REAL ESTATE AUCTION REFERENCE GUIDE
This helpful and informative guide will provide you a better understanding on real estate auctions.
Below you will learn the following:
This Real Estate Auction Reference Guide is available in a printable format which can be ordered free of charge by contacting us via email or telephone.
We suggest downloading and printing the printable version to share with your spouse, friends or business associates.
Is This True?
Not only is this NOT true – it could not be any further from the truth. The fact is, the majority of auctions today don’t result from foreclosure or distress situations, but rather are the result of a seller choosing a cost-effective, accelerated method to sell a property. Builders or financial institutions, for example, prefer auction rather than laboring for months or years to sell units of a development by one. Auction allows the seller to eliminate virtually all long-term carrying costs, passing the savings directly to the purchaser in the form of a reduced price. Auction is truly a win-win situation: sellers obtain immediate cash and buyers purchase properties at fair market value, the price determined by open, competitive bidding.
What Factors Impact The Success of An Auction?
THE BENEFITS OF SELLING REAL ESTATE AT AUCTION
Benefit to the Seller
Benefit to the Buyer
A LOOK AT THE TYPES OF REAL ESTATE AUCTIONS
In this scenario, the high bid is reduced, in effect, to an offer not a sale. A minimum bid is not published, and the seller reserves the right to accept or reject the highest bid within a specified time – anywhere from immediately following the auction up to 72 hours after the auction concludes. Sellers predetermine the price at which the property will be sold and are not obligated to confirm a sale other than at a price that is entirely acceptable to them. The main disadvantage of a Reserve Auction is that prospective buyers may not invest the time and expense of due dilligence when there is no certainty they will be able to buy the property even if they are the highest bidder.
MININUM BID AUCTION
The 'What If' Factor
What If The Sale Doesn’t Close?
A well conducted real estate auction which provides the necessary due-dilligence information on a property to prospects before the auction along with a signed bidder and purchase agreement along with obtaining an earnest money deposit greatly minimizes the chance of failure. Failure to close happens infrequently. If a sale doesn’t close, the sller may quickly find another interested buyer by turning to the next highest bidder. In a traditional negotiated transaction, the seller may have to return to square one in search of a new buyer.
What Happens to the Earnest Money If A Buyer Decides Not To Complete The Transaction?
Earnest money in an auction situation is generally not refundable. Deposits can be forfeited if the high bidder is unable to complete the sale, regardless of the reason. If the seller
Earnest money in an auction situation is generally not refundable. Deposits can be forfeited if the high bidder is unable to complete the sale, regardless of the reason. If the seller cannot close because of defective title, etc…., the buyer’s deposit is refunded. The rules and regulations on this issue will vary from state to state.
What If A Property Doesn’t Sell At Auction, Is it Possible to Still Market It?
Yes! The auction marketing method will have exposed the property to a large segment of the buying public. Many times a buyer will make an offer after the auction date. In some instances, offers to buy the property PRIOR to the auction date are made and accepted.
AN INSIDE LOOK AT REAL ESTATE AUCTION TERMS, PRICING AND BIDDING
The seller sets the terms with the advice of American Eagle Auction & Appraisal Company, LLC. It is necessary to have ‘balanced’ terms – terms and conditions that satisfy the seller’s needs, but not so one-sided to discourage buyer interest. Usual terms require the high bidder to deposit earnest money (either a percentage of the purchase price or a specific stated amount) and sign a purchase agreement immediately following the auction. The balance of the purchase price is usually due within 30-45 days, at closing. Properties generally sell “as is” with no warranties expressed or implied except as to title. The buyer’s due dilligence must be done in advance of the auction and therefore American Eagle Auction & Appraisal Company, LLC usually prepares a detailed information packet to assist the buyer to make a wise buying decision.
The use of a buyer’s premium is commonplace in the auction industry. It is an additional charge to the buyer, expressed as a percentage of the high bid and is added to the high bid to create the contract price. The use of the buyer’s premium ensures the seller that they will receive the actual bid price of their property as the buyer is responsible for the commission to the auctioneer.
Yes, if proper advertising and marketing is done. An appraisal is merely an opinion from one individual. It is NOT an offer to buy. The real measure of a property’s value, at any given time, is what it will bring under competitive bidding from informed and motivated buyers.
No. The auction can be structured in a way that gives the seller the right to accept, counter or reject any bid without having to disclose the minimum acceptable price prior to the auction. Sellers will want to carefully select the type of auction that best suits their needs. *Exception - An 'Absolute' Auction' you must accept the final bid.
UNDERSTANDING MARKETING, ADVERTISING AND OTHER RELATED EXPENSES
How Are American Eagle Auction & Appraisal Company Auction Properties Advertised?
Because lead time in a real estate auction is generally short (6-10 weeks), the marketing program must be comprehensive, intense and targeted to the specific markets identified as prospective buyers.
American Eagle Auction & Appraisal Company, LLC will design a specific advertising budget to properly expose the property to the marketplace. Most auction marketing programs will include direct mail advertising (from a black and white postcard to a full-color brochure), print advertsing (local, regional and/or national newspapers, magazines, trade journals etc.) and signage (attractive, attention-getting signs posted on or about the premises). Additionally, such activities as telemarketing, publicity, radio and television, billboards, Internet and email campaign, etc. are often used to enhance market exposure.
How Much Does Advertising/Marketing Cost and Who Pays For It?
Depending on geographical location, value of the property and size of the marketing area (local, regional or national), advertising budgets can run from one to four percent of estimated proceeds. While the auctioneer prepares, coordinates and places all advertising, the advertising expense is the responsibility of the seller and is typically paid to the auction company at the signing of the auction contract.
How Long Does It Take To Market the Property, Have the Auction and Close the Sale?
The time-frame varies, depending upon the type of property auctioned. Generally, however, the process takes from 6 to 10 weeks from listing to auction day. Sellers usually allow buyers an additional 30-45 and even 60 days for closing.
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Eagle Auction Company.
site is dedicated to the auction method of marketing and appraisal services in
the state of Michigan by auctioneer Ken Lindsay of American Eagle Auction & Appraisal