On a sunny afternoon in Florida, an energetic audience gathers on the lawn of a luxury property. A loud and eager skirmish between an auctioneer, a group of bidders and bidding assistants fills the air. For several minutes, the auctioneer asks for the next higher bid and the bidder’s answer. Suddenly the bidders fall silent. The highest bidder holds his breath to prepare for winning the auction. The auctioneer calls for another bid. With a loud, clear voice rolling over the audience, he says: “Fair warning, last chance”, the auctioneer pauses, “SOLD”! And in less than 10 minutes another multimillion dollar estate has changed hands.
Successful real estate auctions like the ones mentioned above take place throughout North America and the Caribbean. Recently, real estate auctions have been on the rise, with increasing popularity being driven in part by growing inventory levels and dwindling buyer confidence. Properties sold in weeks using traditional methods are now languishing in a market that has been unable to attract buyers despite the seller’s lower prices. Many say the real estate boom is over, but savvy buyers and sellers benefit from real estate auctions.
Real estate auctions operate in up or down markets.
Regardless of trends and market cycles, real estate auctions offer an open and transparent process for buyers and sellers. Properly conducted real estate auctions attract willing buyers and motivate them to act now.
The auction method eliminates the “wait and see” attitude, which serves to further reduce the value of real estate. Buyers are always concerned about overpayments. Buyers gain confidence in their purchases at real estate auctions because they can see what others are willing to pay.
When market demand is high and inventory levels are low, real estate auctions can deliver selling prices far above what a willing seller would have accepted in a negotiated sale through a private contract. In a well-selling climate, many property owners use traditional real estate methods; negotiating with one buyer at a time leaves thousands of dollars of equity on the table. During the up markets, real estate auctions are the best way to determine the best market price.
Valuation of your property for auction
Not every property or every seller is a good candidate for an auction. First of all, sellers must be willing to sell now and at the current market value. Even a real estate auction will not solve any problems caused by a decline in the market value of your property, if you will pay more than a willing buyer, be prepared to close with your checkbook.
Properties that perform well in real estate auctions have a high uniqueness factor. Ask yourself: “What makes my property different from most others? You may own a Resort property or a luxury high-end home, commercial real estate and land do very well at an auction. Real estate auctions thrive on uniqueness. If your property is like everyone else’s, the best thing you can do is offer the most competitive price.
Most importantly, sellers must be reasonable when it comes to setting a minimum bid. A seller must look at the lowest, most up-to-date Comps and the price below to generate the interest and urgency necessary for a successful real estate auction. Once the auction begins and qualified bidders compete against each other, you can observe the sales price increase.
Find a Qualified Real Estate Auctioneer
Start by joining the National Auctioneers Association, the best real estate auctioneers belong to this organization. These real estate auctioneers are well trained and adhere to a standard of practice and a code of conduct. Many participate in the annual International Auctioneers Conference, where the latest techniques and innovations in the real estate auction industry are presented.
Find out if the company you are interviewing is a full-time real estate auction house. Many real estate agents receive auction licenses, but have no experience with the auction method of marketing. A successful real estate auction is nothing like a (private contract) traditional real estate sale. Go with a real estate auction professional.
You are probably better off with an auction house that specializes in real estate auctions. There are many qualified auction houses that have over generations of experience in the field of real estate auctions.