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Real Estate Auctions

WHAT IS A REAL ESTATE AUCTION?

A real estate auction can be an innovative and effective method of selling real estate. It is an intense, accelerated real estate marketing process that involves the public sale of any property including those that are nondistressed – through open, competitive bidding.

All Auctions Are Not the Same
The main categories of real estate auctions are listed below.

Absolute Auction – Auction without Reserve
• The property is sold to the highest bidder, regardless of price
• Since a sale is guaranteed, buyer excitement and participation are heightened
• Generates maximum response from the marketplace
• Many sellers, including financial institutions and government agencies, are using auctions more frequently

Reserve Auction (Auction Subject to Confirmation)
• The high bid is reduced, in effect to an offer, not a sale
• The seller reserves the right to accept or reject the highest bid within a specified time — anywhere from immediately following the auction up to 72 hours after auction
• A minimum bid is not published
• Seller predetermines the price and is not obligated to confirm a sale other than an entirely acceptable price
• A prospective buyer may not invest the time and expense of due diligence when there is no certainty of buying the property even if he/she is the highest bidder

Minimum Bid Auction
• The auctioneer will accept bids at or above a published minimum price which is stated in the property brochure and advertisements and is announced at the auction
• The seller bears reduced risk because the sales price must be above a minimum acceptable level
• Buyers know they will be able to buy at or above the minimum
• The seller may limit interest in the auction to only those buyers willing to pay the minimum bid price which therefore must be low enough to act as an inducement rather than a hindrance

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