Selling
Real
Estate At Auction
Frequently Asked Questions From Sellers
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1.
What are the advantages of auctioning real estate versus listing
it at a stated price?
When your property is “priced,” it leaves you open to under
pricing or overpricing, and you will lose either way. If the price
is set too low, the property sells quickly but equity is lost. The
first bargain hunter that comes along finds a “steal,” perhaps
making the profit that should have been yours. Likewise, if the
price is too high, the property does not sell. It then has to be
advertised again at a lower price or negotiated through haggling
with one potential buyer at a time. Unless sold quickly and
efficiently, real estate can become an expensive liability (taxes,
maintenance, insurance, etc.). In addition, the process of hosting
repeated showings and open houses can be disruptive and
frustrating if a serious buyer does not come forth. Auctions
create a sense of urgency and produce true fair market value.
Simply put, when a group of serious buyers are brought together to
compete, it drives the price upward. The competitive atmosphere
then generates its own “buzz,” which leads to even more
spirited bidding. As a result, auction is the only method of
marketing that offers you the potential to receive more money for
your property than you would have asked if pricing it outright.
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2.
What is “fair market value”?
Fair market value is the price for which a property will sell on
the open market between a willing buyer and a willing seller,
neither being forced to buy or sell as of a specific date. Since
auctions are the purest form of free enterprise, where the laws of
supply and demand prevail, fair market value is the price that a
property will fetch at a well-advertised auction. Other factors
that come into consideration are location, age, condition,
quality, size and desirability.
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3.
What types of properties sell at auction?
All types, from vacant
land to building lots, single-family homes, multi-family homes,
commercial buildings, condos, townhouses, subdivisions, and
industrial buildings.
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4. What
determines whether my property is a good candidate for auction?
The most important factors are your motivation to sell and the
marketability of the property. The ideal candidate for the Auction
Method would be a motivated seller who owes less on the property
than what the current market is expected bring. Factors such as
condition, location and amenities are also key.
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5.
Can I auction a property that has a mortgage, taxes or liens owed?
Yes, most sellers have a mortgage and/or other liens on their
property. You have until the closing to pay off any outstanding
debts and provide insurable title to the successful bidder.
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6.
What do you mean by “insurable title”?
If a Pennsylvania title insurance company will insure the property
at closing, you have completed your obligation to the buyer. All
PaisleyAuctions property auction offerings are sold with
good, insurable titles and no liens, judgments, mortgages or back
taxes. If the title cannot be cleared, the down payment is
refunded to the buyer.
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7.
Are there different kinds of real estate auctions?
Yes, auctions can be "absolute," "subject to
confirmation," with “reserve," or with a "stated
minimum."
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8.
What does “absolute auction” mean?
A property that is sold at absolute auction means that it is
selling to the highest registered bidder regardless of price.
There is no minimum, and the seller cannot reject the highest bid
attained at the auction.
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9.
What does “subject to confirmation” mean?
It means that the property is being offered to the highest bidder,
subject to the seller accepting or rejecting the bid. Most Rogers
Auctioneers property auctions are conducted subject to seller
confirmation.
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10.
What is a “reserve” auction?
It is similar to the “subject to confirmation” auction, except
that there is an undisclosed reserve dollar amount set by the
seller. The property cannot be sold unless the bidding meets or
exceeds the reserve.
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11.
What is a “stated minimum bid” auction?
It is an auction at which the seller announces the minimum bid
before the auction starts and will sell the property once that bid
is reached or exceeded. For example, if a property “shall sell
at absolute auction at or above a minimum of $41,237," if
anyone bids $41,237 or more, the property will sell.
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12.
How does PaisleyAuctions get compensated for services?
You, as the seller, pay a commission; however, the buyer offsets
our commission in the form of a buyer’s premium. You are
responsible for the marketing expenses. For our part, we will
provide you with a budget and timetable, and we will execute the
marketing.
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13.
What is a buyer’s premium?
A buyer’s premium is that portion of the commission paid by the
buyer. It is usually a percentage of the bid price. The total sale
price includes the high bid amount plus the buyer’s premium. For
example, if a property sells for $100,000 and the buyer’s
premium is 10%, the buyer will pay a total sale price of $110,000.
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14.
What is the usual timetable for a real estate auction?
Typically, we recommend allowing 6-8 weeks from the time your
property is listed until the auction date. This schedule ensures
we have enough time for brochure distribution, posting signage,
several rounds of advertising, and previewing. If this timeframe
is not workable, we will explore other options with you.
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15.
What type of marketing campaign will you use to sell my property?
PaisleyAuctions conducts an extensive promotional campaign
for your property. The plan includes advertising (traditional
& internet), signage, our website as well as numerous other
internet sites, emails, illustrated brochures. National, regional
and local ads are run for three-and-a-half weeks prior to the
auction. Brochures are mailed to adjacent property owners, several
hundred neighbors, our database of proven buyers, and real estate
agents. The timely marketing creates a sense of urgency, which
drives the most serious buyers to your auction.
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16.
Where is the actual real estate auction held?
Depending on the location and type of property, we will either
conduct an “on-site” auction at the property under one of our
tents or an “off-site” auction either inside a hotel ballroom,
restaurant or other building suitable nearby. We will do a free
site analysis for us to determine which would be a better auction
environment for your specific circumstances.
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17.
I have not seen a real estate auction before. Can I come to an
auction just to watch?
Absolutely, we encourage anyone to attend and watch the bidding.
You will be entertained and amazed at the process. Best of all,
it's free.
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18.
How do I know whether potential buyers are qualified to buy my
property?
We use a proven system to get all serious bidders on a level
playing field before competing for your property. When
registering, bidders must meet the following criteria: (1) provide
a valid form of positive ID (such as a driver’s license); (2)
sign the terms & conditions agreeing to the rules of the
auction; and (3) submit a bank check, guaranteed funds or cash for
their initial down payment. No one may participate unless they
have properly registered. Furthermore, after the property sells,
the successful bidder will sign a bid acknowledgment form and a
contingency free purchase & sale agreement, and provide a
second down payment representing from 10-15% of the purchase
price. The bidder will agree to close within 30-45 days, and that
“time is of the essence,” meaning that if they fail to comply,
they have agreed in advance to forfeit their down payments.
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19.
Will I sign an agreement if I decide to sell my property at
auction?
Yes, you will sign a real estate listing agreement provided by
PaisleyAuctions If you would like to review a standard copy
of our agreement before signing one for your property, we will
furnish one upon request.
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20.
What paperwork will I need to provide if I list my property?
PaisleyAuctions would like to have copies of any available
documents pertaining to your property, such as the deed, the
survey, the tax ID number, and a recent tax bill. We also have a
Property Fact Sheet for you to fill out, which we will use to
describe the property in our brochures and ads.
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21.
Will potential bidders be able to view my property prior to the
auction?
Yes, in addition to the website listing, ads and direct mail
brochure, we also offer free preview by appointment or set dates
and times. The
preview is an opportunity for buyers to closely examine individual
properties prior to the auction. We strongly recommend that all
buyers preview properties before bidding, and that they take
advantage of the opportunity to bring their contractor, home
inspector or buyer’s broker with them for inspections.
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22.
What can I expect on auction day?
You will be represented by a professional auction team, and bid
assistants, plus all of the equipment necessary to conduct the
registration process and auction. We will give a presentation on
each property prior to soliciting bids. Once the auction begins,
the auction team will work with the buyers to obtain the highest
possible price. Immediately following the sale of the properties,
contracts will be signed, down payments will be placed in escrow,
and you will be on your way to closing.
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23.
What is a “bid assistant”?
A bid assistant is a staff member, usually one of the auctioneers
not currently selling, who watches the crowd for bids. Sometimes
called “bid spotters” or “ringmen,” they are extensions of
the auctioneer. It is often difficult for the auctioneer to see
all the bids coming from a large crowd; the bid assistant listens
to the “chant” of the auctioneer and scans the room for the
current bid. If a bid assistant yells out “yup,” the
auctioneer knows that he has the current bid being asked for and
will proceed to ask for the next bid.
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24.
Where does the bidding start?
At PaisleyAuctions, bidding starts wherever the bidders want
to start it. As a seller, it is important to remember that setting
a minimum starting bid is not essential, because it is where the
bidding ends that is important. The auctioneer will always
try to get the bidding started at a realistic level, but if there
are no bids, he will drop down to a lesser amount and repeat this
process until the bidders begin bidding.
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25.
What is a bid acknowledgment form?
The successful bidder is required to sign a bid acknowledgment
forms at the conclusion of the bidding. The form has the
description of the property that he bid on, the bid, the Buyer
Premium, the total with Buyer Premium and his bid number. This
form verifies that the bidder agrees that he is the high bidder.
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26.
When and where does the closing take place?
PaisleyAuctions recommends 30-day closings. However, some
sellers opt for 45- or 60-day closings for their auctions. The
closing is usually conducted at a title company.
The winning bidder is afforded the opportunity to use the
title company that we used to do the preliminary title search or
use a title company of their choosing.
Closing can also be conducted at your attorney’s office.
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27.
Is the closing different from any other real estate closing?
No, the closing is the same. The main difference between private
treaty selling and the auction method is how the purchase price is
achieved. Once the auction is over, your attorney and the attorney
for the buyer get together and arrange for the closing in the
customary manner.
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28.
What happens if the high bidder fails to close?
PaisleyAuctions immediately notifies the backup bidder in
order to secure a new purchase & sale agreement.
If unsuccessful, the high bidder risks losing their down
deposit/down payment.
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29.
What is “high bidder's choice,” and when is it used in a real
estate auction?
Properties that are similar (such as residential lots) may be sold
using the high bidder's choice method. The auction is conducted to
achieve a high bid, then the high bidder may choose any or all of
the lots in the group, each at that high bid amount. For example,
if the bidder chooses three lots, the high bid is multiplied by
three. This process is repeated until all lots have been
auctioned.
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30.
What does “auction by the acre” mean?
Land parcels are often offered “by the acre,” which means the
high bid is multiplied by the number of acres to reach the total
purchase price. For example: 150 acres x $500/acre = $75,000.
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