How Does an Auction Work?
Another fast way to sell a home is through an auction. Typically, the home is put up for auction at a date 2-4 weeks out, with an advertised reserve price set at 70% of fair market value. Then, the auctioneer charges the seller a 5-10% up front marketing and advertising fee. About a month later, they hold the auction – usually it’s a “Closed bid” auction where bids are due by the end of the auction day. During the pre-auction marketing period, several open houses are held in which prospective buyers can look at the home and even order inspections, if they wish to. When the home is actually sold – to the highest bidder over the reserve price – it is sold as-is.
The hope is that several people will be drawn to the home due to its low reserve price, causing a competitive bidding situation when the auction day comes. If this happens, the homeowner may achieve the goal of getting the home sold quickly at a price near the fair market value.
The disadvantage to this strategy is that in a slow market, it’s possible that no one will bid on the home or perhaps only a few people may bid and you may only hit the minimum reserve price – in which case the homeowner could have just sold the home for cash faster and without having to pay for the advertising or put up with the hassles of the auction. If you would like to explore this option further – give us a call!
Question
Does an auction work?
- Well, sort of. Like lottery tickets, an auction works if you are lucky. It also works well for certain types of homes (like HIGHLY unique homes) in certain types of markets. If you would like to discuss the auction further, give us a call.
Image: Salvatore Vuono / FreeDigitalPhotos.net
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