Last week I become a "Certified Auction Specialist" with Prudential California Realty and Real Auctions USA! After spending several hours learning about real estate auctions in San Diego County, I came away convinced that this is a viable sales tool under certain conditions for sellers and buyers in today’s real estate market. What is unique about these real estate auctions is that the real estate agents of a major real estate company are involved directly with the auction. In most cases, it is the seller hiring a auction company who does not have the extensive knowledge and experience that Realtors have. I believe this is a first in the industry and I’ve heard that several agents with other companies are looking for a way to implement this program for their sellers.
What is a Real Estate Auction? It is a sales method of achieving a fair market price for a property within a short period of time, usually 30-60 days. It involves a short and intense marketing campaign without a price (only a suggested opening bid price) to test the market for interest with a deadline… the auction day!
Types of Auctions. There are two types of auctions, the absolute and the reserve auction. The absolute auction is where the property is sold to the highest qualified bidder with no limiting condition or minimum price. The reserve auction is where the seller has the right to establish a reserve price that guarantees that the seller will not obligate themselves to sell the property below a price that does not met their financial obligations. The seller in a reserve auction also has the right to accept or decline any and all bids or to withdraw the property at any time prior to the completion of the sale by the auctioneer.
Three Stages of an Auction. The Pre-Auction Period is when a high profile auction marketing campaign is utilized to source qualified buyers who are prepared to bid at the auction. The Day of the Auction is when the auctioneer established the opening bid with the qualified buyers and will not sell the property below the reserve price. If there are no bids above the reserve price, the property is "passed in", meaning that the highest bidder will have first option to accept the seller’s reserve price. The Post-Auction Period is either the time of escrow for the successful buyer or a time when the sellers and the qualified buyers are in negotiation, usually with a successful outcome for both seller and buyer. I’ll write more in the next few days about the benefits sellers and buyers receive from a Real Estate Auction.