Real estate auctions can be an effective sales tool for all types of properties, including luxury residential and single-family homes, as well as multifamily, retail and development sites.
While the conventional stereotype of an auction is that of a vehicle to move distressed properties, the troubled scenario no longer strictly holds true. For example, we’re seeing an overall increase in auctions of luxury residences. This uptick is especially apparent in second-home and resort markets, where baby boomers and empty-nesters are looking to sell their second residences.
In general, real estate auctions offer an efficient approach to a sale that can provide several advantages.
Auctions don’t replace brokers. Many real estate auction firms work in collaboration with brokers. Typically, the auction firm offers a cooperating broker a fee to the agent who represents the buyer. For the selling broker, the compensation structure in the conventional sales agreement often remains in place.
Auctions establish the market. An auction is a market-finding tool. By bringing together a large group of buyers to bid, that establishes what the market can be for the property.
They command attention. Real estate auctions work in much the same way as those for fine art and antiques. Auctions are exciting and draw the attention of buyers from other sales occurring in the area. They also attract interest from a wide set of potential buyers beyond the property’s immediate location. For example, the auction of a premier condominium residence at the Ritz Carlton in New York generated more than 5,000 inquiries from all 50 states, and close to 1,800 international inquiries.
The sale is completed within a definite timeframe. Real estate auctions complete the transaction within a defined period of time. Knowing the precise date when the sale will be done can provide a real convenience for the seller.
The auction process is open and transparent. One of the most positive aspects of a real estate auction is its transparency. Buyers gather and see the act of bidding. Plus, many potential buyers are unsure of the property value—an auction sets a fair market value, with a pricing floor that has a wider appeal to a much larger pool of potential buyers.
Once upon a time, real estate auctions were solely for troubled properties. Today, sellers, buyers and brokers of many different types of properties can reap the benefits of a convenient sales tool.
Jonathan Cuticelli is director of Project Management and principal auctioneer at New York-based real estate auction firm Sheldon Good & Company. Founded in 1965, Sheldon Good is one of the oldest firms in the business.
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