More Popular in Slow Markets:
Auctions help to gather interested buyers into one marketing venue where they can compete for a property. Depending on the type of auction, sellers can set a minimum price and hopefully let the competitive nature of the process bring them a reasonable price for their property.
Most Auctions Do Pay Buyer Representatives:
Auction services want as many buyers present as possible. This increases competition, and hopefully prices. For this reason, most will compensate Buyer Representatives for bringing a buyer. Be sure to register and understand the rules early though.
Real Estate Auctions Make for Faster Transactions:
The very nature of the auction process makes transactions smoother, with faster closings. The buyers know that they should have their ducks in a row before bidding, and there isn't an inspection and repair negotiation process. Buyers at an auction have prepared thoroughly, and there is little back-and-forth after the gavel falls.
The Absolute or No Reserve Auction:
This one isn't used a lot in real estate, as there is no reserve, or minimum bid set. The property will sell to the highest bidder, even if the bid is well below what the seller expected. The one positive is that it does guarantee a sale, even if the seller is unhappy with the final result.
Minimum Bid in a Real Estate Auction:
This is a popular format for real estate auctions. The seller sets the minimum price they're willing to accept, and the bidding starts there. The high bidder is guaranteed the purchase. However, some sellers have found that the buyers come to pay the minimum, and sometimes there is just that one bid, forcing the sale at that price.
Reserve Real Estate Auction:
In a reserve real estate auction, the seller retains the right to accept the high bid within a certain deadline period. They may or may not set a minimum, as they're not bound to sell in this auction. Buyers do not get excited about doing diligent investigation into properties when they cannot be assured a purchase, even if they are the high bidder.
Just Because it's an Auction - Not Necessarily a Distressed Property:
Many buyers believe that all real estate auctions involve only distressed or foreclosed properties. This is not the case. Extremely high end properties are frequently sold at auction, simply because it's a fast and clean process. Depending on the type of auction, the seller can still control the price to some extent.
Real Estate Auctions Can Bring Bargains:
Depending on the type of auction, whether a property is distressed or not, buyers can get a bargain. It's all about diligent investigation and planning. Going in with a bidding plan and a definite cap on what you'll pay for a property can get the buyer a deal.
Real Estate Auctions Are Growing in Popularity:
While sellers can retain some control over the final selling price, buyers can get some bargains as well. It's more about informed sellers and buyers being much more in control of the process than in the normal public listing and sale process.
Depending on the type of auction, the seller can retain complete price and acceptance control. Or, they can relinquish all control and the property can be sold for whatever the market will provide in an absolute auction. More transactions however result from minimum bid auctions. There is still some buyer excitement, as they know the high bidder will get the property as long as the bid is over minimum.
Buyer representatives shouldn't shy away from auctions. Most pay a buyer representative commission, and you do have value for the buyers. Helping them to investigate and inspect the property, as well as doing CMA's and interpreting auction rules and documents are all valuable services that a buyer representative can provide. As the commission comes from the auction company, the buyer should use representation.