Vol 7 No. 19 - January 31, 2007

Auctions becoming a marketing tool

By Louise Bolger

sun staff writer

Auctioning residential property has always had a negative connotation attached to it. However, as sales continue to be soft in many real estate markets, auctioning property has become less of a last ditch effort and more of a marketing tool.

There are a variety of reasons a seller may decide to auction a property rather than peruse conventional selling methods. If a sale needs to be achieved quickly for reasons ranging from shifting financial positions to government liens or a swift sale required to settle an estate, an auction could be the solution. An auction is really an accelerated marking process, which uses a compressed time period to market the property involved.

Auctions are advertised and promoted by the qualified auction companies handling the sale. Pre-auction open houses are conducted allowing adequate time for inspection of the property and, just like any other form of sale, repairs and cosmetic improvements should be made. Local real estate brokers are encouraged to bring qualified buyers to the auction and will be paid a pre-arranged commission if their client is the successful bidder.

Terms and conditions of the auction should be clearly indicated on any signs, flyers and advertising material prior to the auction. There are basically two types of auctions — an absolute auction and a reserve auction. An absolute auction is where the property is sold to the highest qualified bidder regardless of price with no limiting conditions or amount. The seller may not bid personally or through an agent and there is no reserve. A reserve auction is one in which the seller reserves the right to establish a reserve or upset price, setting a minimum price that the seller is willing to accept. The seller also reserves the right to withdraw the property at any time prior to the announcement of the completion of the sale by the auctioneer. Be aware if the property is being auctioned as is without warranties as to the condition and/or particular use of the property.

In addition to commission paid to the auction company and any real estate brokers, there is frequently a buyer’s premium added to the high bid in the form of a percentage or a flat fee which determines the total contract price to be paid by the buyer.

The amount of deposit money required and in what form the deposit will be accepted by the auctioneer should also be published with the marketing material.

Buying and selling at auction is not for the novice real estate investor. No where in the real estate industry does "caveat emptor" (let the buyer beware) become more important than when negotiating the auction process. If you’re a seller finding yourself in the position of marketing through an auction process, fully understand the auction listing agreement relative to commission and responsibility of the auctioneer. If you’re a buyer, get your feet wet by attending real estate auctions as a spectator and reading local and national newspapers that advertise auctions. The National Association of Auctioneers’ website, www.auctioneers.org, will give you a crash course and advice on finding a qualified auctioneer. And if you would like to attend a property auction in your own backyard, American Heritage Auctioneers will be conducting two in Bradenton Beach on Feb. 17. You can check out their website for more information.

Auctioning as a marketing tool? It may not be for everyone, but whatever works in a tight market works. Gentlemen start your gavels!

AMISUN ~ The Island's Award-Winning Newspaper