Auction Facts
Anything of value is sold at auction. Picassos, diamonds, antique cars, these and more expensive items are always sold through the bidding process. What is the largest auction that goes on every day? The stock market. The government uses auctions all the time. They sell treasury bills through auctions. Outside the U.S., the auction method is the main method of selling real estate. In fact, in Australia over 90% of the real estate is sold using the auction method. In the U.S., we auction billions of dollars worth of real estate annually. It is predicted that by the year 2020 over 50% of the real estate transferred in the U.S. will be by auction.
The biggest advantages of using the auction sales method over the conventional sales method are expediency and less costs overall. A conventional sale can take 6 to 8 months to close. During this period there is a real loss in equity due to monthly operating costs such as property taxes, insurance, maintenance, management and debt service. This adds up to large dollars. A conventional sale has timely contingencies which allow a buyer to back out with no seller compensation. Should this occur, the property goes back on the market and the process starts all over again. Each time this happens, the property loses some of its luster and results in a gradual erosion of the purchase price. The longer a property lingers on the market, the greater the value spirals downward.
Sale at auction, on the other hand, offers the seller an expedient and final way to sell a property. Typically, 30 days are devoted to marketing a property for auction. One day to sell the property at auction, and 30 days to transfer title. Since the closing takes place much faster than a conventional sale, there is a huge savings in holding costs netting the seller more dollars.
The key to a successful real estate auction is successful marketing. A sound and successful marketing plan will bring multiple bidders together under one roof interested in the property or properties advertised. This creates an atmosphere of competition where intense bidding drives the purchase price upwards. Unlike a conventional sale, there are no contingencies in an auction sale. On auction day, you know you have a done deal!
