Types of Auctions
There are two types of auctions – Absolute and Reserve.
An Absolute Auction is one in which the property is sold to the
highest bidder regardless of price. The advantage of an Absolute
auction is that bidders know the property is going to sell without
reservation of price. Thus it tends to generate more interest among
potential buyers. In an Absolute auction the Seller cannot bid on the
property nor can anyone bid on the Seller’s behalf. If an auction is
not advertised as Absolute, you can presume that it is a Reserve auction
A Reserve Auction is one in which the Seller can put a minimum,
or reserve price, on the property. The advantage of the Reserve auction
is that if the property doesn’t bring what the Seller needs, it does not
have to be sold. The disadvantage of a Reserve auction is that it is
usually not as effective in generating interest and attendance among
potential buyers. In a Reserve auction the Seller may: 1) set the
minimum amount, 2) have the sale price subject to confirmation, 3)
accept or reject the final bid, or 4) designate someone to bid on the
Seller’s behalf, with proper disclosure.
What is a Buyer’s Premium?
A buyer’s premium is
a percentage added to the bid to determine the final selling price of
the property. For example, if there is a 10% buyer’s premium and the
final bid is $100,000, the final selling price is $110,000. The buyer’s
premium is paid to the seller and is in turn used to assist the seller
in paying the costs of the auction. These costs usually include, but
are not limited to, advertising, commissions, and other costs that may
be incurred in bringing the property to auction.
The use of a buyer’s premium does not mean the buyer must pay more than
originally intended. For instance in the example above, if the buyer
intended to only pay $100,000, they should stop bidding at $91,000. In
that case a 10% buyer’s premium would make the final selling price
$100,100.
Most of our real estate auctions include a buyer’s premium. However,
most of our personal property auctions do not. Whether a buyer’s
premium is used, should be disclosed in the advertising or at least
addressed prior to the auction. If it is not, feel free to contact the
Auctioneer and ask.
Pre-auction Inspections
Real Estate:
For nearly all real estate auctions there are one or two prescheduled
“open houses” several days prior to the auction. If you are not able to
attend the “open house” we will try to arrange a separate time for you
to view the property.
In nearly all real estate auctions, the property is sold “as is” with no
condition or contingency. That includes inspections such as home,
termites, radon, lead-based paint, etc. We want potential buyers to be
as knowledgeable about the property as they care to be. Thus, potential
buyers are welcome to get any kind of inspection they want but it should
be done prior to the auction; it cannot be used as a negotiating item
with the Seller; and the potential buyer must pay for the inspection.
Personal Property:
The public is welcome to inspection the personal property prior to the
auction. The inspection times scheduled vary depending on the type and
amount of property being auctioned. In most cases the inspection time
is indicated in the advertising. If not, feel free to call the
Auctioneer to determine when the pre-auction inspection is scheduled.
Buying Real Estate at Auction
As more sellers are offering their real estate for sale by auction, more
buyers are entering the market place by purchasing properties at
auction. Some of the advantages of the auction method for buyers are:
1)
Pre-established terms and conditions. This puts all potential buyers on
a “level playing field” in their opportunity to purchase the property.
2)
Open
forum environment. Nearly all auctions are conducted in an open market
forum whereby all bidders have the privilege of seeing who is bidding
and observe and establish the bidding increments.
3)
Establishes the market value. Buyers seldom want to pay more for a
property than they have to. In an auction, the buyer has the confidence
of knowing that they had to pay just enough to get the property,
otherwise the second place bidder would have gotten the property at the
next lowest bidding increment.
4)
Potential for buying at a price lower than expected. Most bidders come
to an auction with an amount in mind as to how much they plan to pay for
the property. If the bidding stops below the amount they were willing
to pay, they have saved money. If the bidding goes higher than what
they were willing to pay, the bidder still had the option to stop
bidding or to continue bidding.
Knowing the Terms and
Conditions
This is a very important part of the auction that the buyer should be
aware of. The terms and conditions of sale will vary among real estate
auctions and among personal property auctions. Potential buyers are
advised to be fully aware of the terms and conditions of sale before
bidding on the property. For example, for real estate auctions, key
terms of sale would be 1) how much down payment, 2) what forms of
payment are acceptable, 3) date of closing and possession. For personal
property auctions, key terms of sale would be what forms of payment are
accepted, and when must items be removed from the auction site.
Registering for the Auction
We assign bidder numbers to all persons interested in bidding at the
auction. The registration process is very simple. When you arrive at
the auction please go to our auction office. The office staff will
request to see your driver’s license to record your name, address, phone
number, etc. You will then receive your bidder card with your bidder
number and you may proceed to inspect the property. When the auction is
scheduled to start, the Auctioneer will assemble the crowd and verbally
review the terms and conditions of the sale.
Bidding Options
If you want to bid on a piece of property, whether personal property or
real estate, but are not able to attend the auction, you may still have
the opportunity to bid. This is what is called an absentee bid. In
some cases you can make an absentee bid by telephone or internet by
designating the Auctioneer or his staff to bid on your behalf. If you
wish to bid in this manner, you must contact the Auctioneer and make the
necessary arrangements prior to the auction. |
