Real Estate Auctions - When Should You Use Them?

by : Tom Wood

Real Estate Auctions have been used to sell properties successfully for many years. Do they always work? No, but if done in the right way, they ALWAYS attract attention. They ALWAYS make a property stand out from other properties on the market.

There isn't a magic formula that will always sell a property, except price. An auction gives you the ability to use price as a way to attract buyers. However, the majority of buyers that you attract are expecting a deal. So, unless your property is in a hot real estate market or is unique and highly desired, you need to expect to sell at a discount. You should expect to discount at least 10% and many times more.

If you're considering selling by auction, you need to realize that you will probably be giving up some equity for the convenience of selling fast. However, time is money, and it still makes sense for many sellers to use this method. Not to mention, there have been many auctions that have received bids right at, or higher than market value.

When should you use an auction?

1.On any property that you are willing to take at least a 10% discount. The bigger the discount the better chance for success.

2.On any property in a hot market. If you're in a market where multiple offers are common for any listed property, take advantage of that excitement and let buyers bid against each other in an open format.

3.On any good investment deal. If you have a property that needs to be rehabbed, income producing property with good cash flow, or any other type of good investment property. Investors buy based on numbers, show them the numbers!

Up until a few years ago, seller's who wanted to sell by auction usually held a "live" auction on the property. This process requires hiring an auction company and paying hundreds and sometimes thousands of dollars in fees regardless of whether the property sold or not.

Along came the Internet, and then Internet auctions for "stuff". Now Internet Real Estate auctions are starting to take hold. One of the advantages of using the Internet is that it doesn't require people to be onsite to bid. Bids can be placed anywhere a person has access to the Internet.

It's understandable why real estate Internet auctions are becoming popular. They make this successful method of selling real estate accessible to many more sellers and investors.