The Auction Advantage
By Cory ShepardPresident, Real Auctions USA
Auctions are designed to attract genuinely interested, highly qualified buyers. These buyers are focused on establishing the highest price they are prepared to pay in light of all of their alternatives — not how steep a discount they might get. As motivation on auction day is often bolstered by the environment that an auction creates, this also strengthens the natural form of competition between buyers.
We’ve found that the word “auction” attracts the attention and interest of potential buyers, with nearly 40 percent of those who register to bid not in the market until they heard about the auction. Their interest seems to increase when a suggested opening bid is below the true market value. In addition, pre-determined deadlines create a sense of urgency and certainty.
Auctions offer a way for sellers to get a good idea of just how much their property is worth — and an opportunity for buyers to feel like they are paying a fair price. On top of that, using a nontraditional strategy differentiates a home from others on the market in the same neighborhood. One reason auctions work is that all bidding is out in the open, so buyers are in control of their own destiny, eliminating potential animosity between the buyer and seller. Buyers are able to review all important documents before the auction day so they can ease their minds about the process and they leave an auction knowing they paid a fair price.
In the past, real estate auctions have mainly been used for distress sales. However, today they work well for nondistressed sellers and properties that range from poor condition to pristine. They can work for anyone who would like to sell their home in 30 days even though the market time in their area is longer than that. Auctions are ideal for sellers who are moving up and need to eliminate their contingencies quickly in order to secure their new home, or for someone who has inherited a home and needs to dispose of it quickly to avoid paying the mortgage for too long.