Selling Real Estate at Auction: Is It Right For You?
Real estate auctions are commonly misunderstood, let’s take a deeper look at selling real estate at auction.
Sep 21, 2023
Anderson Gail Farms sold at auction by Pearce & Associates Auction Company
Dispelling Myths About Real Estate Auctions
Are real estate auctions always foreclosures?
You may have heard that the only time real estate is sold at auction is in foreclosure cases. This is actually far from the truth, our company sells less than 1% of our real estate in foreclosure situations. The large majority of the time, we are working with sellers that have made a conscious and informed decision to use the auction methodology.
Are real estate auctions always sold absolute?
When a property sells “absolute”, this means that it sells to the highest bidder regardless of the price it brings at the auction. This is not how the majority of real estate auctions are conducted. The majority of the properties we sell are “subject to seller confirmation”. This is similar to selling the property with a reserve price (the lowest price a seller will accept for their property). With “subject to seller confirmation”, the seller has the ability to watch the auction play out and can decide at the end of the process whether they want to sell the property at that price or not. There are scenarios where an absolute auction can be the best course of action, but it is definitely not the most prevalent method used.
What are the main differences between a real estate auction and a traditional listing?
The largest difference between a real estate auction and a traditional listing is the fact that an auction does not place a “list price” on a property. Instead, an auction relies on the bidding process to establish a fair market value for that property. Another difference between an auction and traditional listing is that an auction operates on a fixed time frame. In the case of an online auction, the online bidding will be open for some period of time with a fixed ending date. With a live auction, the auction and bidding process will occur on a specific date. This specified time frame results in a “time is of the essence” scenario, it creates excitement and a sense of urgency from the buyers.
What are some of the Benefits of Selling Real Estate at Auction
Lets look at some of the benefits for a seller:
- No Contingencies: an auction is typically not contingent on things like financing, home inspection, etc. A property selling without contingencies is commonly referred to as being sold “As-Is”.
- Buyer Pays Fees: in many cases, the buyer will pay the auction companies commission fees, survey fees, and title/closing costs.
- Timely: a property can be sold by auction in less than 30 days and the seller gets to name the day that it will sell.
- Competitive Environment: in a professionally marketed auction, bidders from around the country will be participating in the auction and will compete against each other for your property.
Property Types That Work at Auction
The simple answer is that most property types can be successfully sold at auction, including:
- Farms
- Land
- Commercial
- Residential
- Industrial
- Vacation Properties
There are a couple of property types that may be better suited for an auction than a traditional listing:
1. Acreage
It is possible to list a large amount of land for sale for a list price. Have you considered what that same property might be worth if you were able to divide it into parcels? By utilizing our proprietary “Ultimate Choice Software” we can do exactly that. The system is a web based bidding system that allows someone to sell raw land, building lots, condos or any asset selling in a combination format. It allows bidders to bid on individual tracts or a combination of tracts throughout the auction. This expands the buyer pool drastically, it will open up the opportunity for buyers only interested in a small parcel to participate along with buyers interested in the property in its entirety. This results in increased competition and a higher value per acre for your property.
2. Unique/Highly Desirable Properties
If you own a property that is very unique, it can be hard to find comparables to inform an accurate listing price. In this scenario, an auction can be a fantastic “price finding” tool by utilizing the general public to determine its fair market value. In the case of highly desirable properties, it would make sense that many buyers will be interested in the property. An auction provides the perfect opportunity to create a competitive bidding environment around your property.
When considering a real estate auction, your personal situation and motivation for selling are typically more important than the property type.
Circumstances That Work Well for an Auction
Below are some of the situations that are best suited for an auction.
- Needing to Sell a Property Quickly and on Your Timeline
As mentioned above, selling a property at auction can occur in 30 days or less and the seller is able to name the date that it will sell.
- Needing to Sell Real Estate and Personal Property
If you are considering selling your real estate and all of the contents, an auction could be a great solution for you. This scenario is common in many property types including residential, commercial, and farmland. Typically, the contents and the real estate will be sold in two separate auctions. The personal property auction will end about two weeks before the real estate auction ends. The personal property auction will also generate interest in the upcoming real estate auction.
- Properties That Are Part of an Estate
If the property is part of an estate, an auction can be a great option to consider. Many times, estate executors do not live near the subject property, do not want to pay taxes and utilities, and do not want to spend a large amount of money repairing the property in preparation for a sale. An auction can alleviate these issues by selling the property quickly and in “As-Is” condition.
- Properties that Require Significant Repairs
If the property is going to need significant repairs and rehab before it can be listed traditionally, an auction can be a an effective way to sell the property in “As-Is” condition without need of repair.
Why Sell With Pearce & Associates Auction Company?
At Pearce & Associates, we have decades of experience selling real estate at auction. We have been trusted by many types of clients to sell a wide variety of property types. We have had the privilege of conducting auctions for large corporations including AT&T, KBR Construction, ERS Construction, and Alabama Power. Some of these clients have worked with us for over 15 years. As experts in conducting and marketing online auctions, we are able to continuously provide service and results that are clients are pleased with. Our company is a part of MarkNet Alliance, this alliance has over 65 partner companies all across the United States. Our alliance sells over 3,000 pieces of real estate each year. When you hire Pearce & Associates Auction Company, you don’t just get our experience and resources, but also the experience and resources of our entire alliance. We have a database of nearly 800,000 bidders worldwide. We are licensed real estate professionals in South Carolina, Alabama, and Florida, and have offices in Charleston, SC, Birmingham, AL and Gulf Shores, AL.
"Dating back to 2019, Alabama Power Company (“APC”) has engaged Auction By Pearce to conduct several auctions of APC-owned properties throughout the State ofAlabama, ranging from smaller remnant parcels, to larger acreage tracts, as well as developed properties containing improvements. We have always found Chip Pearce and his team to be professional, responsive, and they have provided excellent customer service. We have been very pleased with the work they have done, and, as such, intend and hope to continue our relationship well into the future."
-Tim Davis, Corporate Real Estate Land Sales Supervisor at Alabama Power Company