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Myths about auctions abound, and it is definitely to your benefit to be able to separate the facts from the fiction before you decide to sell your house with the auction method. |
Here are some of the most common misconceptions about auctions:
MYTH #1: ALL real estate auctions are for distressed and bank owned properties, where people buy for pennies on the dollar.
FACT: Some are, and some aren't. There is a big difference between the big auctions for multiple distressed properties, and a boutique or individual auctions. With an individual auction, the focus is 100% on your property. A professional auction company launches an intense strategic marketing campaign that effectively targets hundreds of thousands of prospects. On auction day, prequalified buyers arrive with cash in hand, prepared to buy.
MYTH #2: My home will not sell for fair market value at an auction – I'll have to give it away!
FACT: Since informed bidders have done their due diligence prior to the sale date, they have a good idea of the market value of your home. However, in a competitive bidding situation with the excitement of a live auction, properties often sell for more than fair market value. Unlike a traditional listing sale where it's customary for buyers to negotiate for a lower price, an auction drives the price higher.
MYTH #3 Auctions are the last resort.
FACT: If this were true, why do record prices get set for art, antiques, collectibles and real estate at auctions? The reason is: auctions create competition. No other form of selling creates competition like an auction does.
The reason some people think of auction as the last resort is because some sellers list their property first at an unrealistic asking price, and it sits on the market forever. They then decide to auction, and it promptly sells for fair market value and real estate at auctions? The reason is: auctions create competition. No other form of selling creates competition like an auction does. The reason some people think of auction as the last resort is because some sellers list their property first at an unrealistic asking price, and it sits on the market forever.
They then decide to auction, and it promptly sells for fair market value. Yet, if a seller chooses the auction method first, they have a better chance of getting a great price, because the property has never been priced to the market – and the market determines the price.
MYTH #4: Real Estate Auctioneers are not real estate brokers.
FACT: Real estate auctioneers must be licensed as realtors in almost every jurisdiction.
MYTH #5: Auctions are Expensive.
FACT: Sometimes sellers have issues with the marketing and advertising costs associated with auctions.
These costs cover direct mail, signage, newspaper, magazine, online advertising videos, press releases and property information packages. Marketing can cost thousands of dollars, depending to the type of property being sold.Consider this: Have you ever known of anyone that had a great product; but the marketplace was not aware of it? How much exposure are you really getting when you stick a sign in front of a house, place a listing in the MLS, and then wait for a buyer to show up?
How many businesses go broke each year because they invest no money in advertising? In our fast-paced world, people must be informed before they are motivated to act. A properly executed auction marketing campaign gets stellar RESULTS.
MYTH #6: Selling my home at auction will cost me a lot more in commission than if I hired a Realtor.
FACT: The cost is comparable. However, with the auction method, the seller actually saves money in the long run, especially if they auction first instead of listing, because they can eliminate long-term carrying costs such as mortgages, maintenance and taxes. (See chapter on The Time Value of Money)
MYTH #7: If the high bid is less than the seller hoped for, he must accept the bid.
FACT: There are three basic types of real estate auctions: Absolute, Minimum and Reserve.
In an Absolute Auction, the property is sold with no minimum or reserve sales price. An absolute auction attracts more buyers and more competition. In a Reserve Auction, a minimum price point is set. If the high bid does not reach the reserve point, the seller is NOT obligated to accept the bid.
In a minimum bid auction, the starting bid is set at the minimum price the seller will accept for the property. Technically, the house could be sold at the minimum bid, but competitive bidding usually drives the sale price higher.
MYTH #8: If the property does not sell at auction, it is very difficult to market and sell it afterward.
FACT: Nothing could be further from the truth! In the extremely rare case that the property does not sell at the auction, remember that the intense marketing method has exposed the property to a huge buying public. When contacted post auction, buyers will often make offers on the property. In many cases offers to buy the property prior to the auction date are even made and accepted.
MYTH #9: Auctions attract buyers who are looking for a good deal.
FACT: This is actually true, and this is why auctions attract so many buyers. However, serious qualified buyers do their due diligence prior to the auction, so they will have a realistic idea of the value of the property. While everyone wants the best deal possible, competition from other bidders actually drives the price up to market value and often even higher.
MYTH #10: Auctioneers compete with real estate agents.
FACT: Auctioneers are licensed real estate agents themselves, and most of them welcome other agents and pay them a co-op commission for bringing buyers to your auction.
For more information on real estate auctions call (877) 612-8494 or go to www.ajkaras.com.
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