Spencer Auction Team
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Frequently Asked Questions
Look below to questions that have been submited to us through the years. If you have any additional questions please feel free to call us anytime!
What is a Real Estate Auction?
A Real Estate Auction is a method of buying and selling real estate which accelerates the purchasing process through the medium of an auctioneer.
What Are the Benefits of a Real Estate Auction?
The Real Estate Auction is definitely a win-win proposition for everyone involved. The seller disposes of properties quickly and efficiently, thereby saving long-term carrying costs such as interest, real estate taxes and maintenance. For the buyer this can mean a smart investment, since properties are usually purchased at fair market value through competitive bidding. Because the auction sale is conducted in an open forum, both motivated buyers and motivated sellers have assurance of watching the property's true market value emerge as the bidding process progresses. For buyer and seller, fair market value for the property prevails.
What are the Advantages to the Buyer in an Auction Situation?
The buyer knows the seller is fully committed to sell. Auction agreements obligate the seller to transfer title to the highest bidder in an absolute auction; the auction agreement obliges the seller to transfer title to the highest bidder that meets or exceeds the reserve price in a non-absolute offering. The buyer knows he is getting the property at fair market price. The buyer feels comfortable with the purchase knowing that others would have been willing to pay about the same amount for the property as the bid. The buyer sees many offerings in the same place at the same time and is able to make market comparisons quickly and easily.
What is an 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. Typically, no-reserve or absolute auctions receive higher final bids. This is partly due to the larger total number of bidders the property attracts. For a buyer, a high number of bidders makes a property seem more desirable.
What is a Reserve Auction?
An auction in which the seller reserves the right to establish a reserve price, to accept or decline any and all bids or to withdraw the property at any time prior to the announcement of the completion of the sale by the auctioneer.
What Terms Does a Property Sell at Auction and Who Sets the Terms?
The seller sets the terms with the advice of the auction company. Some terms included in the auction contract are as follows:
The winning bidder enters into a legally and binding purchase contract and is usually required to deposit earnest money (either a percentage of the purchase price or a stated set amount) immediately following the auction: The balance of the purchases price is usually due within 30 days at the closing. Properties generally sell "As Is" with no warranties expressed of implied. Since the only issue left is price, due diligence is done in advance of the sale such as preparation of information packages and inspection reports.
What Happens To The Earnest Money If A Buyer Decides At A Later Date Not To Buy The Property?
Many of the same things happen in an auction situation as in any other real estate transaction. The earnest money deposit is forfeited if the higher bidder is unable to consummate the sale regardless of the reason. In a normal transaction, the earnest money will be deposited and will be deducted from the total purchase price.
What is A Buyer's Premium?
A buyer's premium is an additional charge to the purchaser of the property. It is usually expressed in the form of a percentage the high bid. The typical buyer's premium in a real estate auction is 10%. You need to refer to the terms and conditions the specific auction to ascertain the amount of the buyer's premium.