Are You Shy and Reserved, or Absolutely Outgoing?

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I spoke with the IT director of a large local franchisee of a national chain brokerage yesterday.  He oversaw their online presence, but comes from a traditional real estate sales management role.  He recently managed a large group of REO Agents, and became burnt-out on the whole game.  I was surprised by the fact that he (as a Realtor®) preferred Absolute auctions.  What is the difference, you might ask between an Absolute Auction and a Reserve Auction?

An Absolute Auction is when the Seller has agreed to the sell the property to the highest bidder, regardless of the amount of the high bid.  It can be a very effective way to generate a lot of interest in a property, and therefore more bidders.  There is a perception that a bargain is more likely to be found at an absolute auction.  If you put the exact same 10 bidders in a room (or in our case, online) and have them bid for the exact same property, given their level of desire to own the property, there would be no difference in the final bid in an Absolute Auction vs a Reserve Auction.  The only difference is if the Seller is obligated to sell at that price.


In a Reserve Auction, the Seller can specify a price, below which he/she will not sell.  Call it a "safety net."  Bidders are not aware of what the Reserve Price is, until bidding has reached that point.  If you've ever been to a live auction, or seen one on TV, you may have heard the auctioneer announce "the reserve is off!"  This often sparks even more bidding, because bidders now know that they can secure the property at the highest bid.  After the reserve has been met, the auction essentially becomes absolute. 

The platform enables the Listing Realtor® to set a reserve price (with Seller's approval of course) within the system.  You simply enable the Reserve feature while uploading a listing and enter the amount of the Reserve.  While Bidders are bidding, they are not aware of what the reserve price is.  If they place a bid that is below the reserve, they are notified on the bid form that the reserve has not been met, and are given an option to place a higher bid if they want to. 

I was somewhat surprised by the IT director's preference for a Reserve Auction, given the fact that he's also a Realtor®.  Auctioneers prefer Absolute Auctions, because they know a property is going to sell, and therefore, they'll get paid.  I would hope that Realtors® would prefer Reserve Auctions, as a means of protecting their Seller.  Different strokes, I guess.

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Glenn Roberts
Retired - Seattle, WA

There seems to be a venue that will meet all of the different seller and buyer needs out there. I've seen a few more auctions around here lately, but not enough that it affects the market.

Apr 19, 2011 12:12 PM #1
Chris Mayr
D3 Interactive Marketing - Orlando, FL

Mitch, I am more Grumpy than anything else.  Does that mean I shouldn't do an auction?

Apr 19, 2011 01:35 PM #2
Mitch Gover - Orlando, FL

Glenn - There's still thousands going on here in Florida (mostly stale REO listings).  It's a great way to sell desirable non-distressed properties too.

Chris - We're an equal 7 dwarf opportunity site.  C'mon in.   

Apr 19, 2011 02:43 PM #3
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