II: IS A PUBLIC AUCTION RIGHT FOR MY CLIENT?
2.1. Are all properties suitable for sale at a public auction? Are all sellers and buyers suited for participating in a public auction?
All properties are not suitable for sale at a public auction. For the majority of properties–including residential, commercial, and land sales–auctioning can work effectively. It is important, nonetheless, for the REALTOR to cooperate with an auctioneer to forecast the probable outcome of an auction. Only by carefully considering the relevant market and the perceived condition of the property will a REALTOR be able to ensure the effective use of a public auction.
Additionally, some REALTORS point out that some sellers and buyers may not be suited for comfortable with selling or buying properties at a public auction, which may be stressful and which demands quick decision making. Proper counseling by the auctioneer is important.
2.2. Why may a client prefer an auction?
Most sellers who choose an auction to market a property are ordinary sellers with ordinary needs, who engage a local auctioneer, most of whom are REALTORS, to conduct the auction. In fact, sellers faced with bank foreclosures and bankruptcies6represent only a small percentage of those choosing auctions. A public auction can provide a cost-effective, accelerated method for selling real estate by any client who wants to eliminate the long-term labor and carrying costs of selling the property through the traditional private treaty marketing method. Alternatively, a public auction may be a method chosen to ensure an equitable sale of a property which several friends; family members or neighbors have expressed a desire to buy, as all may bid.
For one example, taking into account mortgage payments and the costs of utilities, insurance and taxes, it costs approximately 1% of the property value per month to maintain ownership of a property. A property valued at $350,000, therefore, can cost $3,500 a month for upkeep while it is on the market. Consequently, clients who have bridged a mortgage, or clients faced with relocation, may find it more beneficial to eliminate these costs as quickly as possible rather than to hold onto the property in hope of receiving the highest possible sale price. For a second example, families faced with selling real estate after the passing of loved ones may find that selling the property at public auction is an effective way to bring closure to a situation. REALTORS should remind their clients that an auction is not always the quickest method of selling a property, as there is always a possibility that a buyer will enter into contract for an exclusive listing and that the sale of this listed property will close in two weeks. However, a client who selects the auction method to market a property is able to set a timetable for the auction date and the closing with the REALTOR in advance.