Frequently Asked Questions
1. What Is A Real Estate Auction?
A real estate auction is an accelerated purchasing process that incorporates competitive bidding.
2. Why should a property be sold by Auction?
Speed of transaction is one of the main reasons to sell a property by auction. Plus, the competitive process helps ensure that a property's true market value is reached at the time of sale. This process benefits both the buyer and the seller.
3. What kind of properties are sold by Auction?
The real estate auction is a good selling method for most types of properties. Even large developments will do well at auction if marketed effectively.
4. Are all auctions conducted the same way?
No, there are three major types of auction:
- ABSOLUTE AUCTION - (Or auction without reserve) -- There is no minimum bid for this type of auction and the highest bidder wins no matter what the bid amount.
- AUCTION WITH RESERVATION - A minimum bid may or may not be posted; however, the seller has a right to refuse the sale for up to 72 hours after the bidding ends.
- DUAL BID METHOD - This process begins with sealed bids, the highest of which becomes the opening bid for an outcry auction. This method allows the seller to judge the value and interest in the property.
5. Can a property that is scheduled for auction be sold before the event? Early Bird Bidding
Properties often sell either before or after an auction occurs. Not all buyers are willing to risk the competitive bidding process and will make an offer before the auction event. Others wait to see the result of the auction before making an offer.
6. I'm worried the Selling Price will not be fair. How do I know that I will get market value for my property?
Competitive bidding is one of the best ways to determine the true market value of a property.
7. What ensures a successful auction?
Of course, the property's value is the most important factor for success; however, using a professional auction company that guides the entire process greatly contributes to the success. The auction company should promote the sale, make certain the property is ready for sale, prepare information packages, manage the event and follow up on the closing.
8. What type of promotion is used for auctions?
Different properties required different marketing strategies to reach the appropriate market. For instance, a residential property may be advertised in local periodicals and with signage while a large commercial market may require promotion to wider audience. The Internet is the newest form of marketing that reaches buyers from all markets.
9. How long does the whole process take?
It varies by the type of property and the auction, but 30 to 90 days is typical.
10. What is Earnest Money?
It is very similar to a deposit. It is paid by the successful bidder the day of the auction. If the buyer does not complete the sale, the Earnest Money is forfeited. If the seller is unable to complete the sale, the Earnest Money is returned to the prospective buyer.
11. What does it cost to auction a property?
Auctioneers charge a negotiable commission that is a percentage of the sale price. Expenses relating to the marketing, promotion, the auction are paid by the seller or with a "buyers premium."
12. What is A Buyer's Premium?
A buyer's premium is an additional charge to the purchaser of the property. It is usually 3% to 10% of the hammer price (highest bid). The terms and conditions of the auction specify the amount of the buyer's premium.
13. What Are The Advantages To The Seller In An Auction Situation?
The entire sale process is streamlined. Advertising is concentrated. Bidders are qualified. Costs associated with a property like insurance, taxes, etc., are minimize because of the speed of the transaction. The seller can see that the true market value of the property is reached.
14. What Are The Advantages To The Buyer In An Auction Situation?
Buyers participate in an open forum where the market value of a property is reached competitively. The buyer knows that others value the property. The buyer is certain that the seller is committed to the sale. (The seller is required to accept the highest bid in a absolute auction or the highest bid that meets or exceeds the minimum bid in an auction with reservation.)