Why Are Real Estate Auctions so Successful? Real Estate Auctions: Win-Win Marketing for Sellers, Buyers & Agent

Imagine your ideal real estate sales technique. It would probably be one that sold the property quickly at a price that both the seller and buyer consider fair and that gave the real estate agent a good fee or commission too. Well, you don’t have to tax your mind trying to figure out what this technique might be because it already exists. It’s called a real estate auction.

Auctions are an effective, easy and fun marketing tools that are rapidly growing in popularity as a means of selling real estate. No longer simply a way to dispose of property after a bankruptcy or foreclosure, auctions have become a legitimate way to sell real estate. And they work for all types of property, including residential, commercial, industrial, agricultural and vacant land. In fact, auction sales of real estate have more than quadrupled since 1980 and are expected to increase each year.

Why Auctions Work

Why are real estate auctions so successful? Because they change the direction and focus of the sales effort in several important ways:

1. From waiting for an offer to simulating the market make an offer
2. From reducing the price (negotiation) to building a price (bidding)
3. From valuing only price to valuing the time involved in getting an offer
4. From competition among properties to competition among buyers


Let”Ēs look more closely at how auctions differ from a negotiated sale. One of the most difficult parts of the traditional listing process is setting the asking price. If the price is set too low, the property sells quickly and the seller loses money. If the price is too high, the real estate might not sell for some time, resulting in holding costs that can eat considerably into the owner’s proceeds. Besides the sale date being uncertain, the offer is usually subject to negotiation and contingencies, such as financing and inspections, which can adversely affect the price and make the closing less definite.

The auction process flips this over. The seller establishes the date and terms of the auction, such as minimum bid (with reserve) or absolute auction (without reserve). Bidding sets the price. There is no negotiation and the property is sold "as is". This makes inspections part of the pre-sale due diligence process, not the post-offer negotiation process and makes closing on the accepted bid almost a certainty.

Also, auctioneers typically allocate more for marketing than is the case for a traditional listing. In fact, well-planned marketing efforts are key to an auction’s success. Consequently, auctioneers use strong media advertising, targeted direct mail, internet advertising and other aggressive marketing techniques to get the word out about the auction and attract bidders to it. And because auctioneers often advertise in more than just the traditional places - for example, placing ads for vacation homes in the sports section - their ads attract bidders who might not be actively seeking a particular property but from whom the top bid comes.

Everyone Benefits

From the Seller’s point of view, auctions provide a powerful tool for selling their property quickly and at a fair market price. That’s because auctions often generate more interest and greater value than other sales techniques for several reasons.

By establishing a definite sale date, an auction creates a sense of urgency that creates buyer interest. Having a definite sale date gives auctions another advantage. The seller usually gets the proceeds shortly afterwards.

However, sellers are not the only ones who benefit from the real estate auction. Buyers like the fair competition that auctions provide -- all bidders have a chance to buy the property -- and the fact that they determine the purchase price. Buyers also have an opportunity to do inspections and due diligence before they bid, so they have a better idea of what they are purchasing and greater certainty that the top bidder will get the property.

Real estate agents benefit too. Auctions can increase not only their sales and market share but also their fees and commissions. They can even get a commission by bringing the winning bidder to an auction. Because auctions can help customers achieve their goals for selling a property, real estate agents can strengthen their reputations and get customer referrals for more business. Also, by cooperating with an auctioneer, the agent can generate leads from the bidders who attend the auction but did not end up with the property.

"Auctions Produce Results for Sellers, Buyers and Agents."