Q. Aren't auctions just for the selling of personal items & distressed properties?
Ans. No, not any more! Auctions, once considered appropriate for art, antiques and property needing a quick sale, have increasingly become attractive & accepted method of sale of prime real estate.
Q.
Don't I have to accept the final bid made at the Auction ?
Ans. No! Nearly all of the real estate sold at auction is sold subject to the owner's acceptance of the winning bid. The main advantage to the seller is that even after observing all the offers including the final bid - THE SELLER MUST STILL APPROVE OF FINAL SALE AMOUNT!
Q. How do auction fees compare with traditional real estate commission fees?
Ans. There are two major comparisons when comparing auction fees with traditional fees;
1. Time Value of Money.
Because of the nature of an auction's expedited marketing campaign, the seller will receive funds from the sale of their real estate sooner than with a traditional brokerage approach. When it comes to getting paid, sooner is always better than later! An auction's high impact, shorter marketing and settlement period allows a seller of real estate to take full advantage of settlement funds for otherwise lost opportunities. In effect, the sooner a property sells, the more money will be available for reinvestment into other opportunities.
2. High Carrying Costs Reduced.
Months and sometimes years (on larger properties) of interest, taxes, insurance, association fees, and property maintenance expense and payments are eliminated. The avoidance of these carrying costs often cannot be achieved by traditional brokerage where the marketing time is much longer and the settlement date is unknown. A developer had 7 commercial units that he could not sell and the lender was about to foreclose on the property. The lender finally went to auction. Within 60 days from the running of the first advertisement the bank had been paid in full and the developer walked away with money in his pocket!
Q. What are some of the other advantages to selling real property at auction?
Ans. First, you select the day you want to sell your property. One of the requirements of an auction is that the sale is non-contingent, so the sale is virtually completed the day of the auction. Selling by auction spotlights a property setting it apart from other properties currently on the market. An auction creates a mood of excitement about the property. People attending the auction are interested buyers prepared to purchase your property that day. There is no waiting for offers and counter offers that can take up valuable time. Also, seller need not accept a low offer fearing they won't be getting a higher offer at some later date. The SELLER approves the final bid at auction.
Q. How do I select an auctioneer?
Ans. It's very important to use the services of an experienced Auctioneer of good reputation. Unfortunately, traditional real estate brokers can attend a one week auctioneers school and come back to try and auction your property. The result usually being a dismal failure due to lack of experience on the part of the real estate broker.
Q. What is a buyer's premium?
Ans. A buyer's premium is a percentage of the high bid that is added to the high bid to establish the total purchase price. For example, if your high bid is $100,000 and that particular auction is using a 10% buyer's premium, the buyer's premium would be $10,000 ($100,000 high bid multiplied by 10%) and the total purchase price would be $110,000. This methodology is common to the auction industry, but is not used in all regions or in all auctions. Refer to the Terms and Conditions of specific sales to see if the buyer's premium is applicable.
Q. What is the difference between an "absolute" auction and a "reserve" auction?
Ans. An absolute auction means that the property is sold to the highest bidder, regardless of price. A reserve auction, sometimes also referred to as an auction "subject to confirmation," means that the seller reserves the right to confirm the high bid at the conclusion of the sale. Unless explicitly advertised as "absolute" and likewise disclosed in the Terms and Conditions, auctions are "reserve" auctions.
Q. What does it mean when property is sold in "As-Is, Where-Is" condition?
Ans.
This means that you are bidding on the property where it is at the auction and in whatever condition it is in at the auction. There is no representation as to the working condition of property and no warranty or guarantee is provided or implied. Therefore, you need to do your inspections prior to the auction so that you know the condition of the property on which you are bidding. Material defects known to the auctioneer prior to the auction will be disclosed. However, the auctioneer makes no representations, guarantees or warranties as to the property.
