When people contact us, they often have questions about the auction process. Here is a list of those frequently asked questions, and their answers. Once you have read these questions, take a look at our upcoming auctions section.
1. What is an auction?
An auction is a popular way to buy or sell assets. The auction process is accomplished through a concentrated and accelerated marketing campaign.
2. Why should I buy or sell real estate through an auction?
The real estate auction is beneficial for all parties. For the seller, the real estate auction is a way to sell assets at an accelerated pace. The inherent efficiency in the auction process enables the seller to eliminate long-term carrying costs including maintenance and carrying costs. The resulting competitive bidding atmosphere gives the buyer an opportunity to purchase an asset at a price they establish.
3. What are the elements that determine a successful auction?
- Assertive advertising and marketing to attract prospective buyers.
- Realistic price expectations by the seller.
- The selection of an auction type that best represents the needs of the seller and the asset being auctioned.
- Ensuring that buyers are knowledgeable.
4. What are the types of auctions?
- Absolute Sale
The absolute sale is the purest, and in many cases, the most successful form of an auction in terms of getting the highest price for personal property and real estate. With this type of sale, the asset is sold regardless of price. This sends a strong message to the bidding public that the asset will be sold for sure on auction day. Buyers can justify their time and effort knowing the asset will be sold on auction day at their price. If the buyer feels he or she can buy the asset at his or her price, then the buyer is more likely to bid. The buyer also realizes that a bid must be submitted because the asset will be sold on a certain day and that there is "no tomorrow" to negotiate with the seller. Through aggressive bidding, true market prices can be obtained at the auction. While the seller has a risk of being forced to sell the asset at a price that is too low, the advantages of this type of auction far outweigh the risks.
- Reserve Sale
With this type of auction there is no published amount at which the seller agrees to sell the asset. The high bid is subject to the seller's confirmation typically at the auction or within two business days after the auction. This method protects the seller from selling the asset for too low a price. The motivation for a buyer, once again, is that they may be able to obtain the asset at his or her own price, not the seller's price. A seller may offer a cash payment or inducement to the highest bidder if that bid is rejected, which is called a buy–back fee. This indicates to the bidders that their efforts will be rewarded if they are the highest bidder and a sale does not occur.
- Minimum Bid Sale
This is a hybrid of the absolute auction and reserve auction. With the minimum bid offering, the seller determines a minimum price level above which he/she is committed to accept. This type of sale is effective only if the minimum bid is low enough to stimulate buyer’s interest. If the minimum bid is too high or near market value, potential buyers will often be discouraged from inquiring, inspecting, and therefore buying the asset. Minimum bid levels can be difficult to determine in soft, slow markets where real value cannot be readily determined. This method of sale can both attract buyers and protect sellers from offers that are too low.
5. What is a buyer's premium?
The buyer's premium, expressed as a percentage of the high bid, is an additional cost to the purchaser. Ranging from 1% to 20%, it is the fee the seller charges the bidder to bring the asset to auction. It helps pay for some or all of the auction marketing expenses.
6. In an auction setting, what are the advantages to the buyer?
- The seller is committed to selling.
- The asset is sold at a fair market price.
- The auction translates to negotiating power for buyers.
- Buyers may have a choice of several assets at once.
- Buyers can set their own purchase price.
- Long negotiation periods are eliminated.
- The time it takes to purchase the asset is reduced.
- Because purchasing and settlement dates are known, buyers and sellers do not need to worry about contingencies.
- Owners of assets sell at the lowest price possible.
- Financing may be available to buyers.
7. How should I prepare to bid?
- Attend at least one preview to determine the condition of the asset.
- Examine the asset information provided by the auctioneer, including the sales agreement.
- Determine what is included in the sale.
- Understand exactly what you are bidding on and the terms of sale associated with the auction process.
- Seek the advice of an attorney, auctioneer, real estate broker or appraiser.
8. When can I view the assets being auctioned?
Typically, there are viewings for assets being auctioned. They are held at various times prior to the auction. Visit our upcoming auctions to learn about our currently available assets and their viewing dates and times.