What does a real estate auction involve?
A real estate auction involves the public sale of property through open, competitive bidding. It is considered to be a high intensity real estate marketing approach that promotes expedient buying and selling.
How do public auctions and foreclosures differ?
Generally, a property taken to public auction is for sale by the owner and commonly the reasons behind the sale do not involve any financial distress, instead the owners have chosen auction as their preferred method of sale. The auction method has become increasingly used by sellers due to high profitability and expedient processing.
A foreclosure however is a forced sale of a property to satisfy a debt in default. Generally the properties sold in these types of auctions are sold without a preview and the auction is held in the county courthouse that the property belongs to.
What are the bidding requirements?
The bidding requirements for a public auction and foreclosure are cash or certified funds in the amount of the pre-determined deposit. Personal checks and letters of credit are NOT acceptable.
Are auction sales reliant on an inspection?
All sales are on an "as-is" basis meaning that they are sold in their current condition and no warranties are made on the condition of the property or appropriateness for a particular use. It is the responsibility of the buyers to practice due diligence prior to an offer.
Once the bid is accepted what happens to my deposit?
The deposit will be credited towards the purchase price of the property and placed in escrow. Please note; it is the purchaser's responsibility to obtain financing. If you plan to use a mortgage to purchase the property, we recommend that you apply for the loan immediately.
What is the procedure in the case that the buyer cannot settle on the property?
A well structured real estate auction is managed to minimize these types of situations. However, these situations may occur. In the rare case that these situations arise, the auction seller can consider the next highest bid, from a buyer that gives a reasonable offer closely resembling the amount initially offered by the buyer that failed to close.
Nonetheless, if a buyer fails to settle on a property, the buyer will have defaulted on the sales contract in which case the buyer may loose a percentage or all of their deposit and may be held responsible for the cost of resale for the property.
When can I view the property?
Commonly, for public auctions, the property is only available for viewing 30-90 minutes prior to the beginning of the auction.
There are no previews on foreclosures. The property is not open to inspection, however you can view the property from the perimeter however you must follow private property regulations as legally the deed holder still owns the property.
What is the procedure in the case that the seller cannot settle on the property?
Our contract states that the title of the property must be clear of liens and judgments. Century Max Realty, Inc. does not conduct individual title search. In case that a free and clear title cannot be provided by the seller, the buyer will be refunded their deposit.
Foreclosure sales the same rule applies, if the seller cannot deliver free and clear title, the deposit is refunded and the sale is considered cancelled.
Who bears the closing costs?
The buyer is responsible for all closing costs as stated in the contract. These costs can include title fee, recording costs among others.
What is an absolute auction?
In an absolute auction there are no reserves or minimums. All the properties will be therefore sold to the highest bidder on that day. Foreclosures on the other hand cannot be absolute.
What is the Buyer's Premium?
The buyer's premium is a percentage added as a service charge added to the final bid of public auctions. Century Max Realty, Inc. charges a 10% service charge additional to the winning bid. As such, the buyer pays the fees and not the sellers. Alternatively, foreclosures do not have a buyer’s premium.
What advantages does a seller have in an auction situation?
Advantages to a seller in an auction include selling you property in its current condition for cash which results in the avoidance of repair and upgrade costs. There are no commissions or settlement costs associated with the auction as well as no financing contingencies. Due to the expedient nature of these processes there are no feasibility studies and the process can be closed in 30-45 days.
Most of the parties interested come to auctions with the intent to buy. The qualification process requires a deposit or certified cashier’s check which results in a group of buyers ready to decide. They are motivated to buy before the auction is over and this high intensity marketing strategy has proven to be more effective than commonly used forms of advertising. Costs associated with the shopping process are avoided and the seller controls the process as sale dates are known which can aide in avoiding costs related to mortgages, insurance and other real estate costs associated with the time a property remains in the market which is conductive to investors of real estate property as well.
Auctions allow sellers to have liquidity in their assets, and as an aggressive approach, it reduces the market time, and both seller and buyer have the ability to satisfy their price requests. This creates a fast and uncomplicated process where the terms are known and closed in a smaller time for processing. As auctions can be demand driven, prices can actually reach higher levels and it is an exciting process.
How can it be ensured that I get a fair price?
Generally a fair price is based on market price, meaning whatever value you are receiving for the property should be comparable to what other parties are willing to pay for a property of similar characteristics in the current market. An appraisal illustrates what value a can be expected of a property to bring at auction. The appraisal given is based on these figures and it gives an estimate of what the value of the property is within the current marketplace.
I have property to sell, what expenses am I responsible for?
The only expenses involved with our selling process are adverting costs. These costs are pre-determined and included in the service contract and are dependent on the type of property being sold as each property has its own advertising requirements.
What are the benefits of selling your property at auction?
A real estate auction benefits everyone in the process. Sellers can sell their properties expediently thereby saving in carrying costs including taxes, interest and maintenance. In the same manner the buyer can take advantage of the good prices that result from competitive bidding. The process is there for all to see and an auction allows a grater amount of pre-qualified, eager buyers and sellers to participate in the auction process resulting in a favorable and fair market price as expedient process. For agents this means a greater number of sales, in a smaller amount of time and this also results in increased profits.
What factors determine the success of an auction?
Factors that influence the success of an auction include:
- Appeal of the property that is being sold. This includes condition, location and other features.
- Marketing and advertising efforts focused on prospective buyers.
- Clear and realistic expectations of what the property can achieve. This applies to both buyers and sellers.
- Optimum selection of the auction type that will bring the greater benefit and best fit the needs of the buyer and seller.
- Professional and effective management of the auction and closing process.
- Due diligence on the buyers part so that they are informed about the property and the conditions of the offer.
What should I look for when attending an auction?
- Professional and knowledgeable staff managing the auction
- Clear and expedient registration process
- Availability of bidder informational material including the sales contract for overview, financial services, and property details during the auction including visual aids
Are all properties suitable for auction?
The main property types that are sold by auction include residential properties, land, and commercial property as long as they are suitable for selling. Some variables are taken into account when determining whether a property would thrive in auction which include market analysis, property condition and seller state.
If a property doesn't sell auction day is it still possible to market it?
Since the property has been exposed there are options open for it to sell even if the sale does not occur at auction time. Offers may be made after the auction date and sometimes the property is sold even before the auction occurs.
Don't real estate auctions depress home values?
Auctions function at true market value so they do not add or take away from any other selling process or home value.
Who usually buys at real estate auctions?
An auction is open to anyone. Buyers include first time home buyers who find that the auction scenario offers them opportunities that otherwise they would not have, also auctions commonly cater to people looking for investment properties or second homes.
How are properties advertised for auction?
Marketing plans are crucial for the success of an auction. Mass communication is essential and it may consist of different channels such as print and media that creates interest in the properties for sale and it varies depending on the intensity required and the existing budget and the market that needs to be targeted. Promotional items may include direct mail, trade magazine publications, local and regional media, signs and phone solicitation. Century Max Realty, Inc. has experience with the marketing procedures and will facilitate all the services needed to successfully gather a robust pool of interested buyers that will create the competitive environment needed for a successful auction.
What are the advantages to a buyer in an auction?
An auction allows the buyer to be certain that the seller is absolutely committed to sell and the auction itself obligates the seller to sell following the terms of the auction. A buyer is exposed to many options that they can compare and choose from as well relevant financing options. Also, the buyer can be confident that they are getting the fair market price for the property and can take advantage of the negotiation power that is inherent to auctions. If a buyer is not completely satisfied with their purchase they have time to withdraw their offer until the gavel falls and they can complete their purchase much faster than in a conventional sale.
How long to I have to close on the property?
Closing time is dependent on the property. A common time frame is 30 days, but you should refer to your contract for specific details.
Are tax sales and foreclosure sales the same?
No. During a foreclosure the owner has no right of redemption which means that the owner has no right to pay off the debt and take back the property. On a tax sale however, there is a time allowance for the owner to satisfy the tax debt and keep the property.
What happens if the property I purchase at a foreclosure sale is occupied?
A real estate attorney can guide you through the process of filing a "Writ of Possession" through your local Circuit Court.
Why should real estate agents participate in auctions?
Auctions have become increasingly popular with real estate agents that see the benefits of this type of process. They have become aware of how auctions help their industry by providing time and cost benefits for both buyer and agent. Auctions allow agents to participate in auction with different roles as they can act as agent, referrer or buyers. Agents should contact the particular auction for details regarding terms and conditions relating to commissions, sales and contracts. An auction can be a meeting place for interested buyers, resources and can provide activity in the particular real estate market area.
Other reasons that can be beneficial about an auction can be but are not limited to:
- Time benefits resulting from having qualified buyers
- New purchasing and selling options
- Increased revenue and market share
- Common ground for selling with reliable sources
- Networking opportunities for agents, buyers and sellers
- Property exposure and selling opportunities are maximized
Does Century Max Realty, Inc. pay broker fees?
Brokers are a valuable resource during our public auctions. We incur broker costs for referrals, if they are the listing agent, or if they are a representative of a buyer during the auction. The broker fee paid depends on the type of service that they are providing during the auction proceedings. Broker referral fees are not paid for in the case of foreclosures. |
