If anyone had told me five years ago that selling a home through an auction would become big business, I would never have believed them. Today, with plummeting house prices and developers with a glut of excess inventory sellers are looking for alternative ways to market their homes. As a result, the real estate auction market increased 5.3% in 2007, generating $58.4 billion in sales.
It seems that the more house sales decrease, the busier auctions get. Buyers feel as though their getting a deal and sellers are happy to unload their homes quickly and for good prices. In the normal housing market, buyers are hesitant, and reluctant to commit. An auction creates a sense of urgency that facilitates a "buy now or lose out" type of selling atmosphere.
Even developers have been turning to auctions as their choice of marketing. It gives them the ability to unload more lots in a shorter amount of time then by selling them individually through model homes.
Auctioneer Marty Higgenbotham claims "auctions give buyers confidence that they are paying a fair price". Recently, he sold 188 of his 200 new homes in a Minneapolis auction. His goal was to get 60% of the asking price, but the end result was closer to 55% to 57%.
Sellers love the convenience of a quick sale, as opposed to agonizing over months of constant open houses and showings. Arkansas home owner Mark Bratton recently sold his lake home for $25,000 more than the minimum bid. He was happy; all that was required was two weekends of showings and the house sold.
The process could not be simpler; a winning bidder must have a certified check or cash of $10,000 to $20,000 for a nonrefundable down payment. Most sales are generally completed in less than 60 days.
Sellers pay about 1% to 2% of the sales price to the auctioneer, and some charge a fee if an auction does not result in a sale. They also determine ahead of time whether the sale will be absolute (property is sold no matter what price is offered), or reserve, which gives the seller the right to decline a bid.
