There has been a boom in the real estate market, but not the type of boom that most people have expected. This boom has been due to real estate auctions and not traditional real estate sales. Real estate auctions are essentially what they sound like. A seller needs or wants to get rid of their home, but instead of putting it on the market like a traditional sale, they will contact a real estate company that specializes in auctions or contact an auction company in the area that specializes in real estate auctions. The home will be put up for auction and buyers will bid on the auction up to a certain time or date. There are three different types of real estate auctions.
The first type of real estate auction is known as an absolute auction. In an absolute auction, the property in question will be sold to the highest bidder, no matter what the price. There is not a reserve in this type of auction and the sale is guaranteed at any price. Excitement is always high for these types of auctions since really, anything can happen. An absolute auction usually will get maximum advertising on the market and it has, in recent years, become a very popular way to auction off homes.
Another type of real estate auction is known as a minimum bid auction. This type of auction is where there will be a published minimum bid, so only bids above that amount will be accepted. There will be printed materials that will be passed out to potential buyers with this price listed. In this type of auction, the buyer will know the minimum price and the seller will know that they will at least secure the minimum price for the auction. This is a reduced risk auction for the seller, which makes these types of auctions much more popular for those wishing to sell their homes at auction. It should be noted, however, that minimum bid auctions can turn many bidders away, so sellers should consider if this is the route they want to go before settling on this auction type.
The third type of auction is known as a reserve auction. In this case, there is no minimum bid that is published and the seller has the right to accept or reject the highest bid that is given, but it must be in a specified time frame, such as 72 hours after the auction closes. The other part of the reserve auction is the reserve price, itself. In this scenario, the seller will set a reserve price, which is the minimum they are willing to accept for the sale of the home. If the reserve is not met by bidders, they are not obligated to accept the price. If the price goes above the reserve, they must accept, though they can also accept, if they choose, a price under the reserve. Buyers tend to shy away from reserve auctions as they aren’t always the easiest or advantageous auction types for buyers.