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Buying Real Estate at Auction

Buying real estate at auction is easy, whether buying your first home or a veteran investor.

Do your own research and be prepared to buy well in advance of the auction date.

The days prior to the auction are the best time to ask questions of the auction company regarding the process and inquire about questions relative to the taxes, zoning, uses, etc.  Most auctions do not allow the provision for contingencies, which means you need to be prepared to buy and close on the property if you’re the winning bidder and deemed the buyer on auction day.  Make sure to attend open houses of the home or building you are interested in, and determine what you can afford to spend. The actual auction process is the fun and exciting part; it is the reward of your research and diligence because a prepared buyer knows what he or she can spend on the property and is prepared to own it.

The best part of the auction process is that the final sale price is a perfect appraisal. We call it true value: the point at which a quorum of buyers compete for the highest price for the property. The winning buyer leaves the auction knowing he or she could not have bought it for less, and the backup bidder leaves knowing he or she could have spent another $1000 and could have bought the property.

The Auction Process

The Auction Advantage

Auctions today offer sellers a faster sale and more money than many other traditional sale methods. A fast-paced auction is one of most efficient ways of converting your property and assets into immediate cash.

With the combination of solid pre-sale marketing and the Auctioneer’s attention-getting chant, you create enthusiastic, attentive buyers aggressively competing to purchase your property. This auction excitement often generates higher values.

As the seller, you benefit from an auction by converting property to cash quickly; getting fair market value; having the flexibility of deciding what and when to sell, and using well-trained Auctioneers as a valuable resource in pre-sale marketing and in conducting an auction.

There’s really nothing better than an auction to obtain the highest price for your property in the least amount of time. For a sure bet, choose the auction method of selling when you want a hassle-free, low-risk, guaranteed return on your investment. Auctions are a time tested proven method of sale that generates benefits for buyers and sellers. An auction is an exciting atmosphere where the Auctioneer acts as an agent for the seller to get the highest price possible for the seller. Auctioneers are well-trained in how to market property before the sale and how to obtain the highest bids on the day of sale. More and more sellers each year are seeing the advantages of the auction method of marketing.

  • Real estate auctions offer a guaranteed sale date and closing date, with a shorter marketing period.
  • Real estate auctions create an atmosphere of high energy, enthusiasm, and urgency. This feeling coupled with intense open competitive bidding spells success and true market value.
  • Real estate auctions force buyers to react on a given date under a strict set of terms and conditions designed to protect you, the seller.
  • Real estate auction marketing features your property on local, regional, state, and national platforms, which exposes your property to a large number of pre-qualified buyers.
  • Preset inspection dates offer you the flexibility to dictate when we will open the real estate for viewing. This helps manage when prospects can view the real estate and reduces the number of unscheduled showings.
  • Real estate auctions offer contingency-free contracts and non-refundable deposits.
  • Real estate auctions offer quick disposal and reduce high long term carrying costs, including taxes and maintenance.
  • Real estate auctions help eliminate hassles of the real estate transaction and limit the negotiating of the terms. The only thing that can be negotiated is the price.
  • Real estate auctions force the hesitant buyer to react and commit on a pre-scheduled date.
  • Real estate auctions work when the client wishes to sell the property in the shortest possible time frame, at the highest price, under the terms and conditions favorable to the seller.

Frequently Asked Questions

Auction Questions and Answers

Question: What situations warrant using the auction method of marketing?

Answer: The auction method of marketing should be used when the client’s objectives are to sell the property in the shortest possible time frame, at the highest possible price, under terms and conditions favorable to the seller.

Question: Is the auction method ever used as a first selling method?

Answer: Yes, the auction method is not only the best but should be the first choice for selling a property. An auction does not create the price ceiling that a conventional listing does. The seller can set the conditions for the sale and eliminate endless negotiations.

Question: What type of property owners should consider using the auction method?

Answer: Auctions can be successful for any property type. Specific types include but are not limited to private and corporate property owners, living trust and decedent’s estates, federal and state courts, municipalities, school boards, prominent families, financial institutions, fiduciaries, trustees, and partnership dissolutions.

Question: Are the courts receptive to the auction method for the sale of decedents’ real estate?

Answer: The court system embraces the auction method as a proven way to ensure fair market value in an arm’s length transaction. In many cases, an auction provides the open public forum estates and disputes need in order to be fair to all parties involved. After the auction, the winning bidder knows he or she could not have bought it for less. This creates the fairest way to establish market value.

Question: What are the costs involved in having an auction?

Answer: The costs involved in an auction include an upfront marketing budget payment, which varies from project to project. A commission is charged and is a small percentage of the gross total of the auction. The commission rate varies from auction to auction. Additional costs may, but not always, include a property survey, taxes and assessments relative to real estate, a phase one environmental study, and closing costs. Auction costs are tailored to fit your individual situation, don’t hesitate to call if you have more in-depth questions. (260) 668-2067.

Question: Are real estate auctions only for distressed properties?

Answer: No, the majority of auctions today do not result from repossessed properties, but rather are the result of a smart seller. A smart seller chooses the cost-effective, accelerated method of selling property rather than listing the property for an undetermined length of time. Usually, listings require long term marketing periods with multiple unscheduled showings and creative contingency offers. The auction method sets the date the property will sell and eliminates these hassles.

Question: Can there be a reserve or a minimum bid on an item or piece of property?

Answer: Yes, the seller has the right to execute a reserve or minimum bid. This figure is discussed with the auction professional during the early negotiations of the contract and is not disclosed to any potential buyer under any circumstances. When a high bid is reached at the auction the seller has the right to accept or reject the high bid.

Question: If the high bid is less than my predetermined minimum value can I accept it?

Answer: Yes, the seller always has the right to sell the property at the highest bid price.

Question: How long will the whole process take?

Answer: Ideally, the contract must be signed seven to eight weeks prior to the auction day, and the closing takes place approximately 30 days after the auction date.

Question: Where will the auction take place?

Answer: On single properties, the auction typically takes place on-site, either in a tent, on the front porch, or in the living room. For multi-property or vacant land auctions, a ballroom setting is typically more appropriate for the auction setting.

Question: How long after the auction occurs will I get paid?

Answer: A closing date will be set for approximately 30 days after the auction. At that time the property owner will be paid and turn over possession to the buyer. The closing will be insured by a professional title company.

Question: What factors determine the success at an auction?

Answer: Many factors contribute to a successful auction, like the desirability of the property being sold: i.e. location, condition, and surrounding properties. Second, and most important to an auction’s success, are realistic expectations on the part of the seller. Every property has a value, and when a property is properly advertised and promoted and two or more approved bidders are in attendance, the high bid achieved is true market value. If the seller realizes this and is truly motivated to sell at the achieved price under stated terms and conditions, a successful auction occurs.

Question: What are the terms of an auction?

Answer: The terms and conditions are devised to protect the seller and the process of the auction method. Properties are sold “as is, where is” with all faults. The purchase agreement is produced with no contingencies, including those for inspections and financing.

 

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