Auction vs Traditional Selling

April 13, 2023

Auction vs Traditional Selling

Selling a home can be done in a variety of ways, and one option that may be worth considering is selling at auction. In this post, we'll take a closer look at the benefits and drawbacks of auctions,  the ins and outs of how real estate auctions work, and why it was the right choice for this Noe Valley home.

Contrary to popular belief, real estate auctions are not just for distressed sales or foreclosures. In fact, they can be a powerful tool for maximizing your return on investment. The auction process differs from traditional real estate sales in three key ways: pricing, format, and a set date.

Firstly, the pricing structure in auctions involves a start price that allows for negotiation upwards with no ceiling. In comparison, traditional sales rely on a list price that indicates the minimum amount that the seller is willing to accept. Secondly, in auctions, all inspections, reports, and disclosures are completed upfront, and the property is sold as-is. Buyers are required to conduct all due diligence before signing a non-contingent purchase agreement. In contrast, in traditional sales, the buyer signs a purchase agreement that may contain contingencies. Finally, auctions have a set date – the auction day – which creates a sense of urgency for buyers to make a decision and informs them that the seller is motivated to sell. This can prevent the home from sitting stale and waiting for offers.

Selling a property at auction has its pros and cons, and the decision of whether to do so certainly depends on the seller's goals and priorities. What's your goal? We'd be happy to share our experience with auctions. 

With that in mind let’s dive into some of the pros of Auction Sales.

  • Quick Sale: Auctions are often completed within a few weeks, allowing sellers to sell their property quickly. This is especially useful for those who are looking to sell their property fast, such as those who are relocating or facing financial difficulties.
  • Sense of Urgency: Auctions create a sense of urgency among buyers, which can lead to multiple buyers bidding on the property. This can result in a higher sale price for the seller, as buyers compete to secure the property.
  • Transparency: Auctions are transparent and open, providing buyers with all the information they need to make an informed decision about bidding on a property. This can help to build trust and confidence among buyers, which can increase the likelihood of a successful sale.
  • Reserve Price: Auctions allow sellers to set a reserve price, which is the minimum price they are willing to accept for their property. This ensures that the seller will not be forced to accept a sale price that is lower than their desired amount.
  • Competitive Bidding: Auctions create a competitive bidding environment, which can lead to a higher sale price for the seller. This is because buyers are motivated to outbid each other in order to secure the property.
  • Reduced Time on Market: Auctions can help to reduce the time a property spends on the market. This is because auctions create a sense of urgency and a clear deadline for buyers to make their bids, which can encourage them to act quickly.
  • Increased Exposure: Auctions can increase the exposure of a property to potential buyers, as they are advertised widely and often attract a lot of interest. This can help to ensure that a property is seen by a larger number of potential buyers, increasing the chances of a successful sale.
  • Fair Market Value: Auctions can help to ensure that a property sells for its fair market value. This is because the bidding process is transparent and competitive, which can help to ensure that the final sale price reflects the true value of the property.

When considering selling your property at auction, it's important to keep in mind some potential risks as auction fees can be higher than traditional selling fees. For example, the property may not sell if the reserve price is too high. Competitive open bidding can work both ways. It can drive a sales price upwards but also runs the risk of a lower offer if there are few bids and the parties are not aggressive. Timing is important. Successful auctions need to ensure buyers have enough time to conduct thorough due diligence.

To mitigate these risks, it's crucial to work with a trusted real estate agent with experience in auction sales. They can provide valuable guidance on preparing the property for auction with disclosures in place, developing a marketing strategy, and setting a realistic reserve price based on the property's value. By following these tips, sellers can increase their chances of a successful auction sale and achieve the best possible outcome.


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