WHY CONSIDER AN AUCTION?
If you are an owner of a property and you are have a specific need (or motivation) due to a time and/or financial situation, you may want to consider an auction. An auction is an “Accelerated Marketing Method” and an expedited sales process that can be a solution to your situation. Reasons vary but in today’s market, many sellers are looking for options to reduce or eliminate holding costs to maintain a property (e.g. real estate taxes, insurance, association dues, repair costs, cost of money, etc.). The auction process allows sellers to take control of the process and gives them a viable option to help them move on with their lives and business.
WHAT VALUE DOES AN AUCTION BRING?
The value of the auction is simple. The key components are Aggressive Marketing and Competitive Bidding. The marketing campaign is customized to your specific property or event and is targeted toward the most likely buyer segment that will have the most demand for the property. Competitive Bidding among the Buyer participants is what helps a seller achieve the highest possible price for the property. Only an auctioneer can conduct this method of sale for another party.
WHAT TYPE OF AUCTION IS BEST FOR ME?
There is no cookie-cutter approach to auctions and each one is customized to the needs of the client and the specific property. Several factors are taken into consideration. What is the uniqueness of the property or is there ample supply or shortage in the market? Will there be enough demand for this type of property to generate interest and motivate potential buyers? These and other factors help your auctioneer customize the marketing plan and what type of auction will be used to maximize the potential for a successful outcome?
WHAT TYPES OF AUCTIONS ARE THERE TO CONSIDER?
- ABSOLUTE: This is the purest form of auction and is primarily used when the Seller is highly motivated to no longer own the property, the property is in a low demand category and the Seller is in a financial position to allow the market to determine the value through competitive bidding. The value to Buyers is that an absolute auction tells them that there are no restrictions on the sale of the property by the seller and if they are the high bidder they will own the property regardless of price.
- RESERVE: All property sold at auction, unless sold Absolute is implied to be with Reserve. In a Reserve Auction, the Seller places a restriction on the final sale and generally consist of three types:
- Minimum Bid Amount: The Seller has identified a specific amount that they want to achieve in order to sell the property. This information is confidential and is not shared with potential Buyers, however, if that amount is met or exceeded during auction, the restriction is waived and the property will be announced and sold as Absolute from that moment forward.
- Seller Confirmation: If the Seller has flexibility, this method provides the Seller with the ability to either accept or reject the high bid attained at the auction. This method has become increasingly attractive to Buyers as well as an indication that the Seller may be willing to work with the high bidder a the sale.
- Published Minimum Bid: In certain cases, if the Sellers financial need is so low but they are not willing or able to sell Absolute, this is an effective method to entice Buyers to come to the auction by allowing the Sellers to “show their hand” by publishing in pre-auction advertising an acceptable minimum bid. This has the same effect as an Absolute Sale if the minimum is attractive enough to potential buyers to come and participate in the sale.
If a property is marketed with a reserve, the Seller has a financial obligation or goal in the sale of the property. Depending on the property merits and the level of demand, a reserve auction can be beneficial or detrimental as to the final outcome primarily as to it being attractive to potential Buyers. However, always keep in mind that the Seller has made a significant time and financial investment in the auction process and will be motivated to sell regardless of the reserve option.
AS A BUYER, CAN MY BROKER ASSIST ME WITH A PURCHASE?
Most auctioneers welcome Broker participation. Brokers must register their client prior to the auction and there are other requirements of them during the process. In return, the Buyer will be paid a “Buyer Referral” from the sales commission.
We provide all Brokers with a BROKER REGISTRATION FORM and it is available on the website for download. All Brokers should review the terms and conditions, sign and return before the deadline.
WHAT TYPE OF WARRANTIES DOES A SELLER OFFER?
The Seller only offers a warranty on clear and marketable title. This is determined well before the auction to insure that a Buyer can easily obtain title insurance at their expense. The property will be offered in “As-Is” condition and the Seller is willing to accept a price based on this assumption.
WHAT DOES “AS IS” CONDITION MEAN?
Buyers purchase the properties with no guarantees in regards to the condition of the properties. Buyers shall rely entirely on their own information, judgment, and personal inspection. Any known adverse conditions will be disclosed to all Buyers prior to the sale.
WHAT IS A 10% BUYERS PREMIUM?
During an auction, the bid amount is the gross amount the Seller will receive for the property at closing. Sales commissions are paid separately as a Buyers Premium that is an additional 10% of the high bid. Simply stated, (example only) if a bid is attained and accepted at $500,000 the total purchase price will be $550,000. This includes the Buyers Premium. Buyers can adjust their bidding to reflect the maximum amount that they are willing to pay for a property when the Buyers Premium applies.
- Terms and Condition may vary with each property sold at auction. Please review the terms for each sale posted on the website.
- Inspections: Each property will be available for viewing prior to the auction date. Please check the auction listing for information as to dates and times of scheduled inspections. Vacant land can be inspected (at your own risk) and with pre-approval from the auctioneer as well as all private showings.
- Auction contracts will be handled on-site by a designated real estate closing Attorney or Agent.
- Each High Bidder (or accepted high bidder) will sign a Real Estate contract at the conclusion of the auction.
- All Buyers are urged to review all documents provided before and just prior to the auction.
- All announcements made on Auction Day take precedence over any written or advertised materials; however the Real Estate Sales Contract as executed shall be controlling.
- All Bidders must be prepared for the following on Auction Day:
- Bring a Bank Issued, Certified Check equal to 10% of your anticipated high bid for each property. The actual amount of the deposit will depend on the final purchase price.
- A company check will be allowed only with a Bank Letter of Guarantee that there are sufficient funds in the account for the check to clear.
- The check must be made out to the designated Closing Agents Escrow Account. This information will be provided in the sample contract for each property.
- In order to bid on a property, a bidder must register, provide documentation of ability to pay and received a bidder number.
- All Buyers will pay a 10% Buyers Premium in addition to the high bid obtained at the auction to determine the final purchase price.
- The 10% deposit on auction day is non-refundable.