Real estate auctions tend to have a negative stigma associated with them. Between banks looking to offload property due to foreclosures or government agencies needing to cut their losses from properties with tax liens, many of the assets auctioned off aren’t exactly glamorous. After all, they’re being auctioned off for a reason.
But that’s not all real estate auctions are for. Sometimes it can be as simple as sellers who want a quick, easy, and stress-free sale – three qualities auctions boast. For those of you who are unfamiliar with real estate auctions, read more below on the various types of auctions, how these auctions work, and tips on how to have a successful first real estate auction.
Real estate auctions are the public sale of property through an open bidding process. They continue to evolve as an alternative to traditional real estate transactions.
Real estate auctions are popular due to their variety of people and organizations they can serve. In general, there are four parties who use real estate auctions.
When conducting real estate auctions, an auction house will use one of the following to sell the property.
Absolute auction: Also known as an auction without reserve, there is no minimum bid required to sell the property – it is awarded to the highest bidder.
Minimum bid auction: As the name suggests, an auction house will only accept bids over a certain price. This prevents houses and real estate parcels from selling far less than their estimated value.
Reserve auction: The seller, whether it is a homeowner or a bank, can review bids and either accept or reject them.
As with any auction, real estate is sold “as is,” meaning you assume the risk of buying a property that may be damaged or have other issues.
Before you bid, you should do your due diligence by, at minimum, visually inspecting the property. Auction houses will allow you to view the property beforehand, usually a week or two before the event. Of course, the naked eye can only see so much, and what you see doesn’t account for any issues that may exist with the foundation, walls, or floors.
To help protect yourself, consider contacting a real agent or contractor to get a better idea of how much it would cost to repair a property. This valuable information will help you know how much to bid. For example, if you know repairs will cost at least $50,000 on a property, you should adjust your bids accordingly to avoid overpaying.
Check with the auction house to see if they offer financing options. Getting pre-approved before an auction can help the transition go smoothly.
On the day of the auction, bring any pre-approval loan documentation you have received along with a cashier’s check. Immediately after winning a bid on real estate, you will put down a deposit called earnest money and you are also subject to auction fees and/or bidding fees.
From there, property sold at real estate auctions proceed just as any other real estate transaction would by going through the escrow and closing process. You will leave the auction with a certificate of sale. During the next week or so, you should receive a certificate of title to make the sale official.
While most real estate auctions are successful, there is always a chance properties fail to sell. If this occurs, the auctioneer or auction house will work with potential buyers to move the property off the market. For example, unsold real estate at our auctions generally is sold within a week to a month following the event.
If the property still remains unsold after a month or two, you would have two options moving forward: put the property up for auction again or work with a real estate agent to sell the property in a more traditional manner. Many auction houses, such as Dakil Auctioneers, also serve as real estate agents and can sell your house or property by showcasing it on a multiple listing service (MLS).
Each state has different requirements on whether auctioneers need a real estate license. In Oklahoma, a licensed real estate broker is required to sell real estate by auction, whereas in Texas, a real estate license isn’t needed for someone to call an auction of real property.
Regardless of state laws, you should find an auction house with a real estate license. This ensures they know the ins and outs of auctioning off property so there are no surprises.
Each year, Dakil Auctioneers, Inc. holds anywhere from 150 to 200 real estate auctions in Oklahoma. About 75% of property sold is within Oklahoma City limits, while the remaining 25% comes from agricultural and rural properties across the state.
We have the flexibility to auction off single-family homes or hundreds of acres of unused government property. We also regularly deal with commercial real estate auctions, both for agricultural and business development purposes.
Are you interested in buying or selling property at a real estate auction? Get in touch with us today using this contact form or call us directly at (405) 458-1645.
