May 12, 2021
What is the first thing you think about when someone might suggest you sell your real estate at auction? For many, it’s the thought that the only reason people would have a real estate auction is because the property is in disrepair, or the seller is in financial distress. We dispel this myth in a previous article titled The 11 Myths of Real Estate Auction.
In fact, selling your real estate at auction has many advantages, and you should consider all of your options before making a decision on how to sell what is likely your most valuable asset.
To learn more about how a real estate auction can help you, call us at 816-384-0095 or email us.
Estimated Reading Time: 7 minutes
Table of Contents
The advantages of marketing your property through a real estate auction
Real estate auction buyers will be giving a deposit equal to 10% of the purchase price of the property or a significant fixed amount of $5,000 to $50,000 or more depending on the value of the property when they execute the real estate purchase agreement.
On the contrary, most traditional real estate buyers will be utilizing financing and will only include a nominal deposit of $500 or $1000 when making an offer on your property. It is much easier for a traditional real estate buyer to default on the real estate contract as they have less to lose if they decide not to close on the property for whatever reason.
Real estate auction buyers will have much more invested in the purchase and are less likely to default on the contract.
Even though the real estate purchase agreement is a cash contract with no contingency on financing, most real estate auctions allow for a closing period that would give the buyer an opportunity to utilize financing.
The real estate auction process is time defined and allows the seller to choose the day their property will be sold. Real estate sellers also define the amount of time allowed for the buyer to close on the property. Sellers, with the help of a professional real estate auction company, set the terms and conditions of the auction.
The traditional real estate sales method is subject to the current amount of inventory available on the market as to when the property will sell. If there is too much inventory on the market, the property may take an exceptionally long time to sell. If there is too little inventory, the traditional process can create many challenges for a real estate seller, including leaving money on the table from selling the property too quickly.
The real estate auction has the advantage of knowing when the property will sell which allows the seller to have more control over the process of selling their real estate.
A significant advantage to the real estate auction process is the ability for the seller to sell the property with no contingencies on inspections or repairs. Real estate auction buyers conduct their due diligence on the property prior to placing their bid.
The traditional real estate sales method can involve inspection periods which many times lead to renegotiations of the purchase price and buyers backing out of the real estate purchase agreement.
Some traditional real estate agents want the listing to be the best it can be without necessarily being a good investment regarding repairs or updates.
Certain repairs should be done when selling your property, and a real estate auction professional will advise a seller on what repairs should be done. Not all repairs will result in a return on the cost to do the repair.
When selling your property at auction there is a specific marketing plan designed for your property to ensure a successful outcome.
This marketing is targeted to ready willing and able buyers who are looking for the type of property you are selling. Because the property is sold in a time defined manner, these motivated real estate buyers look at your property in a different manner than a traditional real estate listing.
If the market is slow and real estate buyers have a lot of inventory to choose from, they will look at a real estate auction before deciding on other comparable properties on the market. In essence, the real estate auction freezes the market around it.
If the market is hot and real estate buyers have less inventory to choose from, they will see the auction as an opportunity to compete for the property on an even playing field with other real estate buyers.
Give us a call at 816-384-0095 or email us.
It is a common misconception that only foreclosures or distressed properties sold at a real estate auction.
It is true that financial institutions regularly and successfully sell their bank owned (foreclosed) properties at a real estate auction. However, all types of real estate sellers benefit from selling their real estate at auction. Read more in Myth 2 on our article on real estate myths.
Prospective buyers often ask, “Can I buy a house at auction with a mortgage?”. While the majority of real estate that is sold at auction is sold with no contingency on financing or inspections, most real estate auctions will allow 30 to 45 days to close on the property. This allows for most buyers to utilize financing and purchase a property at auction without having to have the entire amount in cash on auction day.
Yes, first-time buyers can buy a home at auction. If you require financing, you will have to have that arranged before the auctions. Most real estate auctions will allow 30 to 45 days to close on the property.
For a home auction, the seller can choose the type of auction. In an absolute auction, the property sells to the highest bidder regardless of price. But a seller can set a minimum acceptable price using a minimum published bid auction or an undisclosed reserve auction. We go more in depth on this in our The 11 Myths of Real Estate Auction article.
For a home auction, the seller can set a minimum acceptable price. If bidding doesn’t reach that level, the house will not sell.
On the contrary, in many ways a seller has more control than through a traditional real estate sale.
For more details on how a real estate auction works, give us a call at 816-384-0095 or email us.
You can also visit our real estate auction page.