Every week, we ask a real estate professional for their Short List, a collection of tips and recommendations on an essential topic in real estate. This week, we talked with Diana Peterson, the president of AuctionWorks, about the benefits for engaging in an auction house.
Many residential real estate agents are unaware of the benefits that can come from non-traditional selling methods, such as using an auction. No longer just for distressed properties, auctions provide sellers and their real estate agents a number of perks that are not typically achieved in a traditional sale.
For agents considering engaging an auction house for an upcoming sale, here are the top three benefits to consider:
3. Cost savings for sellers. Auctions eliminate high seller carrying costs, because they take less time than other selling methods. Typically, the marketing and bidding process lasts only three to six weeks.
That substantially reduces the holding time of the property and its associated costs (e.g., property taxes, homeowners association dues, etc.). Once a bid is accepted, closing typically occurs in 30 days or less, reducing holding costs even more.
2. Non-negotiable sale. Sellers and their agents can rest easy knowing there will be no drawn-out negotiations on their sale. Unlike a traditional sale, which can entail weeks of haggling over inspection issues, price and other aspects of the purchase agreement, the auction method of sale involves no such negotiation, and the terms of the auction contract are non-negotiable.
Many traditional sale transactions never make it to the closing table, and often, the deal falls apart due to property condition issues uncovered during the inspection process and the consequent attempt by the buyer to re-negotiate the terms of the contract. While bidders have the opportunity to inspect an auction property before placing a bid, it is their obligation to base their bid on their own due diligence and inspection.
1. Convenience for sellers. Having a definite date of sale allows sellers to properly plan for their next move. By eliminating the uncertainty of a traditional selling period, sellers can be immediately proactive about their next purchase. Sellers also don’t have to worry about financing contingencies affecting their sale.
As is the case with most auctions, sellers will likely be working with all-cash buyers, ensuring an easy close. While a buyer is allowed to seek financing, auction contracts generally are not contingent upon the buyer getting financing, and the bidder must either perform (close) or forfeit all earnest money in escrow.
Of course, look for an auction house that provides market-rate commissions to participating agents. Low commissions have swayed agents away from auctions in the past, but today, savvy auction houses know that giving partner agents their market value is the best way to deliver a smooth transaction for all involved.
Diana Peterson is the president of AuctionWorks; she has more than 19 years of experience in law, real estate brokerage and auctions. Prior to founding AuctionWorks, Diana was executive vice president of Auctions by ATG. She serves on several non-profit boards, including The Auxiliary Board of the Art Institute of Chicago, PAWS Chicago, The Poetry Center of Chicago and The Young Leaders Fund of the Chicago Community Trust.