by Rick Levin
In today’s real estate market, values of properties are harder than ever to determine by agents and appraisers. The old adage “something is worth what someone is willing to pay for it” has never been more true.
With real estate auctions becoming a more and more acceptable way to buy and sell properties, the problem is solved by letting purchasers “name their own price.” Some brokers are choosing to joint venture with existing auction companies as an expeditious way to dive into the fast-paced world of auctions.
When diving into the world of auctions, brokers must look for sellers who have realistic price expectations and are willing to accept what buyers are willing to pay.
Auctions can take 30 to 45 days to conduct and are held as either live events or online. Fees are always negotiable and may include upfront fees and buyer’s premiums.
Auction methods include the public outcry auction and sealed bid auction. With the public outcry auction, all interested parties are gathered together at a designated time and location. The auctioneer solicits bids from the public, who cry out their bids. With the sealed bid auction, there is no “formal” auction event for this type of sale. The auctioneer invites potential buyers to submit a written bid, along with an earnest money payment, to the auctioneer on or before a certain date.
Auction strategies include the absolute sale, reserve sale and minimum bid sale. The absolute sale is the purest, and in many cases the most successful form of auction in terms of getting the highest price for property. With this type of sale the property is sold regardless of price. With the reserve type of auction offering there is no stated price at which the seller agrees to sell the property. The minimum bid sale is a hybrid of the absolute auction and reserve auction. With the minimum bid offering, the seller determines a minimum price level above which he is committed to accept.
More and more these days, especially with the rise in popularity with Internet sites such as eBay, the notion of an auction may just be a logical tool for brokers to add to their set of services offers to sellers.
Rick Levin is is the president of Rick Levin & Associates, and has been in the auction business since 1990. Levin can be reached at 773.252.4500.