. . . Frequently Asked Questions

Auctions are often thought of as "fire sales" for properties in distress. Is this true?

Until recently real estate auctions, unlike art and antique auctions, have experienced unfounded negative images in the marketplace. The majority of auctions today don't result from foreclosure or distress situations, but rather are the result of a seller choosing a cost-effective, accelerated method to sell a property. Builders or financial institutions, for example, prefer auctions rather than laboring for months or years to sell units of a development one by one. An auction allows the seller to eliminate virtually all long-term carrying costs, passing the savings directly to the purchaser in the form of a reduced price. An auction is truly a win-win situation: Sellers obtain immediate cash and buyers purchase properties at fair market value, the price determined by open, competitive bidding.

What factors impact the success of an auction?

• The seller must have realistic expectations, including a fair sales price, terms and timing.
• The desirability of the property. This includes location, condition, plus the value of surrounding properties.
• Since a variety of auction methods are available, carefully choose the auction type that best suits the property and the seller's needs.
• A well planned, aggressive marketing/advertising campaign targeted to prospective purchasers is critical to an auction's success.
• Making sure that due diligence information is provided to prospective buyers ahead of time.
• Preparing the property for sale so it is presented to prospects in its best condition.

What properties are suitable for auction?

Most properties are saleable by auction. All types of real estate, including residential property, town homes, condominiums, cooperative apartments and single-family homes, commercial and industrial property, vacant land and even boat slips are sold at auction. Not all property, however, is suited for auction. If a property will only appeal to a narrow market, auction may not be the most effective marketing method.

An auction self-test: the two-thirds rule

One method to determine if auction is the best marketing strategy is the two-thirds rule. This involves analysis of the market, property and seller situation. Generally, if two of the three parts (market, seller, and property) lean towards auction, then auction should be offered to the seller as a sales option.

Do real estate auctions reduce property values?

Real estate auctions reveal the true market value of a property because they are conducted in an open competition. Values ascend to the level the market determines and therefore are neither inflated or deflated.