How To Sell Your Home At Auction

How Do Home Auctions Work?

Selling your home at auction is a good alternative to the traditional market if you need to sell by a certain date or you’re worried about home inspection issues. It can also be a great way to capitalize on a hot market and capture as much money for your property as possible.

But only in recent years has it been used as a viable option for owner-occupied, non-distressed properties. As such, it could be confusing as to how to get started. Here are the basics.

Step #1 - Can you Sell Your Home at Auction?

Yes. As long as you legally own the property you can sell it at auction -- even if you’ve already hired an agent. It’s become more common for auction houses to work with agents in recent years because they have symbiotic functions. Agents advise sellers on setting appropriate reserve prices, listing the property on a multiple listing services (MLS), and marketing the auction to their network. Auctioneers then sell the home in one day, usually paying the agent a small commission.

If you’ve already hired an agent and feel like auctioning your home is the best option for you, ask for their thoughts on the process. Ask if they would be willing to represent you through the process. If they say yes, find an auctioneer that works with agents.

Step #2 - Find Your Auctioneer

The National Auctioneers Association (NAA) recently created its own auction MLS and auctioneer search engine to make it easy for buyers and sellers to find the information they need. 

As a seller, you would click on the “Find an NAA Auction Professional” button and when the search fields pop up, choose “real estate, residential” (or real estate, land) under auctioneer’s specialty, the area of your home, and any designations and education you want them to have. If you aren’t sure what kind of education or designation is applicable, the NAA has a guide in the left margin. (You may also want to read Your Real Estate Auctioneer's Duties.)

Online auctions such as auction.com are different than in-person auctions, so if you think you want to go the digital route, you’ll want to hire a company like Xome.com that specializes in this space.

Tip: Once the search engine pulls up a list of prospective auctioneers, research their experience. You want an auctioneer who has sold homes like yours before because they will help advise you on setting a reserve price and guide you through the process. They will also advertise the auction to their client list and those clients are usually looking for a specific type of house.

Hopefully, you have at least two good auctioneer options at this point. The next step to choosing your auctioneer is to interview each one. Ask how they get paid, whether or not they work with agents (if you’ve hired one), and what services they provide. Next, attend one of their auctions to get a feel for how they operate.

Step #3 - Choose Between Absolute Auction or Setting a Reserve Price

A reserve price is a minimum price for which you are willing to sell your home. If you set a reserve price, buyers’ bids will have to exceed this amount in order to trigger a sale -- which means you could end up not selling your home if there’s little buyer interest. It also protects you from selling your home far below your mortgage balance or the price of your next home (or any other financial constraint you might have).

An absolute auction is when there is no reserve price and the home gets sold to the highest bidder regardless of how much that is.

When an auctioneer advertises an auction, it will tell buyers ahead of time whether or not the seller has set a reserve price, but it won’t tell buyers what that reserve price is until the bidding has surpassed it.

Tip: Some auctioneers advise against reserve prices in slow markets or when the sellers are in a time crunch. They say reserve prices can scare off price-sensitive buyers and can result in your home not selling at all that day.

If you choose to go with a reserve price, you have until the day of the auction to decide what it is. And your auctioneer and agent (if you’ve hired one) can help guide you toward an appropriate price.

House Sold at Auction -- Now What?

While not the most common road people travel when selling their home, the auction process can be the most efficient. Just make sure to hire the right auctioneer for your property and research how reserve prices are handled in your market. Make the best-educated decisions you can and then on the day of the auction, sit back and wait to hear the auctioneer yell, “Sold!”