How Do Real Estate Auctions Work?

Set Your Minimum Price

It used to be that the only real estate that was auctioned was property that was in rundown condition or was subject to foreclosure. But people are now turning to real estate auctions to dispose of their homes. Contrary to common belief, you do not run the risk of selling the property for much less than its value because you can set a minimum amount that you will receive. Furthermore, if you set that minimum price, you will not have to buy back the house if it does not reach that price, and you will not be required to pay the auction house's regular commission on the sale.

Why People Auction Real Estate

One reason people auction real estate is that they want to avoid the typical sales commission charged by real estate agents because they run as high as 8 percent of the property's value. Secondly, the property owner controls when the real estate is sold. That is important in times when real estate takes a long time to sell, and you are represented by a real estate broker. Also, it is often in the best interest of a real estate investor to move the parcel as quickly as possible to avoid further costs associated with that property. Finally, an auction by its nature creates excitement around the sale of real estate, so most real estate auctions are well attended.

The Auctioneer's Responsibility

The major responsibility of the auctioneer is to create a lot of buyer demand. He will do this by advertising the sale of the real estate. In addition, the auctioneer must attract buyers to the auction who are then registered and financially pre-qualified. In addition, the auctioneer will be sure that the buyers make significant, non-refundable, down payments and that they agree to close the transactions as soon as possible. Because of that pre-qualification, a seller does not have to wait several weeks for the buyer to secure financing because, in many cases, the sale cannot be completed because the buyer is turned down for a mortgage.

All Real Estate Is Auctioned As Is

Unlike traditional sales methods where an owner must make improvements to his real estate to accelerate the sale, real estate sold at auction is sold on an as-is basis. The potential buyers are given plenty of time to make a judgment about the real estate, so it is sold with no contingencies, which is a benefit to the seller.