Selling and buying a home by auction
Anyone who's sold, or contemplated selling, a home knows how stressful the process can be. Just setting the listing price can be intimidating. If the price is set too high, your home may languish on the market for weeks or months. If your house sells quickly, you may wonder if the price was too low.
The stress doesn't end there because once the for sale sign goes up, the waiting game begins. How long will it take to get an offer? Will you get the closing date you need? What kind of conditions will be attached?
But there is an easier way to sell your home -- by auction. While once considered the domain of foreclosures, a growing number of people are discovering that selling a home by auction is quick, efficient and saves a seller months of carrying costs and stress.
"It puts the person who owns the asset in control of his own direction," says Theresa Taylor, an accredited real estate auctioneer based in Cornwall, Ont. The seller decides when the auction takes place, how large a down payment is required and when the closing date is.
"There's no grey area," says Trevor Hands, an auctioneer with Hands Auction in Perth, Ont. On auction day, "the property either sells or doesn't sell."
Any kind of property can be sold by auction, including farms, commercial or residential. That said, some auctioneers believe that properties that appeal to a broad range of potential buyers do best at auction as a result of the competitive nature of bidding.
What's more, a property auction is usually best-suited to a motivated seller. Perhaps you've got an offer on another place conditional on the sale of your home, or maybe you're being transferred to another province. Regardless of the situation, the seller is motivated to get out of his current home quickly.
How selling by auction works
Once a property is consigned, the auction house markets it to the general public, as well as realtors (who get a cut of the commission), using website promotions, on-site signage, newspaper ads, direct-mail campaigns and even radio or TV.
"Right from the onset, we're able to invest more money on the advertising side to properly promote the property for a specific event on a specific date," says Kevin Tink, vice-president of Ritchie Bros Auctioneers based in Vancouver. With an auction, the seller pays for the marketing of the property, whereas in a conventional sale, the realtor absorbs the cost. "There (comes) a point in time that if the property hasn't moved, (realtors) are hesitant to throw more money in it because they're investing in something that doesn't have sense of finality like our process has," says Tink.
Marketing is the key to making auctions work; buyers need to be aware a property will be offered and sold on a specific date either with a reserve bid (or minimum price) or without.