Real Estate

Should you hire an auctioneer to sell your home?

Real estate auctions are nothing new but they haven’t been all that common in the United States where realtors have dominated the market for decades. Worldwide real estate auctions are actually very common and in Australia they are the number one method of selling properties.

You’ve probably seen the advertisements in your local paper and if you haven’t attended an auction you might be confused by some of the terminology. For instance the word absolute auction, which means the property, is to absolutely be sold regardless of the high bid amount. Auction regulations or rules are highly misunderstood and make most potential sellers with their own misconceptions shiver at the thought of being forced to sell their home to the highest bidder regardless of the bid amount. In short, unless you advertise using the words “absolute auction” the home will not and cannot be sold unless you the seller accept the high bid and agree to sell at that price. In other words you don’t sell unless you want to sell at that price.

The reputable auctioneer will provide you with a contract well before the auction. This contract will allow you to list your minimum or reserve price and you do not under any circumstance have to accept anything below that amount unless you want to do so.

Make sure you auctioneer requires a contract in writing with you and your reserve price along with commissions are clearly understood. Auctioneers have the option of either charging a buyer’s premium and not charging the seller or charging the seller a commission or charging an amount to both the buyer and seller.

A buyer’s premium is a commission the buyer pays over and above the sale price. Example a five percent buyers premium or fee on a one hundred thousand dollar sale would require the buyer to pay a total of one hundred and five thousand dollars in total. This works nice for the seller who otherwise pays the commission him/herself and would receive ninety-five thousand dollars after the commissions are paid.

It is best in fact required that tell your auctioneer the amount that you absolutely must receive for your property and if you have a mortgage or other leans make sure you get this information from your lenders. The auctioneer may also require permission from your lenders including release papers.

Often sellers are reluctant to set the lowest possible acceptable selling price for their home. Obviously everyone wants as much money as possible from their sale and sellers fear they might have gotten more if they had only asked for more. This scenario is the furthest thing from the truth when an auction is conducted well by a reputable, honest and hardworking auctioneer. The auctioneers job is the sell the property for the highest amount possible and if he/she is able will try an sell it for more than you might have thought it was worth.

When sellers hold back their minimum price from the auctioneer the actually work against their own sale. Bidders come to auctions where they believe they will get the deal of a lifetime and do not come to auctions where they will pay market values. The trick for the seller is to get as many potential bidders to the auction as possible. Usually one bidder has an opinion of the properties value that is higher than the others but it takes the low bidders to “bid up” the price to that third bidders amount. If they don’t bid before his/her bid you are left with only one bidder at a low amount. This is called the auction method of selling real estate.

One more very important step to selling real estate at auction is to make sure your auctioneer has plans to properly market your property.  This should include both tradition advertising and the utilization of modern live auction websites where bidders may participate from around the world in your auction.

Below is a checklist you can use to help determine if you and your property is a good real estate auction candidate.

1. Are you being forced from your property within a short time period due to unpaid mortgage or taxes?

If the amount of time you have is less than 60 days it may be difficult for the auctioneer to properly market your property. If you are in foreclosure or bankruptcy you may need written permission from your lender with specific selling prices and or work out a short sale price.

2. Are you allowed to sell your property?

If you are not the sole owner you will need the other owners to sign the auction agreement. If you do not own the property i.e. your name is not on the title but you recently inherited the property, you will need to clear the court system before going into an auction contract to sell your real estate.

3. Do you have money for the marketing of the auction?

Most auctioneers require the seller to provide the marketing monies. These are usually not refundable even if your property does not sell. The auctioneer uses this money to advertise your sale. This amount should be clearly agreed upon before the auction. The auctioneer should provide you with a marketing plan that you and the auctioneer agree. This amount ranges depending upon the property value, local advertising as well as national advertising rates and the overall aggressiveness of the ad campaign. Typically the seller provides this money up front during the signing of the real estate auction contract.

4. Are you prepared for the possibility of a no sale?

No auctioneer nor any realtor or anyone else for that matter can promise a sale. A good auctioneer has enough experience to make an educated guess and will only take on properties that he/she believes will sell at auction but there is no way for anyone to promise or guarantee a sale.

5. Is your property unique, desirable or priced to sell?

Real estate that other people desire i.e. waterfront property, acreage, scenic views etc make good candidates. Don’t expect to sell distressed or rental properties unless the price is extremely low and the neighborhood doesn’t scare the bejeezus out of people. The less common the property is the more desirable it could be at auction.

6. Finally, do you really want to sell?

Mind changers don’t do anyone a favor by going out on a whim. You will have angry buyers and an auctioneer with a legally binding contract in court with their bug eyed lawyer glairing over at you if you suddenly change your mind about selling the property after the agreements have been made. If you aren’t sure about selling do not sign an auction contract. Most contracts provide the auctioneer with back out provisions equaling up to the action commission amount based on the minimum bid you agreed upon. Take your time, no reputable auctioneer is going to force you to sign before you read and make certain of your terms of sale.

About the Author

Michael McNabb is an auctioneer for Stiles Auction, LLC Located near Green Bay Wisconsin and on the web at www.stilesauction.com real estate auctions