Real Estate Auctions

Many of my clients are simultaneously intrigued and intimidated by auctions; these home buyers and sellers appear equally drawn to auctions but few participate in this method of real estate sales.

What are real estate auctions?

Auctions are a valid, alternative method of accomplishing a public sale of real property, involving an accelerated marketing process.

Are auctions a popular method of selling real property?

In general, auctions have dramatically increased in popularity over the past few years. According to a report published by the National Auctioneers Association (NAA) in 2006, residential property auction sales saw a 39.2 % increase from 2002-2005- from $10.2 billion to more than $14.2 billion annually.

This increased interest in the auction method of selling real estate, may be attributed to the rise in pre-foreclosure and foreclosures. With increasing numbers of home owners experiencing difficulty making their mortgage payments, and some owing more than their house is worth, these consumers are seeking faster alternatives to selling their home. Auctions can be a powerful marketing tool!

Does the Realtor association endorse auctions as a way to sell real estate?

For years, the National Association of Realtors (NAR), has circulated information pertaining to the auction method of real estate sales. In the past few years, the NAR has worked closely with the NAA to educate real estate professionals about auction sales. Auctions are not, however, a process to be 'endorsed,' rather a business model that some brokers are utilizing.

Can properties be auctioned for sale if not at risk of being foreclosed upon by a lender?

Yes. Most consumers are familiar with foreclosure auctions held by a lender to sell a property under a power of sale. But not all auctions are distress sales. In fact, some consumers choose to sell their home via auction rather than the traditional listing agreement.

What is the real estate broker's role in selling real property via auction?

Previously, the two professions (auctioneers and real estate agents) were at odds. However, in recent years, partnership opportunities have emerged for Realtors. Real Estate professionals are now welcome and encouraged to provide services and refer clients to the auction company, as well as, bring their buyer client to the auction .

Are auctions of real estate subject to the same legal mandates as traditional sales?

Yes, there is no exception to title five, lead paint, home inspection or mandatory disclosure requirements simply because a property is sold at auction.

What is a broker required to do to earn a fee?

If a property is listed in the multiple listing service, it is the same procuring cause standard. It is essential for the real estate broker to establish an agreement with the auction company, and fee expectations must be established prior to the auction.

Are auction companies required to arbitrate a fee dispute?

A note of caution for any Realtors entering the auction arena is that most auction companies are NOT Realtors, therefore, they are NOT required to arbitrate a fee dispute. Some auction companies have their own standards, as well as, rates for the payment to buyers agents. Brokers should be aware of any restrictions to payment for any auction that is not listed in MLS.

Why would a home owner who is not in default, opt for auction over a traditional listing?

Auctions involve highly intense promotion that isn't typically part of the traditional residential listing process. Auctioned properties are scheduled to sell immediately, and therefore, create immediate interest from buyers. Additionally, auctions institute control over the terms and conditions of the sale because auction contracts are usually more definitive than traditional purchase and sale agreements, as most inspections are done prior to to auction.

What is the time-line for marketing the property, having the auction, and closing the sale?

Of course, the time frame varies, depending on the type of property being sold. In general, the process takes from six to 10 weeks from listing to sale day. Sellers usually allow buyers an additional 30-60 days for closing.

How much does advertising or marketing cost, and who pays for it?

Depending on geographical location, the value of the property, and the size of the marketing area (local, regional, or national), advertising budgets can run from one to four percent of estimated proceeds from the sale. While the auctioneer prepares, coordinates and places all the advertising, the advertising expense is generally the responsibility of the seller, and is usually paid to the auction company at the signing of the auction contract.

Do auctions offer an opportunity for consumers to get good buys?

The final price of auctioned properties depends on public interest. Good buys are possible, just be sure to do your own research and inspect the property, and consider enlisting the help of a trained professional/Realtor.

Auctions are often viewed as smart investments because the auctioned properties are sold through competitive bidding and usually purchased at fair market value.

Auctions offer clients, customers and real estate agents, new selling and buying options.

For more information on the auction method of real estate sales, please contact me at: druckerj@raveisre.com, or via cell at: 617-835-3251.