involvement
8. Has some equity
9. Has high carrying cost on the property
10. Knows auction will bring a fair market price

Absolute or With Reserve Auction

A property at auction can be sold two ways- “Reserve” or “Absolute”. A reserve auction has a minimum bid which is established with the auction company beforehand. If the highest bid is below the reserve, the seller must choose whether or not to accept it. An absolute auction sells to the highest bidder. This type of auction generally draws in more buyers, which will typically result in the bestselling prices. Bright Star will help you decide which is the better option for you.

Buyer Benefits
1. The buyer knows that the seller is committed to sell
2. Competitive bidding helps ensure that properties are being sold at fair market value
3. The buyer determines purchase price
4. There is no long negotiation period
5. Auctions ensure that a property can be bought in a short time period
6. Purchasing and closing date are on a set date
7. All bids are open so buyers know they are competing fairly with all other buyers

FAQ

Seller FAQ

How long does the process take?

We can sell properties as an auction or a conventional listing in as little as ten days and have, with great success. Usually though, figure 30 to 40 days of marketing until auction day, and another 30 to 45 days until closing.

Do properties sell for more at auction than with a traditional listing?

Yes, typically. Each property is unique, but generally the competition of an auction leads to higher prices. Our team of experts will help you determine the best strategy for your situation. Our goal at Bright Star is the best result for you, the seller- while being fair to any and all buyers.

What is my property worth?

Please call us and an agent will be happy to meet with you and provide you with a free market analysis.

Buyer FAQ

May I do inspections?

Yes, most times you as a buyer are welcome to do any and all inspections you like- prior to the auction. We want you to be comfortable knowing what you are getting when you purchase the day of the auction since you will be making a nonrefundable down payment.

What happens if the appraisal comes back for less than the auction price?

This very seldom happens. The auction process itself is somewhat of an appraisal. Less than 5% of the time, the appraisal comes in for less than the auction price. If this happens, your lender will probably require you to put more money down to make up the difference between the appraised value and the purchase price. We have never had a buyer lose a property because of a low appraisal.

What do I need to bring the night of the auction to purchase?

You will only need to bring a form of payment to put 5% down. Personal or company checks are perfectly acceptable as are cashier’s checks or money orders. If you alert us at Bright Star beforehand, we can even accept credit card payment at no extra cost to you.

May I back out if my financing falls through?

No. Part of the reason you sometimes get a better deal at auctions is you are considered a ‘super-qualified’ buyer since you are putting down a nonrefundable down payment- which assures the seller you are willing and able to close. It would create a burden for the seller if they went through the auction process only to have the winning bidder walk away and have to start over again.

How soon can I close?

Most times, as soon as you want to. In many cases the seller can be ready to close in 7 days, but is willing to give the buyer 45 days so the buyer can get financing lined up.

Why are you selling it at auction?

Usually the seller is very motivated. Also, an auction is a way to find true market value.

What are the advantages to a buyer at an auction?

  1. The advantages to a buyer are many- not the least of which is transparency. You will not be submitting an offer into a dark void without knowing what else the seller is considering. You will be able to tell with perfect clarity what you will need to pay in order to purchase the property you desire.
  2. Another advantage to buying at auction is dealing with motivated sellers. Many times auction sellers are not just ‘testing the market’. They are spending a considerable sum of money to advertise their auction event and fully intend to sell it on the advertised day.
  3. It is fun! Few things will get your heart rate up and give you a rush like purchasing a dream property in an auction setting. If you have never experienced it- rest assured, there is nothing like it.