They say that fact is better than fiction, and knowledge is power. With this ideology, let’s take a look at fact versus myth (opinion) when it comes to how auctions work and who they work for. What do you want to know about the auction method of selling real estate? Do you think that it is simply a method for foreclosed and bank-owned properties? Do you think it is only for distressed sellers? Do you think you can’t buy at auction? These are some of the most frequent questions and concerns we hear. So, in the words of Sergeant Joe Friday, “Just the facts, ma’am.”
The auction method of selling real estate continues to grow and gain popularity. According to the Wall Street Journal, the sale of real estate at auction has increased by 120% over the last five years. That is a lot of increase. There could be multiple reasons for this increase. One is the quick time in which a property can be sold and closed is very appealing to sellers. Another, is that auctions are better accepted by a wider audience of potential buyers, not just the “cash kings”. And finally, people are beginning to see that auctions are just a method that come with a unique marketing strategy that allow a property to stand out from the others.
The question I hear most when we are selling properties is “Does a bank own this property?” or “Is the seller fixing to lose the property?” And 95% of the time, the answer is no to both questions. While we do sell properties for banks and financially strapped sellers from time to time, the largest majority of our sellers are folks just looking to sell their property quickly, for the highest price. This is accomplished by a combination of effective marketing and competitive bidding. So far this year, our firm has sold 100% of the ten properties we have offered through an online bidding method and three of those properties were sold before the auction (yes, you can do that!).
“I can’t buy at auction, I don’t have cash!” Ten years ago, this might have been a more true statement. The main goal of auctions was to sell the property quickly and that typically meant to a cash buyer. However, as the popularity of auctions have evolved, so have the terms of the sale, to make them more attractive to a larger pool of potential buyers. Properties used to be offered in 30 days, with maybe one open house, always sold “As Is”, with twenty percent down on auction day and close in 30 days. That was basically the rule. But a crashed economy and rebounding real estate values have changed that perspective. Now not only do auctions help people sell property fast, but for top dollar. And top dollar is reached through competitively bidding buyers. We have engaged more buyers by lessening the amount due on auction day, allowing more closing time, and offering several open house and viewing dates to allow the buyer ample time to complete their due diligence before they bid. So now, not only are sellers enjoying the auction method, buyers are actually looking at auction properties first and traditional listings second!
All of this information probably has you thinking. It is probably not what you thought you knew about real estate auctions. Hopefully we have debunked some of those fears you have about buying or selling at auction. Things are not always as they appear, and they are not always as you have heard. Did you know that Sergeant Joe Friday never said the words “Just the facts, ma’am.”? Nope, not one single time. Because the words were used in a spoof of this character many years later, it stuck. See how easy it is for myth to become fact!