~A Guide To Real Estate Auctions~

    Effective, quick and dependable, the auction sale is the most effective way of asset conversion. An auction assembles genuine purchasers into a competitive bidding forum, establishing true market value and obtaining the highest possible price for every item sold.

1. What Is Real Estate Auction?

A Real Estate Auction is a method of buying and selling real estate, which accelerates the purchasing process through the medium of an auctioneer.

2. What Are The Benefits Of A Real Estate Auction?

The Real Estate Auction is definitely a win-win situation for everyone involved. The seller disposes of properties quickly and efficiently, thereby saving long term holding costs such as interest and maintenance. For the buyer this can mean a smart investment, since properties are usually purchased at fair market value through competitive bidding, because the auction sale is conducted in an open forum, both motivated buyers and sellers have assurance of watching the property's true market value emerge as the bidding process progresses. For buyer and seller, fair market value for the property prevails.

3. Are All Properties Suitable For Auction?

Most properties, but certainly not all, are saleable by auction. Residential property (including single and double story houses, bungalow, town house, country homes and condominiums), commercial property, vacant land can be sold at auctions. The majority of sound developments that can be marketed effectively do extremely well at an auction.

4. Can I Be Sure Of Getting A Fair Price?

The only genuine measure of value of real estate is what someone else is willing to pay for it. An appraisal is merely an informed opinion. It is not an offer to buy. The real measure of value of real estate, at any given time, is what it will fetch in monetary terms under competitive bidding from informed and motivated buyers.

5. Don't Real Estate Auctions Depress Home Values?

Not at all, Real Estate Auctions reveal the true market value of a property because auctions are conducted in an open forum where all bids are known, and participants are given immediate feedback on the property value. At an auction, the open market value settles at the level the market can bear, neither elevated nor deflated.

6. Real Estate Auctions Are Often Thought Of As A "Cheap Sale" For Someone Who Cannot Meet Their Mortgage Payments. Is This True?

Although most other forms of auction, like art auctions, have a very positive image, real estate auctions, have at times suffered from a poor one. Auctions today don't result from individuals' repossessed properties, but rather from a smart seller, who chooses the cost effective, accelerated method of selling a property rather than laboring for months or years to sell the property. This accelerated sale allows the seller to eliminate virtually all long-term holding costs. These cost saving are passed along directly to the purchaser. It is truly a win-win situation. Property owner can move on with their lives and buyers can purchase quality properties at fair market value.

7. What Factors Determine The Success At An Auction?

• The desirability of the property being sold. This includes location, condition and surrounding properties.
• An aggressive marketing and advertising plan.
• Realistic expectation on the part of the seller.
• Conducting the auction in a professional manner.
• Undertaking due diligence beforehand so buyers are knowledgeable. The only issue that remains is price.

8. How Are Properties Advertised For Auction?

This varies greatly depending on the type and value of the property being sold. Each auction has its own promotion and advertising strategy. Auction marketing is an intensive effort and well-timed plan to create massive interest in the properties available for sale. The various forms of advertising are distribution of Proclamation of sale or brochure mailed directly to prospective purchasers and posted in public places, newspaper advertising in local and possibly regional or national papers, ads in trade journals and magazines, radio ads, signs posted on the property, television ads and phone solicitation. A qualified and experienced auction company knows which form of advertising are best for a particular type of auction and its location and will facilitate everything from preparing the advertisements to placing them in desired forms. The aggressive advertising hits large groups of buyers that will come and competitively bid for the property thereby yielding true fair market value.

9. What Terms Does A Property Sell At Auction And Who Sets The Terms?

The seller sets the terms with the advice of the auction company. Usual terms are that the successful bidder deposits earnest money (either a percentage of the purchase price or a stated set amount) and enters into a purchase contract immediately following the auction. The balance of the purchase price shall be paid within 90 days from the date of Auction Sale. Properties are generally sold on an "as is where is" basis with no warranties expressed or implied.

10. What Happens To Ernest Money If A Buyer Decides At A Later Date Not To Buy The Property?

Many of the same things happen in an auction situation as in any other real estate transaction. The earnest money deposit is forfeited if the highest bidder is unable to complete the sale regardless of the reasons. If the seller fails to close because of defective title, etc. the buyer's deposit will be fully refunded immediately.

11. How Much Does An Auction Cost?

Auctioneers, like other real estate brokers, charge a commission as a percentage of the sale price. The commission is negotiable. In addition, the out-of-pocket expenses relating to the marketing and promotion as well as the conduct of the auction are paid by the seller.

12. What Are The Advantages To The Seller In An Auction Situation?

Buyers come prepared to buy. "Lookers" are eliminated because most often bidders must qualify by depositing a bank draft or cashier's order. Sellers get maximum exposure for their property. The Auction Marketing strategy differs form the conventional advertising. It is more concentrated, therefore more intense and visible. High holding cost are avoided. Through auctions, the seller is in control and knows, that if the property is priced, his property will sell on a certain date from the auction listing. By selling quickly, the seller is able to avoid high holding costs and is also able to benefit from the use of the monies to reinvest in other opportunities elsewhere.

13. What Are Advantages To The Buyer In An Auction Situation?

The buyer knows the seller is fully committed to sell. Auction agreements obligate the seller to transfer title to the highest bidder in an auction. The buyer knows he is getting the property at fair market price. The buyer feels comfortable with the purchase knowing that others would have been willing to pay for about the same amount for the property as his bid. The buyer sees many offerings in the same place at the same time. He is able to make market comparisons quickly and easily.

14. Fair Market Value

A term used frequently by appraisers referring to their judgment and opinion about the sale price. As the auction process is open to all bidders, a sale at an auction is considered to be a measure as Fair Market Value.