|It has been said that “something is worth only what somebody else will pay for it”.||
In recent years we have witnessed a rollercoaster in the real estate market, and properties have soared in price only to experience a severe decline. Pricing properties for sale, at times, was often a perplexing exercise as the volatility of the market left both buyers and sellers in a state of flux.
The auction process brings buyers and sellers together to establish the true value of a property. With a real estate auction the true value of the property is established because it will be the marketplace that competes for and establishes the final price. Additionally, an auction brings other benefits to the participants. With auction there is speed, there is action, there is finality, there is opportunity, and there is cash for the seller.
There are generally three types of auctions: “Minimum Bid”, “Reserve”, and “Absolute”.
Which Auction is chosen is the decision of the seller, and a brief discussion of each follows.
MINIMUM BID AUCTION
A “minimum bid” auction means that the initial bidding price must be equal to or higher than the published minimum bid.
“Absolute” auctions are where the property will be sold on the day of the auction regardless of price. While sellers might sometimes perceive this as a risky strategy, most often it is the “absolute” approach that brings out the largest number of bidders, which results in the highest price.
A “reserve” auction is where the seller does not publically disclose the minimum contract price that the seller will accept. If the seller’s minimum is not reached there will be a “no sale”.
A “no sale” at a “reserve” auction, however, doesn’t necessarily mean that there will be no sale. Often the mere assembling of buyers and the seller together in a fluid format results in a successful negotiation between a buyer and the owner.
An auction is not a panacea or cure-all and not all auctions result in a sale. But an auction is a dynamic process which can result in turning real property to cash quickly.The process is well-established as it has been used by estates, courts, governments, and other institutions for years.