Auction Basics & Benefits

Real estate auctions have become very popular in the southern and western United States, especially in major cities where property prices are rising, due to low-interest rates, high demand, and limited inventory. Here in the Washington D.C. metro area, we are beginning to see the same real estate dynamics. The southern and western U.S. states dramatic increase in selling and buying real estate at auction may be an indicator of the soon to be “norm” as people become more educated about the auction process and its advantages.

Real Estate Auctions in foreign countries such as in Australia make up nearly 40% of all residential and commercial real estate sales. Auctions are even more prevalent in Australia’s major cities. In fact, Sydney and Melbourne saw an average of 50 percent for home sales.

In the U.S., residential real estate auctions became more common after the housing crisis as new platforms were developed to auction bank-owned homes online. With today’s highly competitive and increasingly expensive housing market, some auction platforms are incorporating consumer-friendly features to cater to more traditionally minded buyers and sellers who are increasingly looking to the auction market to buy their primary residences.

The growing popularity of auctions makes sense when you consider they offer a transparent means to purchase real estate compared to opaque processes associated with the standard sales approach used by real estate agents in which buyers are often outbid because they did not have the opportunity to increase their offer, thus, hurting both buyers and sellers. Consumers should consider auctions for the following key reasons.

  • Fair market value: Buyers decide on the fair market value of the property. There is efficient price discovery during the open bidding process, and both buyers and sellers can understand how desirable the property is by seeing how many bidders are competing and how quickly offers are rising. As a result, Buyers can feel more confident about their offer knowing that they are paying exactly what the current market dictates, and home sellers can feel better about getting a fair market price.
  • Less time spent on marketing a home: A traditional approach to selling a home takes weeks or months to complete while a live auction typically only shows potential buyers the house on one given day or, for online auctions, approximately a week. In an ideal scenario, at the end of that day or week, the property is sold. This limits the number of marketing efforts that sellers must deal with, such as hosting numerous open houses.
  • Fast, convenient and final sales: In an auction, the seller determines the definitive date that the home will sell, which can be helpful for the seller in terms of planning their move or balancing other financial obligations. In turn, interested buyers can come to the auction with their pre-approved mortgage ready to buy the home. At an auction, sellers are in control via setting the minimum price they are willing to take, and buyers know immediately if they have the accepted bid on the property as soon as the auction closes. Given the quick sale, homeowners can also save by reducing (or eliminating) the time they have two mortgages if they already purchased a replacement home compared to the much longer time frame associated with a more traditional approach to selling a home.

 When Is The Best Time To Auction Real Estate?

Auctioning a property when it first comes on the market has tremendous advantages over the traditional sales method. Statistical data clearly indicates that the highest amount of interest in a newly listed property is in first 30 days of when a property is first placed on the market. 

An auction of a property in first 30 will often deliver better results for a Seller over the traditional sales method. Auctions do not cap or limit the sale price that the traditional sales method does. The excitement that comes with an auction delivers completive bidding that will drive up the price often beyond the traditional “fixed” asking price determined with the traditional sales method. In addition, auctioned properties are sold in “as is” condition with no contingencies and close in 30+/- days from the auction date. Auctions eliminate the Sellers carrying cost and the entire auction process takes 60 days+/- from the listing date to the closing.

Love Auctions No Risk Sales Approach

Absolutely No Risk

Before the auction, the Seller will determine a “Reserve Price”  (the lowest price the Seller is willing to accept for the property). Therefore, if the highest offer doesn’t reach this price point, the Seller is not obligated to sell the property. 

Before a Seller determines the reserve price, we review the market comps and recent sales in the area where the property is located and work together with you to determine a satisfactory auction sales price.  We then set an auction date to take place in the following 30+/- days. At the same time, we advertise and market the property to potential buyers and to Broker/Agents through various marketing methods, including placing the property on MLS and numerous other online real estate sales platforms.

Our advertising and marketing efforts are designed to stimulate interest in the property and to encourage purchase offers prior to the auction. It is not unusual for properties are sold prior to the auction. 

Auctions Net More Money For Sellers

Fewer Seller sales cost means bigger net proceeds at closing!  Love Auctions Seller fees are less than the traditional sales commissions and the Love Auction process is fast, usually, 60+/- days form from listing to closing, which saves a Seller huge carrying cost. Properties are sold in “as is ” condition without contingencies saving a Seller time and money.

Click on our Love Auction Calculator page and input the desired sale price for a property you are thinking about selling along with the mortgage payoff and monthly property expenses. We will provide 5 different sale price scenarios. See the difference in net proceeds between a Love Auction and a traditional sale. 

 No Conditions

We provide all of the necessary information to Buyer’s ahead of time so that they can make an offer on the Sellers property without any conditions. In addition to the customary marketing material, Love Auctions will provide a home inspection report, title report, and property survey. All of the reports are prepared by a professional and independent third-party company prior to listing your property and provided to each and every Buyer who shows interest in making an offer. For condominiums, the status certificate is ordered ahead of time and ready for review.

 No Surprises 

We complete the entire offer documentation ahead of time where the Seller determines the ideal closing date, the items included in the sale along with any exclusions. Each and every Buyer has access to this information that is posted on our website ahead of the auction date so they are aware of the details. Once the auction is concluded and, the only part of the agreement that needs to be completed after the auction has completed is the Buyer’s name and purchase price amount.

Efficient  

When we list your property to be auctioned, we keep the process on a tight schedule. When our Love Auction sign goes up, it tells Buyers how the Seller has chosen to sell the property and the date it will sell. An auction date is a deadline that Buyers take seriously. As potential Buyers register for the upcoming auction, we continue to encourage purchase offers prior to the auction. Should the auction proceed and the property is not sold, the auction listing automatically converts to a traditional listing and marketing efforts continue until the property is sold.  The Love Auction sales approach offers Sellers a unique sales approach that provides the best of both sales platforms.  The Seller is not limited to any one sales approach.

No Cash & Property Needs Work In Order To Maximize The Value…NO PROBLEM!  

Love Auctions has established relationships with local companies that will make all the repairs necessary to maximize the sale price of the property and delay payment until the property is sold. If you need pre-sale home improvement services anywhere in DC Metro Market, Love Auctions has the solution. Love Auctions can arrange 100% financing with no cash, credit, or income requirement, and no finance charges or hidden fees. We can get your property refurbish and payment is made from the sale proceeds of the home. Regardless of how long it takes to sell your home, you won’t pay for our home repair services until you sell and close, and there won’t be any finance charges. Services provided includepainting, roofing, flooring, appliances, HVAC, handyman repairs, landscaping, staging, and so much more. Free estimate right up front so you’ll know what it’s going to cost to get your home looking it’s best and ready to sell at its maximum potential price. All work is guaranteed.

Qualified & Motivated Buyers 

When a Buyer registers to participate in the real estate auction, they need to be verified and provide an auction registration deposit. This ensures that each and every Buyer is taking the process very seriously. In addition, the Buyer who becomes the winner of the auction is required to provide an addition purchase deposit.

Total Transparency 

A Buyer will feel more comfortable increasing their bid amount if they know that other potential Buyers are actually bidding on the property but most importantly,  if they know the prices these competing Buyers are offering. Competitive bidding drives the sale price up and ensures the Seller of realizing the best price possible for the property. 

Live Auctions & Online Bidding

Love Auctions are live events with a professionally licensed auctioneer typically held at the property location and simulcasted on our online bidding platform to ensure that every potential buyer can participate in the auction without having to physically attend the live auction.  More Buyers bidding at an auction will always result in a higher sale price.

 If The Property Doesn’t Sell At Auction, It Is Converted Into A Traditional Listing 

If the highest auction offer doesn’t reach your predetermined minimum sale price (the Reserve Price), we automatically roll the listing into a traditional listing with our professional sales team and the marketing the property continues until it is sold.  Keep in mind, Buyers will often make offers before the auction and even after the auction closes when the Reserve Price is not reached. It is not unusual to see deals being made after the close of an auction where the Reserve Price was not reached. 

Remember

Research has proven that the best opportunity to sell a property is with the first 60 days of when a property is placed on the market.  The highest rate of interest from prospective Buyers is during this window of time. We are not simply Auctioneers, we are real estate professionals that specialize in the sale of residential and commercial real estate with decades of real estate sales background and fully understand the market and the sales process.  That is why Love Auctions can provide a Seller a combination sales platform to ensure Sellers the property will be sold either by auction, by the traditional sales method and/or a combination of both methods.  The Love Auction sales strategy provides a Seller with the best opportunity to quickly sell a property in “as is ” condition, with no contingencies at the highest price 

Time Kills Deals! 

With the traditional sales approach, the process goes far beyond 60 days and can linger for months and even years without ever obtaining a single purchase offer. With traditional sales method, contract offers are riddled with contingencies that that result in terminating nearly 30% of all traditional contracts.

Imagine, if you listed your property for sale and obtained a purchase contract in the first 30-60 days and then, weeks later, the contract is terminated due to a contingency. You must start the entire sales process all over after you carried the property for months. What if the “hot” Sellers marker that was in place when you first offered the property for sale has now changed and the market has greatly slowed? You have lost the best opportunity to sell the property at the highest price and you have spent good money month over month to carry it.

An auction eliminates this risk, 95% of auction sales close in 60 days without a single contract contingency because auction properties are only offered for sale in “as is” condition. Should a property linger on the market beyond 60 days, Sellers are also diluting the net proceeds due to the cost to carry the property. The average cost to carry a property is nearly 10% of the value of the property annually, considering; mortgage payments, taxes, insurance, and upkeep.

Investors/Builders/Home Flippers

Real Estate Investors, Builders, and Home Flippers fully understand the urgency to sell an investment property quickly. The best way to sell an investment type property is by auction. An auction is fast; 30 days or less from the listing date to the auction sale date.

Properties are sold in “As Is” condition and there are no contingencies. In addition, the Buyer pays most, if not all of the recordation and transfer taxes along with interest on the sale price from the auction date until the closing date, usually a 30-day period.

Every single day that goes by without a sale and a quick closing decreases the profit an investor type property can earn due to the cost to carry the property. Loan fees, real estate taxes, utilities, etc, all add up fast and a property sitting on the market for a long time will turn a profitable deal into a loser for the Investor. Simply stated, the longer an investment property goes unsold, the less profit the investor will earn, if any profit at all!

An Investor, Builders and Home Flippers, can’t afford to wait the lengthy time the traditional sales method takes which allows a Buyer to be in control and to utilize time as a tool to negotiate the sale price down.  An auction puts the Seller in control of the sale date, sale price, and the sale terms. An auction offers competitive bidding with no limit to the sale price. An auction puts the Seller in the position to watch the sale price go up, not down and often exceeds “asking price” found in the traditional sales method.

  Vacant Property

If a property is vacant,  Sellers must recognize that the property can and will deteriorate very  quickly and drive any potential sale price down. The cost to carry a vacant property while it is deteriorating will drive the potential net proceeds from a sale down 20% or more annually.  Vacant properties should be sold quickly to preserve the value. Vacant properties are also prone to break-ins and vandalism.  In addition, a small problem such as a leaky toilet in an occupied property can turn into a flood in a vacant property resulting in major damage and cost to repair

 

 Opportunity Value

A Seller cannot ignore the negative effect that time has on the value of money along with the cost of lost opportunity. A great example can be best compared to a stock in a company sold on The New York Stock Exchange. There were people who owned stock in America On-Line (AOL) and when the stock crashed years ago, it lost 80% of its value.

Some people held it thinking it would rebound, it never did. Other people sold the AOL stock and invested in a company known as Apple and made back the money lost on AOL and realized huge returns with the Apple stock. Real Estate and stocks are both investment and must be looked at in a similar fashion. Often, it is better to sell a property that is not maintaining or increasing its value like a stock and reinvest the proceeds into another property that will produce better results.

Emotion

Selling real estate can be a difficult process. Often, a Seller is too emotionally attached to a property which will cause a Seller to lose out on the best opportunity to sell the property. A Seller may have a sentimental attachment to the property that causes them to lose sight of the true current value of the property. Human emotion is a factor that should not outweigh prudent business decisions but often does.

Benefits to Sellers:

  • Buyers come prepared to buy;
  • A quick sale reduces long-term carrying costs, including taxes & maintenance;
  • Assurance that property will be sold at true market value;
  • Exposes the property to many pre-qualified prospects;
  • Accelerates the sale;
  • Creates competition among Buyers – auction price can exceed the price of a negotiated sale;
  • Requires potential Buyers to pre-qualify for financing;
  • The Seller knows exactly when the property will sell;
  • Eliminates numerous and unscheduled showings;
  • Takes the Seller out of the negotiation process;
  • Ensures an aggressive marketing program that increases interest and visibility.

Benefits to Buyers:

  • Properties are usually purchased at fair market value through competitive bidding;
  • The Buyer knows the Seller is committed to sell;
  • Buyers determine the purchase price;
  • Auctions eliminate long negotiation periods;
  • Auctions reduce time to purchase property;
  • Purchasing and closing dates are known;
  • Buyers know they are competing fairly and on the same terms as all other Buyers;
  • Buyers receive comprehensive information on property via due diligence packet.

 

Love Auctions v. Traditional Sales Method

Auctions are FAST!!! Auctioned properties can sell for less and net higher sales proceeds than a traditional sale! Less commission, less closing cost, less carrying cost, less time to close, less overall inconvenience…brings true market value and higher net proceeds!

14 Reasons Why To Auction Real Estate.

 

 

                                  Auction Method

                             Traditional Method 

1

 The Seller is in control of the entire process

Buyer is in control of the entire process.

2

FAST SALES PROCESS with predetermined auction /sale date & settlement date.

The property may sit on the market for months/years with no predetermined sale or closing date.

3

Entire Auction process usually takes 30+/- days. Closing occurs faster, usually 30+/- days after the Auction date.

The entire Traditional process usually takes over 180 days. Contingencies eat up Sellers time and money. Closing from contract date can drag out for 60 -120 days and longer.

4

 The property is quickly sold in “As Is” condition for Cash.

Financing and other contingencies from the date of contract slow the process.

5

No price limitation. Final Auction price often exceeds the traditional listing price of the property, especially in a hot market.

Limited sales price. The listing price is usually the highest price a Seller can achieve. Rarely able to negotiate sales price up, only down.

6

 Seller pays a minimal closing cost, increasing net proceeds. Buyer pays most, if not all closing cost.

Seller pays thousands of dollars in Closing cost decreasing Sellers net proceeds

7

Buyers bid competitively to purchase the property. Auctions create the sense of excitement and urgency and force Buyers to act.

Buyers submit low-ball offers and attempt to bargain Sellers price down, using time as a pressure tactic.

8

Less than 5% of Auctioned properties fail to close.

25-30%+/- of all contracts fail to close for one reason or another

9

Auctions provide the Seller & Buyer a true picture of the actual market value of the property on the day of the Auction.

Perceived market value is subjective. The estimated market value at the time of the listing often changes and may increase or decrease by the closing.

10

An Auction focus is solely on Sellers property.

No real focus on Sellers property. Just one of many of properties listed. Agents will show your property and countless others on the same tour.

11

Little or no carrying cost after the Auction date. Buyer is responsible for carrying cost from the date of Auction.

Seller pays some or all carrying cost until closing.

12

 Limited Property inspection. Showings are controlled by Seller. The Seller sets the dates and times of showings.

Potential Buyers create a never-ending inconvenience. Strangers tramping through the property with little or no notice to and often going through Sellers personal property. Invasion of privacy.

13

People who inspect the property, register to bid, post the required deposit and attend the Auction are real Buyers that want to purchase the property.

People who inspect the property are often tire kickers, nosey neighbors and/or financially unqualified to purchase the property or simply sightseeing and wasting the Sellers time.

14

 If Auction fails to meet the Seller “Reserve” price and the property does not sell, Seller still has Buyers that are ready, willing and able to purchase the property. Often, deals are made before and after the Auction takes place.

If a Buyers opts out of the contract due to a contingency or fails to close on the purchase, Seller has no other prospective Buyers that are still in the market due to the time lost. The entire long Sales process starts over.

Types of Auctions

Selling Without A Reserve

Selling without a reserve is also referred to as an “Absolute Auction”. This means that the Seller has agreed to have the value of the property determined by the “market” through competitive bidding on auction day. The Seller will accept the high bid regardless of the amount. The benefit of this strategy is the confidence it instills among Buyers as they know the property will be sold to the highest bidder regardless of the price on auction day. Buyers come prepared to make their highest and best bid.  Auctions without a reserve typically will produce a much better Buyer turn out than an auction with a reserve. In addition, research shows that auctions without a reserve typically will bring a higher sale price for the property than auctions with a reserve.

Selling With A Reserve

Selling with a Reserve means that the Seller is placing a minimum sale price for the property the Seller is willing to accept. Should the highest bid at the auction fall short of the Reserve price, the property will not be sold. The negative with this strategy is that potential Buyers do not know what the Reserve price is set at and/or if the property will even be sold on auction day.  Some potential Buyers will not attend this type of auction. An option to maintain Buyer interest would be to have an “Opening or Starting  Bid”, which is essentially a reserve auction with the reserve being disclosed upfront.   The Opening or Starting Bid lets potential Buyers know that the property will be sold, so long as the winning bid surpasses the Opening or Starting Bid.  

 

Auction Dictionary  

A

Absentee Bid – A procedure which allows a bidder to participate in the bidding process without being physically present. Generally, a bidder submits an offer on an item prior to the auction. Absentee bids are usually handled under an established set of guidelines by the auctioneer or his representative. The rules and procedures of absentee bids are unique to each auction company.

Absentee Bidder
A person (or entity) who does not attend the sale but submits, in advance, a written or oral bid that is the top price he or she will pay for a given property.

Absolute Auction – An auction where the property is sold to the highest qualified bidder with no limiting conditions or amount. The Seller may not bid personally or through an agent. Also known as an auction without reserve.

Accounting of Sale
A report issued to the seller by the auctioneer detailing the financial aspects of the auction.

Agent – A person who acts for or in the place of another individual or entity by authority from them.

AIC – Auctioneer In Charge. The person designated by the auction company who is responsible for organizing the details of an auction.

Appraisal – The act or process of estimating value.

Apprentice Auctioneer – An auctioneer who is in training, operating under the supervision of a licensed or experienced auctioneer.

As Is – Selling the property without warranties as to the condition and/or the fitness of the property for a specific use. Buyers are solely responsible for examining and judging the property for their own protection. Otherwise known as “As Is, Where Is” and “In its Present Condition.”

Auction – A method of selling property in a public forum through open and competitive bidding. Also referred to as a public auction, auction sale or sale.

Auction Block
The podium or raised platform where the auctioneer stands while conducting the auction. “Placing (an item) on the auction block” means to sell something at auction.

Auctioneer- The person who is authorized by a Seller to conduct and oversee the sale of Sellers property through an auction platform. The Auctioneer is usually the person who calls the bids, however, the Auctioneer may have someone else call bids while overseeing the auction.

Auction Listing Agreement – A contract executed by the auctioneer and the Seller which authorizes the auctioneer to conduct the auction and sets out the terms of the agreement and the rights and responsibilities of each party.

Auction Marketer
An individual who contracts with sellers for the auction method of marketing property. In the case of real property, he or she may not actually conduct the sale but is directly responsible for all aspects of marketing the property.

Auction Marketing
The method of marketing real property utilizing the auction method of sale.

Auction Plan
The plan for pre-auction, auction day and post auction activities.

Auction Price
The price of a property obtained through the auction method of marketing.

Auction Value
The price which a property brings in open competitive bidding at public auction.

Auction with Reserve – An auction in which the Seller or his/her agent reserves the right to accept or decline any bids. A minimum acceptable price may or may not be disclosed and the Seller reserves the right to accept or decline any bid within a specified time. Also known as auction subject to confirmation and reserve auction.

Auctioneer – The person whom the Seller engages to direct, conduct, or be responsible for a sale by auction. This person may or may not actually call or cry the auction.

Auctioneer Subcontractor
An auctioneer hired by the principal auctioneer to call bids.

B

Ballroom Auction – An auction of one or more properties conducted in a meeting room facility.

Bank Letter of Credit – A letter from a bank certifying that a named person is worthy of a given level of credit. Often requested from prospective bidders or Buyers who are not paying with currency at auctions.

Bid – A prospective Buyer’s indication or offer of a price he or she will pay to purchase the property at an auction. Bids are usually in standardized increments established by the auctioneer.

Bid Acknowledgment
A form executed by the high bidder confirming and acknowledging the bidders identify, the bid price and the description of the property. Also known as Memorandum.

Bid Assistants – Individuals who are positioned throughout the attendees at the auction to assist the auctioneer, spot bidders and assist prospective bidders with information to help them in their buying decision. Also referred to as a Ringman or a Groundsmen.

Bid Caller – The person who actually “calls,” “cries” or “auctions” the property at an auction, recognizing bidders and acknowledging the highest bidder. Commonly known as the auctioneer.

Bid Number – The number issued to each person who registers at an auction.

Bid Rigging
The unlawful practice whereby two or more people agree not to bid against one another to deflate value.

Bidder’s Choice – A method of sale whereby the successful high bidder wins the right to choose a property or properties from a grouping of similar or like-kind properties. After the high bidder’s selection, the property is deleted from the group, and the second round of bidding commences, with the high bidder in round two choosing a property, which is then deleted from the group and so on, until all properties are sold.

Bookkeeper or Clerk – The person who is responsible for the accounting and paperwork at an auction sale.

Broker/Agent – A person who acts for or in the place of another individual or entity by authority from them.

Broker Participation – An arrangement for third-party brokers to register potential bidders for properties being sold at auction for a commission paid by the owner of the property or the auction firm.

Buyer’s Premium – An advertised percentage of the high bid or flat fee added to the high bid to determine the total contract price to be paid by the Buyer.

C

Caravan Auctions
A series of on site auctions advertised through a common promotional campaign.

Carrying Charges – The costs involved in holding a property which is intended to produce income (either by sale or rent) but has not yet done so, i.e. insurance, taxes, maintenance, and management.

Carrying Charges
The costs involved in holding a property which is intended to produce income (either by sale or rent) but has not yet done so, i.e., insurance, taxes, maintenance, management.

Catalog or Brochure
A publication advertising and describing the property available for sale at public auction, often including photographs, property descriptions, and the terms and conditions of the sale.

Caveat Emptor
A Latin term meaning “let the buyer beware.” A legal maxim stating that the buyer takes the risk regarding quality or condition of the property purchased, unless protected by warranty.

Clerk
The person employed by the principal auctioneer or auction firm to record what is sold and to whom and for what price.

Collusion
The unlawful practice whereby two or more people agree not to bid against one another to deflate value or when the auctioneer accepts a fictitious bid on behalf of the seller so as to manipulate or inflate the price of the property.

Closing – Time and place for the exchange of money for ownership. Generally handled by a title company or an attorney.

Commission – The fee charged to the Seller by the auctioneer for providing services, usually a percentage of the gross selling price of the property established by contract (the listing agreement) prior to the auction.

Conditions of Sale
The legal terms that govern the conduct of an auction, including acceptable methods of payment, terms, buyer’s premiums, possession, reserves and any other limiting factors of an auction. Usually included in published advertisements or announced by the auctioneer prior to the start of the auction.

Contract – An agreement between two or more persons or entities which contain an offer, acceptance, and consideration to create or a legal relationship.

Cooperating Broker/Agent
A real estate broker who registers a prospective buyer with the auction company, in accordance with the terms and conditions for that auction. The broker is paid a commission only if his prospect is the winning bidder  and successfully closes on the property. Also known as a participating broker.

D

Dual Agency
The representation of opposing principals (buyers and seller) at the same time.

Due Diligence
The process of gathering information about the condition and legal status of assets to be sold.

E

Estate Sale – The sale of property left by a person at his or her death. An estate auction can involve the sale of personal and/or real property.

H

Hammer Price
The price established by the last bidder and acknowledged by the auctioneer before dropping the hammer or gavel.

L

Listing Agreement
See Auction Listing Agreement.

Listing Broker – A real estate broker who has a listing on a property and cooperates with the auction company by allowing the auction agreement to supersede his/her listing agreement.

M

Market Value – The highest price in terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the Buyer and Seller, each acting prudently, knowledgeably.

Memorandum
Sometimes also referred to as a “Bidder Acknowledgment,” or “Broker Acknowledgment,” the memorandum is signed by those parties either on the auction floor or in the contract room.

Minimum Bid Auction
An auction in which the auctioneer will accept bids at or above a disclosed price. The minimum price is always stated in the brochure and advertisements and is announced at the auctions.

Minimum Opening Bid
The lowest acceptable amount at which the bidding must commence.

Multi-Property Auction
A group of properties offered through a common promotional campaign. The properties to be auctioned may be owned by one seller or multiple sellers.

Multi-Seller Auction
Properties owned by many sellers, offered through a common promotional campaign are auctioned in a single event.

N

National Auctioneers Association (NAA) – An association of individual auctioneers united to promote the mutual interests of its members; formulate and maintain ethical standards for the auction profession; promote the enactment of just and reasonable laws, ordinances and regulations affecting auction selling; make the public more aware of the advantages of auction selling; and generally, improve the business conditions affecting the auction profession.

National Real Estate Auction Committee
A national committee developed by the NATIONAL ASSOCIATION OF REALTORS in April, 1990 to provide education to members concerning real estate auctions, identify issues and monitor, review and analyze trends affecting the real estate auction industry. It also is charged with formulating policies for consideration by other policy-making NAR Committees, its Executive Committee and Board of Directors.

No-Sale Fee
A charge paid by the owner of property offered at a reserve auction when the property does not sell.

O

On-Site Auction – An auction conducted on the premises of the property being sold. The majority of properties are sold on site.

Opening Bid – The first bid offered by a bidder at an auction. Often an Opening Bid can be a Reserve as well.

On-Line Auction – An auction in which participants bid on property via the internet.

P

Preview – Specified date and time the property is available for prospective Buyer viewing and audits. Also known as open house or inspection.

R

Referring Broker – A real estate broker who does not have a listing on a property, but refers the auction company to a potential Seller for an auction. Usually, earns a flat fee commission for referring property to an auction company.

Regroup – A process used in real estate auctions where a bidder has the opportunity to combine several parcels of land previously selected by other bidders, thereby creating one larger parcel out of several smaller parcels.

Reserve
The minimum price that a seller is willing to accept for a property to be sold at auction. Also known as the reserve price.

Reserve Auction
An auction in which the seller reserves the right to establish a reserve price, to accept or decline all bids or to withdraw the property at any time prior to the announcement of the completion of the sale by the auctioneer. See also Auction with Reserve.

Ringman-– Individuals who are positioned throughout the attendees at the auction to assist the auctioneer, spot bidders and assist prospective bidders with information to help them in their buying decision. Also referred to as Bid Assistant or a Groundsman.

S

Seller – Entity that has legal possession, (ownership) of any interests, benefits or rights inherent to the real or personal property.

Sale Manager
The person designated by the auction company who is responsible for organizing the details of an auction. Also known as project manager.

Sealed Bid
A method of sale utilized where confidential bids are submitted to be opened at a predetermined place and time. Not a true auction in that it does not allow for reaction from the competitive market place.

T

Tax Sale – Public sale of property at auction by governmental authority, due to nonpayment of property taxes.

Terms – The legal terms that govern the conduct of an auction, including acceptable methods of payment, terms, Buyer’s premiums, possession, reserve and any other limiting factors of an auction.

Terms and Conditions
The printed rules of the auction and certain aspects of the Purchase & Sale Agreement that are read and/or distributed to potential bidders prior to an auction sale.

Tie Bids – When two or more bidders bid the same amount at the same time and must be resolved by the auctioneer.

Traditional Listing– A Traditional Listing is when a listing agreement is executed between a Seller and a Broker to offer the Sellers property for sale. This type of listing also entails waiting for Buyers to make offers, negotiate back and forth with the Seller and proceeding through the process of a closing the transaction that can take months. Upwards of 30% of Traditional listing contracts are terminated prior to closing due to contingencies contained in the purchase contract

Trustee’s Sale – A sale at an auction by a trustee.

U

Upset Price
Commonly known as the reserve price.

W

Withdrawal
Failure to reach the reserve price or insufficient bidding.