Home auctions not for the faint-hearted
We plan to auction our home. What do you
think of this? How does this work and what is required?
If you want to avoid the lengthy and often
convoluted process of selling a home the traditional way,
the auction may be your thing. Currently, the percentage of
homes selling by auction in the United States is still in
the low single digits, but that's expected to grow significantly
in the next decade, according to industry trade organizations
and brokerage firms. In England, about 10 percent or homes
are sold by auction, and up to 80 percent are handled that
way in areas of Australia, mate.
National home-auction firms such as Sheldon
Good & Co., J.P. King and National Auction Group are easily
accessible on the Internet, although they tend to focus on
higher-end properties. If they aren't appropriate for your
needs, they can refer you to an organization that will be.
Many of your larger brokerage houses can also hook you up
with auction sellers or handle these themselves.
Auctions work well if you're under time pressure.
Sales and closing can usually be handled in 90 days. The bulk
of that time will be spent by the auction house intensely
marketing your property to interested buyers before the auction
There's also significantly more buyer urgency
in the auction setting. The process weeds out the tire kickers
and dreamers who can't qualify for a mortgage, so only serious
buyers will be coming to the table. In most cases, auction
buyers must plop down a deposit ranging from $2,000 to as
high as 10 percent of the value of the home and will have
to forfeit that sum if they win the bid and later back out.
Contrast this with the conventional sales method, where as
many as a quarter of agreed-to sales fall through for one
reason or another before any money changes hands.
Not only do you have additional leverage in
an auction, the seller gets to set the sales date and the
minimum price. What's more, you can always refuse to take
less than you want, should the bids not be up to snuff. Of
course there's always a chance you'll benefit from a good
old-fashioned bidding war.
But the fees charged by the auction house can
be comparable to a sales commission set by a standard seller's
agent, or even a little higher. And many auction sales still
require the services of a real estate agent or attorney to
handle closing. So you may not save much other than time through
an auction. You also may have to endure a second auction if
the first one doesn't produce expected results.
Good auction houses should be able to give you
a learned opinion on what your "reserve" price,
or minimum price, should be, well before the big date. They
will base that on current market conditions, comparable sales
in the area and early buyer interest. They will also produce
an information booklet that will contain a statement of auction
terms and conditions, and such things as a survey, water-and-sewer
evaluation, termite inspection and other relevant data to
help prospective buyers in their due diligence.
Open-house showings before an auction are also
more frequent than through the standard drawn-out listing
approach, as you might expect. And be warned that some sellers
find auction day quite stressful, as they see their beloved
home of 30 years hawked publicly to a stranger in a period
of five or six minutes. It's not for the faint of heart, but
it may be right for you.
I wish you luck in the process.
-- Posted: Aug. 14, 2004