Real Estate Auction - Best Practices
- Understand payment terms. Generally seller pays marketing fees upfront. Understand commission payment structure – will it be split between buyer and seller? Or will it strictly be a buyer’s premium?
- Decide if it’s an absolute auction. An absolute auction means the house goes to the higher bidder no matter that the bid. Selling with a reserve price requires the bidding to reach a certain price or there’s no sale.
- Determine how to qualify bidders. It’s common practice to require bidders to bring a letter of credit from their bank or lender. Other auctions require bidders to bring a certified check equal to a percentage of the anticipated sales price, which is returned to non-winning bidders.
- Agree on how bidding occurs. Many auctions occur at the home site with bidders in attendance. To encourage more participation, consider whether to accept sealed bids in advance, as well as telephone and Internet bidding from pre-qualified bidders.
- Select right auctioneer. Inquire about credentials (an AARE-accredited auctioneer is the gold standard in real estate auctioneering). Inquire about marketing strategy and plan. Make sure auctioneer knows the marketplace.