Have you considered auctioning off your home? Even though auctions are traditionally more popular with paintings, antiques, and real estate foreclosures, auctions are growing in popularity among sellers with solvent, good condition homes as well. Here are a few reasons why an auction could be a good idea for you and what to consider when starting the process.
Why Some Sellers Like Auctions
In today’s market, auctions are not just for the sale of foreclosures anymore. Auction professionals have been selling conventional homes on more regular basis. Why? The reason is because sellers are finding out that they can receive just as good of a sales price on the auction as with a traditional sale, but an auction is a faster, more efficient form of selling. According to Williams and Williams, one of the largest auction firms, about 10% of their auctioned homes are sold at an even greater profit than what the seller had marked as the listing price on a previous traditional sale.
If you use an auction you will show your home over a period of weeks, in which the prospective buyer can look at the home, and then the auction will take place and in minutes the house will be sold and the closing will typically take place in about a month. If you are selling a home through an auction you can save a lot of time and hassles.
1 Pick the Right Auctioneer
Any auction is only as good as the auctioneer in charge of it. In this type of sale they are like your marketing agents that bring in the right person with the right bid. So what do you look for in an auctioneer? The first thing you need is one that is experienced in your house. You will find auctioneers that specialize in everything from antiques to multi-million dollar mansions, and everything in between. You need to pick the right one that specializes in your type of home if you want to have a fast home sale.
2. Figure On A Pay Arrangement
Different auctioneers have different forms of payments. Some, like real estate agents, will charge between 6-10% of the closing sale price, while others will do a flat 10% auction premium that the home buyer must pay. Still others will favor splitting the difference between both buyer and seller.
3. Which Method Of Auction, Absolute Or With Reserve
If you go with an absolute auction you will not have any price that has to be met in order to sell the house. In this type of auction the highest bidder will be the one that wins, no matter what price the house sells at. A reserve auction is one that has to meet a minimum price before the house is able to be sell. Most of the time an absolute auction is more dramatic and will also end with a higher final sale price. A reserve auction is much safer but will not usually yield the same final sale price. Also keep in mind that if you do an auction with reserve and you are not able to get a bid high enough to meet the reserve you will still have to pay the auctioneer fee, and it is sometime as much as if the house had sold.
4. How To Qualify Bidders
There are variations but generally auction companies require letters of credit from bidders stating that they can complete the sale. On the other hand, some companies just ask for 10% of the expected sale of the property up front, in which those who do not win will receive this money back.
5. How To Accept Bids
Are you going to have all of the bidders gather on your lawn? Will your home just be one of many other homes and everyone involved will gather in a central location? Are you going to allow people to bid via the phone and the internet? Many people will opt for the yard sale, and it does work, but central location auctions will typically end up with a higher final bid.
As you have discovered there are quite a few things that you need to keep in mind when you are planning an auction but once the auction is actually underway it is a lot less of a headache then if you had sold your home privately through the traditional way.