Frequently Asked Questions
Auction Questions and Answers
Question: What situations warrant using the auction method of marketing?
Answer: The auction method of marketing should be used when the client’s objectives are to sell the property in the shortest possible time frame, at the highest possible price, under terms and conditions favorable to the seller.
Question: Is the auction method ever used as a first selling method?
Answer: Yes, the auction method is not only the best but should be the first choice for selling a property. An auction does not create the price ceiling that a conventional listing does. The seller can set the conditions for the sale and eliminate endless negotiations.
Question: What type of property owners should consider using the auction method?
Answer: Auctions can be successful for any property type. Specific types include but are not limited to: private and corporate property owners, living trust and decedent’s estates, federal and state courts, municipalities, school boards, prominent families, financial institutions, fiduciaries, trustees, and partnership dissolutions.
Question: Are the courts receptive to the auction method for the sale of decedents’ real estate?
Answer: The court system embraces the auction method as a proven way to insure fair market value in an arm’s length transaction. In many cases an auction provides the open public forum estates and disputes need in order to be fair to all parties involved. After the auction, the winning bidder knows he or she could not have bought it for less. This creates the fairest way to establish market value.
Question: What are the costs involved in having an auction?
Answer: The costs involved in an auction include an upfront marketing budget payment, which varies from project to project. A commission is charged and is a small percentage of the gross total of the auction. The commission rate varies from auction to auction. Additional costs may, but not always, include a property survey, taxes and assessments relative to real estate, a phase one environmental study, and closing costs. Auction costs are tailored to fit your individual situation, don’t hesitate to call if you have more in-depth questions. (517) 676-9800.
Question: Are real estate auctions only for distressed properties?
Answer: No, the majority of auctions today do not result from repossessed properties, but rather are the result of a smart seller. A smart seller chooses the cost effective, accelerated method of selling property rather than listing the property for an undetermined length of time. Usually listings require long term marketing periods with multiple unscheduled showings and creative contingency offers. The auction method sets the date the property will sell and eliminates these hassles.
Question: Can there be a reserve or a minimum bid on an item or piece of property?
Answer: Yes, the seller has the right to execute a reserve or minimum bid. This figure is discussed with the auction professional during early negotiations of the contract and is not disclosed to any potential buyer under any circumstances. When a high bid is reached at the auction the seller has the right to accept or reject the high bid.
Question: If the high bid is less than my predetermined minimum value can I accept it?
Answer: Yes, the seller always has the right to sell the property at the highest bid price.
Question: How long will the whole process take?
Answer: Ideally, the contract must be signed seven to eight weeks prior to the auction day, and the closing takes place approximately 30 days after the auction date.
Question: Where will the auction take place?
Answer: On single properties the auction typically takes place on site, either in a tent, on the front porch, or in the living room. For multi-property or vacant land auctions, a ballroom setting is typically more appropriate for the auction setting.
Question: How long after the auction occurs will I get paid?
Answer: A closing date will be set for approximately 30 days after the auction. At that time the property owner will be paid and turn over possession to the buyer. The closing will be insured by a professional title company.
Question: What factors determine the success at an auction?
Answer: Many factors contribute to a successful auction, like the desirability of the property being sold: i.e. location, condition and surrounding properties. Second, and most important to an auction’s success, are realistic expectations on the part of the seller. Every property has a value, and when a property is properly advertised and promoted and two or more approved bidders are in attendance, the high bid achieved is true market value. If the seller realizes this and is truly motivated to sell at the achieved price under stated terms and conditions, a successful auction occurs.
Question: What are the terms of an auction?
Answer: The terms and conditions are devised to protect the seller and the process of the auction method. Properties are sold “as is, where is” with all faults. The purchase agreement is produced with no contingencies, including those for inspections and financing.