The Auction Process
In today’s options of marketing methods, we are seeing a huge increase in the people who choose the auction process as their first choice of marketing. Virtually anything can be sold at auction. Real Estate, equipment, livestock and personal property are just a few of the auction areas. While much of the auction terminology is generic to all type of auctions, we will address real estate in this informational forum.
A real estate auction is the sale of real property in “As-Is” condition for the fair market value, using a competitive bidding process.
“As-Is” is a legal term and concept used to disclaim liability for an item being sold. “As-Is” denotes that the seller is selling, and the buyer is buying, an item in whatever condition it presently exists, and that the buyer is accepting the item “with all faults,” whether or not immediately apparent. The Seller has an obligation to disclose any material defect and the Buyer has the ultimate responsibility to determine the condition and usefulness of the property being sold.
Every Auction is unique and must be evaluated on its’ own merits. The following information is a quick overview to help sellers learn more about the auction process. These events are in the order of occurrence.
Prior to selling real estate by auction, it is important to have sufficient knowledge of the property as well as knowledge of the current market. Entz Auction & Realty conducts due diligence by gathering facts and information about property and includes it in information available to all bidders. Entz Auction & Realty will work with the Seller to carefully evaluate their objectives and preferences to insure a successful marketing event. Roger Maris, world renowned baseball player said it best when he said “you hit home runs not by chance but by preparation.” These consultations and property evaluations are done at no cost or obligation to the Seller.
Once due diligence is complete, Entz Auction & Realty will develop a proposal to outline the details of the auction process. We outline how and where the property is going to be marketed.
The auction proposal includes a:
- Property Analysis
- Marketing Plan
- Advertising Budget Proposal
- Financial Projections
- Fee/Expense Structure
- Closing Information.
We will prepare an Auction contract outlining the terms and responsibilities of all parties for the Seller’s review and signature.
Property Information Package or PIP
The Property Information Package (PIP) is a comprehensive packet outlining important details of the property. It may also contain demographic and geographic information relevant to the property being sold.
The PIP helps all potential buyers better evaluate the true value of the property. Buyers come to the Auction assured they are getting good value for their money.
Marketing Plan and Budget
The marketing plan is a major factor in the success of the Auction process. The plan must be customized to the Seller’s timeline and expectations. The marketing plan must be targeted to the most qualified and likely buyers. It must be attractive and informational to spark the interest of potential buyers. Because the marketing window prior to the auction is generally short, the marketing program must be comprehensive, intense, and on target. Real estate marketing efforts typically begin five to six weeks prior to the sale date.
The auction begins promptly at the appointed time. The process begins with the Auctioneer making opening remarks, summarizing the terms of sale, the methods of bidding, and any last minute changes or disclosures. These comments usually take only a few minutes, concluding with the auctioneer answering any final questions from the potential buyers.
The Role & Responsibility of the Bidder Assistant
The Bidder Assistants are auction staff members trained in the auction process and are well informed about the property being sold. They convey the bids to the Auctioneer and answer any questions a particular bidder may have. Bidders place a bid by raising their bidder card or by signaling to the bid assistant or the Auctioneer. Any tie bids or other issues regarding who has the high bid are always resolved by the Auctioneer, who has complete and final authority.
The Auctioneer says SOLD!
From the first bid, things move quickly with bidders offering their bids up to the price they are willing to pay. The bidding process will slow down and when the Auctioneer determines the final bid has been made, the Auctioneer will announce the parcel “sold” and identify the high bidder.
If the auction is “Subject to Confirmation”, the Auctioneer may “Rest the Bid” and take a short break to speak with the Seller.
In a “Subject to Confirmation” auction, the seller retains the right to accept or reject the high bid within a specified period of time.
If the auction is for a single property this concludes the auction event. The Buyer and the Seller executes the Real Estate Purchase Agreement.
CLOSING the Transaction
The closing process begins with the abstract being brought up to date. In some states where abstracting is not used, a title insurance commitment is obtained. A title opinion is written by the buyer’s attorney and any title defects are corrected by the Seller. Closing on the property typically takes place within 30-45 days from the date of the auction. Closing is not contingent on anything other than clear title.