How does auction work and what are the benefits to auction sellers and auction buyers?
An auction is a highly efficient and expeditious way to sell any type of real estate, including residential, commercial, agricultural properties and more. The terms of auction are straightforward and competitive bidding generates the true market value for properties. You might have an idea of how auction works, in general. But do you know how a property auction works? Who benefits from the real estate auction process? Or how you can buy a house at auction? In this guide, you’ll learn:
How Do Real Estate Auctions Work?
Most of the work that leads to a successful auction occurs before the event. The process focuses on the implementation of a variety of proven methods to promote your property to prospective buyers. The preauction marketing process takes approximately 30-45 days — and often less than 30 days. At Cates Auction & Realty Company, our time-tested three-step auction method entails:
Step 1: Determining the Timeline and Approach
We’ll set up a convenient time for you to meet with our experienced auction team to review your situation. We’ll conduct a thorough evaluation of your property and a comprehensive market analysis. We’ll also discuss auction costs and scheduling, as well as your goals and financial requirements. This enables us to recommend the best approach and strategy for maximizing your results.
Step 2: Promoting Your Property
Next, we’ll develop and execute a well-planned, professional and property-specific marketing campaign to market your property and the auction event. Given the relatively short timeframe leading up to the auction, it’s imperative to employ a targeted marketing strategy that will engage a high volume of qualified bidders quickly. We’ll use a combination of promotional channels, including:
- Print media
- Online marketing
- Social media
- Direct media
- Multiple listing services (MLS) and additional listings
We’ll implement these methods simultaneously and repeatedly during the brief promotional window to saturate the market. Each will also include a clear call to action to generate interest and motivate bidders to attend the auction.
During this step, we’ll also stage presale inspections to enable prospective buyers to gather information about your property. We’ll also encourage preauction offers and advance online bids to increase the likelihood of a successful event. We’ll provide you with detailed weekly updates as this step unfolds.
Step 3: Auctioning Your Property
You can allow prospective buyers to bid on your property online, on-site or a combination of the two methods. If you decide to use an online auction, bidders will preregister for the event and submit their bids via the internet. We’ll choose the method we believe will bring the highest return. Buyers will typically have several weeks to bid on your property, giving them the flexibility to engage in the process at their convenience. The winning bidder must pay a deposit online to hold the property until completing the transaction.
During an on-site auction, buyers can attend in person or place live bids online. The winner must pay a nonrefundable deposit and sign a contract immediately after the event. Cates Auction will work with all parties to ensure a smooth, seamless closing.
Benefits To The Auction Seller:
A typical auction results in a sale in 30 days or less.
The sale cycle is compressed and buyers are motivated to act quickly. No longer does a home linger on the market for months.
Property auctions provides date certainty for sellers.
Plan your sale when it makes the most sense for you. You set a date for the auction, and you gain a market-value return on your investment on that date. Protracted and unknown time on the market is not a factor. The seller knows exactly when the property will sell and can plan accordingly.
A real estate auction returns your home’s true market value.
There is no risk of overpricing or underpricing the property. In an ordinary listing you’re forced to pick an asking price based on recent sales and gut feeling. But sell too quickly, and your property may have been underpriced. If it lingers on the market, it was probably overvalued. A real estate auction returns your home’s true market value through competitive bidding.
Saturation marketing generates the greatest possible exposure for your property.
All properties benefit from a professional, customized advertising campaign. Because the sale date is pre-determined and the marketing period is compressed, a complete marketing plan can be built with daily and weekly activities. Multiple channels can be hit simultaneously and repetitively. This generates the greatest possible exposure for the property. The key to maximizing your return is capturing as many prospective buyers as possible.
Auction buyers come ready to put down a sizable non-refundable deposit.
Buyers come qualified and prepared to buy. An ordinary contract allows buyers multiple “outs” with little or no recourse. Auction buyers come ready to put down a sizable non-refundable deposit. And they are willing to buy the property without the contingencies that so often lead to failed closings and extended listings.
Selling at auction reduces long-term carrying costs.
Quick disposal reduces long-term carrying costs such as mortgage, taxes, insurance & maintenance. This ultimately saves you money, in addition to the extra value you capture through sale in a competitive auction environment.
Auction reduces stress, extra work, and showing hassle.
The stress of negotiating is eliminated because auction terms are fixed for all bidders. Your buyer has already agreed to purchase the property “as is” and without any contingencies. There is no requirement to do work on the property as it sells as-is. Many real estate agents will recommend a laundry list of improvements before even listing. Traditional buyers often produce numerous demands for work they want done. Auction avoids both situations. The headache of ongoing showings is also reduced. Since the property only needs to be marketed for a limited time prior to the auction, all showings must take place in that prescribed period.
Contingencies are not allowed.
Contingencies (for inspections, financing, appraisals, etc.) are not allowed. Additionally, the high bidder pays a non-refundable deposit as commitment to complete the closing process as contracted.
Auction heightens buyer interest and attracts attention in a crowded market.
Auction heightens buyer interest and attracts attention in a crowded market. Buyers no longer have the luxury of waiting for a price reduction or submitting multiple low offers on a variety of properties. They understand that your property will be sold on the published date and they act accordingly.
Benefits to the Auction Buyer:
- Smart investments are made as properties are usually purchased at fair market value through competitive bidding
- The buyer knows the seller is committed to sell
- Auctions reduce the time required to purchase property
- Auction sellers are not holding out for unrealistic list prices
- In multi-property auctions the buyer sees many offerings in the same place, at the same time
- Buyers determine the purchase price
- Auctions eliminate long negotiation and waiting periods
- Purchasing and closing dates are known in advance
- Online bidding offers buyers the ultimate convenience in purchasing real estate
- Buyers know they are competing fairly and on the same terms as all other buyers
- Buyers receive comprehensive information and disclosures on properties via the “Property Information Package”
Why Customers Choose Cates Auction
The decision to sell at auction is followed closely by deciding which company will do the best job of maximizing the value of your property. Cates Auction has over 70+ years of auction experience in the greater Kansas City area and employs highly specialized auction professionals to help you get the best return for your investment. The Cates Auction reputation for honesty, integrity, and professionalism began in 1942 and is highly valued as a core part of company culture. We believe in proving custom auction solutions for buyers and sellers alike and leverage our partner network to bring you the best experience while selling or buying property.
Contact Cates Auction Real Estate Company
Would you like to talk with us about a specific property you are considering selling at auction? Just complete our Property Analysis Form and we’ll follow up with you right away. No pressure or obligation whatsoever. We sell it all!
If you’re interested in learning more about buying real estate through our auction firm, feel free to contact us directly and we’ll be happy to answer your questions.