WHY AUCTIONS?
An auction is an intense, accelerated marketing process that involves the public sale of any property through competitive bidding. The bidders compete against each other, with each subsequent bid being higher than the previous bid. The price increases each time someone makes a new, higher bid, until finally no other bidders are willing to offer more than the most recent bid, and the highest bidder takes the item. An auction is considered complete when the highest bid is accepted and the buyer pays and takes possession.
Advantage to You and Your Business
You owe it to yourself to understand how, for the right property, the auction method could help you realize a higher sales price than selling it via conventional techniques and how well run, successful auctions can create momentum for future business for you; increasing your income and enhancing your image. Auctions will also:
- Help you generate a list of ready, qualified buyers
- Offer your clients and customers new selling and purchasing options
- Help you develop your own market niche
- Provide assurance that property will be sold at true market value within a relatively short period of time
- Expose the property, you and your company to many potential customers
- Generate referrals and return business
Not only can auctions generate additional revenue and market share for you, auctions can offer a fair and transparent process for all parties involved. With the advent of online auctions, the auction method of sale is becoming increasingly popular. All property types can be and are being sold via auction and both buyers and sellers are reaping the rewards.
Advantage to Auction Sellers
Auctions allow sellers to set when and where the auction will take place along the pricing and terms & conditions of the sale. This eliminates them from traditional contingency and negotiation processes allowing them to maintain control over the property and actively participate in the sale.
The defined sale date motivates buyers giving them a goal and deadline. By reducing the time a property is on the market, concentrating all the showing activity into a few specific dates and marketing a specific sale date, buyers are required to take immediate action or risk losing the opportunity to purchase. This results in an increased sense of urgency and competition amongst buyers and high buyer competition tends to push prices up.
Because the sale date is pre-determined and the marketing period is compressed, a complete marketing plan can be built with daily and weekly activities. Advertising and marketing via professional brochures, online advertising, print ads in key publications, targeted direct mail, e-mail marketing, property signs, telemarketing and a webpage with photos and documents gives a property targeted and complete market coverage. This generates the greatest possible exposure for the property and drives the marketplace to the property versus waiting for them to find it on their own.
Holding onto property can be expensive. If a property is on the market for over a year, all the interest, insurance, maintenance and repairs must be accounted for but auctions give a seller a defined sale date that diminishes these long-term carrying costs.
The Auctioneer is paid via the buyer’s premium, which is added to the buyer’s final bid. There is no auction commission charged to the seller. Sellers are only required to invest in the advertising and expenses of their auction event. This way you can be sure you receive the maximum advertising exposure possible for your property at the lowest possible cost.
With defined terms and conditions, buyers know the property is being sold “As-Is, Where-Is” meaning the sale will conclude on auction day without contingencies such as financing, inspections or appraisals. Buyers are provided due-diligence information ahead of time and arrive to the auction having done their homework. They’ve acknowledged the terms and conditions up-front and must be pre-qualified and registered to bid.
In traditional real estate transactions, a seller determines an asking price based on recent sales and gut feelings. The Seller now runs the risk of overpricing and killing interest or underpricing and selling for less than the property is worth. In the auction process, the price of the property is negotiated upward through the competitive bidding of interested buyers. The true market value of the property is what a buyer is willing to pay at the time of sale.
Auctions are conducted in an open forum, which allows both the seller and buyers to watch the property’s true market value be realized as the bidding process progresses. All bids are open and visible, so the process creates a level playing field for everyone. A potential buyer can opt to bid or not bid with a clear understanding of the property’s demand.
Advantage to Auction Buyers
Buying property at auction is a simple, transparent process that can save buyers time and money. The auction method often translates to motivated sellers following established timelines that cut down on the long negotiation periods and time take to purchase. Auctions also level the playing field wherein all interested parties are working from the same terms and conditions for the sale allowing buyers to see the competitive bidding process in real time and bid exactly what they want to pay.
From the moment a property comes on the market, the timescale is clear. With the fixed timescale from the beginning, buyers know how long they have to carry out any inspections or gather paperwork required with no risk of missing out on the purchase. The winning bidder is determined at the end of the auction. There won’t be anyone backing out of the deal at the last minute or risk of the deal falling through. The winning bidder by-passes the typical post-offer negotiation period and moves straight to closing within a set period of time.
All potential buyers receive comprehensive information and disclosures on properties via the Property Information Packet or Due Diligence Packet. This typically includes information such as title commitments, appraisals, maps, lease information, terms and conditions, sale contracts, etc., and are available from the auction company free of charge.
Buyers are in control during the auction, they decide when to bid and how much. Auctions are conducted in an open forum which allows all parties to watch the property's true market value be realized as the bidding process progresses. All bids are open and visible so potential buyers can opt to bid or not bid with a clear understanding of the property's demand.
To keep up with growing demand for fast-paced convenience, many auction companies offer online only auctions or a combination of a live auction with online bidding components to accommodate potential buyers that can’t be at the auction in person. This allows buyers to bid from the comfort of wherever they are using their preferred smart technology whether that is their computer, tablet, mobile phone, television, smartwatch, etc. Online auction technology features like max bids (bidders to enter their max bid and walk away from the auction while the software continues to bid for them up to that amount), bidder notifications (bidders are notified the moment they are outbid) and soft closing (if a bid comes in during the last minute of the auction, the auction timer clock adds additional seconds to allow more bids to come in) are available to ensure that all buyers have the opportunity to never miss a bid and get the best price.
Auctions are organized and the rules are straightforward. All potential buyers are given the same information, terms and timeline and everyone has their opportunity to place their bids. During the auction, bidders see the bids in real time and have the reassurance they will only pay one increment higher than the bidder in front of them without being pressured to buy.