From the Seller's Perspective

Based on the proven success of this method – for buyers, for sellers and for real estate
companies – industry experts continue to share that real estate auctions will continue to increase in the United States during the next 10 years, becoming a viable option for buying and selling residential properties.

As with any other method of buying or selling property, the more one understands the process,
the better prepared one will be to utilize the auction process to its fullest extent.

Those who familiarize themselves thoroughly with the auction process can have a real advantage in today’s real estate marketplace – whether as sellers, buyers or real estate brokers/agents – given the relative “accepted newness” of this method, and given the speed at which real estate can be purchased or sold.

From the Seller’s Perspective

With auctions realizing a resurgence in popularity, sellers participating in this process realize many benefits and advantages as related to the time/money equation. The following summary includes the benefits sellers realize at auctions:

1. Properties receive maximum marketplace exposure.

Auction companies employ saturation marketing techniques during the weeks prior to the event itself. The marketing timeframe is more condensed than through traditional methods, and therefore less expensive. Additionally, all advertising expenses can be shared by all participating properties (as applicable), resulting in a much lower per-seller cost. Traditional means can’t ouch this scale of economy.

2. The time value of money is of major concern to any seller, particularly when the property’s value is higher.

The abbreviated marketing time and the potential for a quick sale will substantially reduce the property’s holding costs, such as taxes, condo fees, insurance and maintenance. These costs can easily add up to several percentage points of the property’s value.

3. The seller can be confident the buyer is qualified and prepared to buy.

In an auction situation, the bidder must present a cashier’s check in order to bid. The buyer has been qualified for bank financing and is aware of the binding nature of his successful bid on the property.

4. The seller knows the buyer is informed of all details about the property, and that the buyer has inspected it and reviewed all relative documentation.

5. Buyers bid against one another to push the price up (not down as with traditional real estate methods or a negotiated real estate sale).

The seller is removed from the haggling process. Last-minute negotiations are avoided, enhancing the seller’s peace of mind.

6. The sense of urgency at an auction is a definite advantage to the seller.

The buyer knows that he/she must win the bid or his opportunity to purchase the desired property is lost.

7. While the auction process sets the market value of a given property on a given day, the momentum of the bidding often results in a higher price than the seller had set as his minimum, or than the estimated value at which the property would sell by traditional means.

Egos and emotions take over during the bidding process, and it’s common for bidders to get excited and exceed the “pre-auction maximum bid” they had in their own minds! Additionally, the seller has the benefit of a large number of qualified buyers – all interested in the seller’s property and assembled in one place. The seller can be virtually assured the property will sell if priced correctly. Plus, even when a property fails to sell on auction day, it’s common for a sale to still take place within weeks of the auction. If qualified buyers are still interested in a property, you can bet that negotiations between seller and potential buyers will typically result in a deal later on.

8. The sales agreement, which is written at the conclusion of the auction, is definitely seller oriented.

The buyer must perform his/her due diligence during the inspection period, as the property is sold “as is, where is, with no contingencies” at auction. Further, if the buyer must finance the purchase of the property, he/she must be pre-qualified or they cannot register to bid. Closings
follow traditional real estate transactions, and typically take place in 30 days or less after the
auction.

9. The seller may, for many reasons, wish to treat the sale of the property at arm’s length.

The open auction process facilitates this, as privately negotiated contracts are eliminated from the process.

10. The properties will often sell before the auction occurs.

Due to the amount of response it is not unusual for the auctioneer to receive offers for the property prior to the auction. (Of course that only occurs with auctioneers such as Higgenbotham and US Auction Realty that are in constant communication with the potential bidders.) The seller may take or reject this offer depending on the response rate and discussions so far with buyers. It is typical for approximately 30% of the properties to be sold prior to the auction date.