How Do Real Estate Auctions Work?

Real estate auctions are an alternative home-selling method. The main reason sellers opt to sell their home through real estate auctions rather than through traditional methods is the potential of a quick and painless sale. Real estate auctions are becoming an increasingly popular home purchasing method for the first time home buyer crowd for two reasons: the opportunity to purchase a quality home for a substantial discount and the lowered closing costs. Contrary to common belief, real estate auctions differ greatly from foreclosure auctions. The most evident difference is the result of a favorable real estate transaction for both buyer and seller.

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The Difference

Unlike foreclosure auctions, real estate auctions allow prospective buyers to take a physical tour of the home and perform a home inspection before placing a bid. The image portrayed by movies about home auctions is incredibly inaccurate. Sellers aren’t forced to sell their homes for dismal amounts of money unless that is their prerogative.

Real estate auctions allow sellers to set a minimum bid amount that they are willing to accept in exchange for the property. Buyers who go into real estate auctions with the intentions of purchasing a top-notch three bedroom home for less than $5,000 need to hop off of the clouds and reenter the real world; this thought process is common amongst inexperienced home buyers such as a first time home buyer or someone who hasn’t purchased a home within 30 years or so.

Seller’s Advantage

Evidently, both parties involved stand to gain great monetary advantages. But, the seller stands to gain far more advantage than ones that pertain to money. A seller gains the advantage of time and ease-of-sale. Quality auction houses (such as Williams and Williams) take the hassle out of home selling for sellers. The real estate auction house will assign a team of qualified auctioneers to a seller’s auction and take full reign of the process. The only task a seller is responsible for is being present at the auction, the initial consultation with auctioneers and being available for open houses (typically held on a Sunday).

The difficult tasks, such as marketing the auction and dealing with the financial issues of potential buyers is handled by the auctioneers. The top-ranked real estate auction houses also take the initiative of prequalifying prospective buyers in attempts to rule out the occasional first time home buyer that isn’t good for the money and problematic attendees who never plan on paying.

Buyer’s Advantage

An attractive feature for buyers that purchase a home through a real estate auctions are the reduced closing costs. Because a buyer is not required to employ the services of a real estate agent in order to participate in a real estate auction (though he may if he chooses), the closing costs are drastically lowered.

Additionally, all closing costs are split 50/50 with the seller of the property. The reduced closing costs are a definite benefit for the first time buyer who is short on cash and the home buyer who only has enough money to put towards their future home’s down payment. However, closing costs will never total less than $1,500 and on occasion, the real estate auction house may charge home buyers a 5% buyer’s premium.

Jazmin Espinal is a professional freelance writer and the owner of Capital Web Writing, a web content solution for businesses and webmasters. To contact Jazmin or to see samples of her writing, please visit CapitalWebWriting.com.