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Top Real Estate Auction Myths

There are many myths about real estate auctions. Following are the top 5 real estate auction myths.

Myth 1 – If I sell my property at auction I will have to give it away.

This myth comes from NOT knowing the different types of real estate auctions, or how market value is determined.

There are three types of real estate auctions:

The first type of real estate auction is what is known as the Absolute or No Reserve Auction. If a seller chooses to send the strongest message of motivation to the marketplace, they will choose this method. When a property is sold using this method, and once a bid is accepted, the property must sell regardless of price.

This method is not suited for everyone or for every property. A well-qualified auction professional will council with their client to make sure the risk is not too high.

The second type of real estate auction is the Minimum Published Bid Auction. This method has a built in protection, in that the property will be offered to the highest bidder at or above the published minimum bid.

The third type of real estate auction is the Undisclosed Reserve, or Sold Subject to Owner Confirmation Auction. This method offers the highest level of protection for the seller, as the property sells to the highest bidder, only if it reaches the reserve amount. The minimum amount the property must bring is only known by the seller and auction company.

Not all properties are suited to sell at auction, and not all properties are suited be sold with or without a reserve. A professional real estate auction company will evaluate the property and the seller’s specific needs to determine if their property is a good fit for the auction, as well as which type of auction offers the appropriate amount of risk to take advantage of the benefits of selling their property at auction.

Now, let’s talk about how market value is determined. There are many different valuation methods when it comes to real estate.

We have comparable market value, which is an estimated value based on previous sales history on similar properties within a reasonable distance to the subject property.

We have replacement value, which is what it would take to rebuild the property if it were destroyed in a fire etc.

We also have appraised value, which is great instrument for determining value for the purpose of lending or refinancing a property.

Each of these valuation methods have their place, and are important for different reasons.

However, as a seller, or a buyer, the only valuation method that should matter to you, is market value.

How do you define market value?

To be put simply, market value is, "something is worth what someone is willing to pay for it on a given day."

An effective and professional estate auction company’s role is to bring sellers and buyers together for the purpose of determining market value through competitive bidding.

It is our job to market the property and engage all potential buyers, so they can participate in the auction. In the end, the competitive bidding process will give buyers the opportunity to bid what the property is worth to them based on their intended use.

What you know now, is that the concept of “giving a property away,” is not reality, and that the auction method of marketing is an effective way to determine the value of the property without putting too much risk on the seller, while still allowing the buyer the opportunity to determine the value and purchase the property at their price.

Myth 2 – The property is distressed or something must be wrong with it, and I won’t find out until I buy the property.

There are many reasons people choose to sell their property at auction. The number one reason people choose to sell their property at auction, is they are able to choose the day their property will sell.

While it is true that another reasons a seller will choose a real estate auction, is the benefit of selling the property “as-is,” this doesn’t mean the property is distressed or the condition of the property has anything to do with the reason for the sale.

The seller is encouraged to disclose all known issues with the property, and the buyer is given full disclosure on the condition of the property on the same disclosure forms used in a conventional real estate transaction.

In addition to encouraging full disclosure, a professional real estate auction company will also give ample opportunity for property inspections during the bidding process. This allows the bidders to make a determination of value based on their own inspections or an inspection from a hired professional.

Myth 3 – If I buy a property at auction, I will have to produce the full purchase amount in cash on auction day.

Not all auction companies utilize the same terms and conditions. So as a potential buyer or bidder, always make sure you have a complete understanding of the terms and conditions for a specific auction.

Most public real estate auctions require a deposit on auction day, or if sold via online bidding, the day following, and allow for 30 days to close on the property. The deposit required is usually a fixed amount or might be a percentage of the high bid or total contract price.

Although the majority of the real estate sold at auction is sold without contingency on financing or inspections, most professional real estate auction companies will advise the seller to allow at least 30 days for closing, and in some cases 45 to 60 depending on the type of real estate being sold and the expected needs of the buyer for that property. This allows a buyer to utilize financing and purchase a property at auction without the need to have the entire amount in cash on the day of the sale.

Myth 4 – I won’t get free and clear title on the property or the owner might take the property back from me after buying it.

This myth is based on the traditions of courthouse-step type foreclosure sales, commonly referred to as ’sheriff’s auctions’ or ’tax lien sales.’

In this scenario the owner has a legal remedy in order to get their property back called a “redemption period.” Every state that allows for a redemption period will have a different time frame for that period and some are longer than others.


Most auctions, conducted by professional real estate auction companies, are not these types of auctions and redemption periods are not part of the terms and conditions. In fact, most properties sold at public auction in this manner will include a seller guaranteed title. In most cases, the transfer of title is performed in the same manner as a ’conventional’ transaction.

It is always recommended that you check the terms and conditions of the auction and make sure that you have a clear understanding of what those terms are, and what you can expect as a buyer.

Myth 5 – Live auctions are more effective than the online or internet only real estate auction.

This myth is one we actually wish were true. As State Champion Auctioneers, we enjoy the live auction environment, and spent many years dedicated to the live bid calling craft.

There is no doubt the live auction is an entertaining and exciting environment that will always be around. However, the reality is in the proof that more and more buyers over the years would prefer to bid from the convenience of their home, office or mobile device.

Allowing the bidder the convenience of bidding from anywhere, at any time during the marketing time frame, increases participation, and ultimately brings more buyers to the auction property.

If you’re a seller who understands the value of your money, and are looking for a time defined sale of your real estate, selling your property at auction is a method that can help you sell your property for market value in 30 days to qualified buyers.
 
All types of properties are potential candidates for the auction method of marketing. From residential and commercial real estate, to all types of land including farm and hunting land, as well as development or industrial property.

For more info about our real estate auction services, contact our office today, or submit the form below:
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