OCT 11, 2019
When it comes to real estate, conventional wisdom is that auction sales are just for desperate sellers or bank-owned properties. But in the past few years, auction platforms have seen a steady increase in the number of homes sold, and far more buyer engagement from owner-occupant consumers.
In fact, real estate auctions for non-distressed properties have increased approximately 35% year over year, according to Nicole Messier, vice president of marketing at Altisource, a real estate company that handles auctions. “We are increasingly seeing users looking at auctions as they would look at any other type of traditional real estate listing,” Messier says.
In Lancaster, PA, a region where live auctions have long been popular among Amish and Mennonite communities, auctioneer and real estate agent Dave Longenecker has also seen a renewed interest from the wider community. Ultimately, auctions can be a smart and efficient way of selling your home in a variety of markets, and it’s no surprise that both buyers and sellers are turning to this accelerated and targeted method. Here are four reasons why selling via auction could be the right choice for you.
1. There’s no ceiling in a competitive market
There’s nothing quite like the buyer’s rush inspired by a bidding war, and in a strong seller’s market, the sky’s the limit. “Auctions create competition,” says Longenecker. “If you’re capturing the market at its height, an auction plays to people’s emotions. And people will often spend a lot more in an auction environment than they would in a negotiated sale.” Messier points out that buyers in competitive markets like Denver, CO, Austin, TX, and Chicago, IL, will sometimes turn to the auction method if they’ve had trouble purchasing through traditional real estate listings. Competitive markets increase the buyer bidding pool and increase buyers’ chances of paying more than they wanted.
2. Save time and money in a slow market
Auctions are not only for competitive markets. They can also be helpful in a downturn to sell a house quickly at true market value. “In a slow market, it can be difficult to keep up with the trajectory of pricing. If the market is losing 5% value every month, and you’re only decreasing by 2% a month, you’re never going to catch up,” Longenecker says. “That’s how you end up with houses that linger on the market for five or 10 years — they just never caught up with pricing.” By auctioning a home, you can avoid that lag and ensure your home sells at its true value.
3. An auction attracts serious buyers
Auctions see their fair share of investors with plenty of capital, but lately, auctions capture bids from the everyday house hunter. About 20% of the buyers through Messier’s company are owner-occupants, just as serious about a purchase as the site’s repeat buyers, who are primarily investors.
“They are usually trying to do one of two things: Get into a competitive market — which makes them a very serious buyer — or they’re trying to get a home that needs a bit of love or renovation,” Messier notes. To further ensure the auction draws only serious buyers, companies like hers require users to undergo a prequalification process before they can bid. Similarly, at Longenecker’s in-person auction, the highest bidder is required to provide 10% of the purchase price at the time of sale. This nonrefundable deposit helps ensure the sale will go to settlement and weeds out less-serious buyers.
4. You know the exact date your home will sell
Holding on to a property can be costly. Selling your home via auction not only expedites the process (Longenecker quotes an average of 45 to 60 days from listing to closing), but the auction method also allows you to know the exact date of sale, so you can budget accordingly. Sellers can avoid high carrying costs like mortgage payments, taxes, and home maintenance by budgeting for an exact sell-by date rather than listing a home the traditional way and hoping for the best.
Have you sold your home at auction? Share your experience in the comments!
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The real estate market is ever-changing. A Buyers’ market can become a Sellers’ market overnight. Real estate values are often determined by the season, the economy, and major events taking place locally, throughout the region and around the world. We’re here to guide you though the process and figure out which method is best for you.