According to Brittanica.com an Auction is the buying and selling of real and personal property through open public bidding. The traditional auction process involves a succession of increasing bids or offers by potential purchasers until the highest (and final) bid is accepted by the auctioneer ( who is usually an agent for the seller).
Prospective buyers are usually permitted to examine the items for sale beforehand. The inspection period enables buyers to evaluate various lots, determine comparative grades or qualities, and arrive at a reasonable price to offer at auction time. Before the auction itself, the seller can set a “reserve” or “minimum” price below which the property will not be sold.
Two Types of Auctions:
There are several ways of doing Auctions, however the two we normally use are:
ABSOLUTE and CONFIRMATION.
An Auction at which Property put up for sale is sold to the highest bidder, where the seller may not withdraw the property from the auction after the auctioneer calls for bids unless no bid is made in a reasonable time, where the seller may not bid himself or through an agent, and where the seller will deliver marketable title.
We have found in our experience that this is the Best way to sell at auction. Absolute sales will always produce more people (why? Because everyone is looking for “a deal”) so needless to say, more people, means more bids, more bids, more money.
(At Auction/ Auction with Reserve) An auction at which the seller or his agent reserves the right to establish a minimum bid, to accept or reject any and all bids, and to withdraw the property at any time prior to the completion of the sale by the auctioneer.
(A typical crowd at an absolute sale approximately 25-100 (depending on what's being sold) at a confirmation sale approximately 10-20 (again depending on what's being sold).
What is an Auction Candidate?
The National Auctioneer's Association states that about one in every six listings is a good auction candidate. One of the more prominent candidates for auction is the estate sale. Many times the heirs have no use for the property and there is usually personal property involved, so the property just needs to be liquidated in a timely manner so this is a very good auction candidate. Other Auction candidates may include a property that is Unique, Lake Properties, Investment Properties, Partnership Dissolutions, Court Ordered Sales. The possibilities are endless.
How do I know if my property is a good Auction Candidate?
Your property may be a good Auction candidate if it falls into any of the following categories:
If it has 40% or more equity
It is a part of an estate
Has been on the market for an extended period of time
Needs work that you are unwilling or unable to do
Is A Unique Property
You want or need to liquidate the property at fair market value in as short of time as possible
What are the Cost of Auctions?
The seller has normal closing costs just as they would in the sale of a private listing. The only additional costs are the Auction expenses. These expenses average between $2000.00 and $4500.00 on a single family home in Middle Tennessee. (Remember, owners generally do not make repairs, pay buyer's closing costs, or have additional house payments. Also since Crye-Leike does such a volume of business with the Newspapers in the area, our advertising rates are absolutely unbeatable. With all that considered, it actually costs no more to use the Auction method of selling.
(The Big Myth) Aren't all Auctions distressed sales?
This certainly seems to be the most common misconception about Auctions. The fact of the matter is, while Auctions do work well in a distressed situation, we do very few distressed sales. We find that people sell property at auction for the same reasons they sell by listing. They are moving up or down, they've been transferred, they've built a new home, divorces. The list can go on and on. Anytime a seller wants or needs to sell and have a faster than normal closing, an Auction may be the way to go. Some may think that Auctions are all lower end homes, however while we have sold in every price range, the average price range home is around $310,000.00
The What If's:
If you've thought about auctioning a property at all, you've probably had many "What If's" unanswered: What if my house doesn't sell? What if I sell my home before I find another one? What if I only get a low offer? What if's can go on and on. Auctions have their own unique set of “What if's” What if no one shows up? (a good question we've never had it happen) What if it don't bring what it's worth? (The one thing I truly believe is that they will bring all it's worth, Will it bring what you want for it??? That may be a totally different number) What if it rains? (Pray for rain, we have some of the best crowds in the pouring down rain, everyone is thinking the same thing… no one will show up at the auction because it's raining) What if it don't close? ( We collect a 10% NON-REFUNDABLE deposit as earnest money the day of the sale, it's not likely that a buyer is going to forfeit that kind of money. (But in the unlikely event that they do, we keep our list of the bidders who registered for the sale, and just go to one of the back up bidders). It's a great thing to have all the interested parties there at the same time!