Auction Properties on the MLS
How do you create a competitive market for a Listed Home in a Buyer's market? Use an Auction!
The Multiple Listing Service (MLS) advertised "auction" is a sales technique that is being used by a few real estate agents to sell properties. This technique is used to gather Purchase Agreements/bids and than negotiate the sale of property for the best price and terms. These "auction" properties span the range of properties from distressed, existing homes to new construction. The seller is creating an "auction environment" to try to get a buyer to negotiate price and terms that are better than can be received in the open market. The best offer at this auction does not guarantee the purchase of the home.
Read an article about Auctions
This "auction" listing/advertisement is created to gather a number of Purchase Agreements/Bids so the seller can negotiate with each of the top bidders by saying things like "you are number two, would you like to raise your bid?" and continues this until no one will raise their bid. This auction (negotiation) can take place either by phone calls, emails or on-line. The seller is taking advantage of a buyer who does not know the true market value of the property.
Think of the auction this way - When we are in a Seller's Market, multiple offers for the same home were received on a regular basis. The seller would than ask each buyer to give another higher bid such as "last and final." There was no guarantee that any of those buyers will be accepted to purchase the home with the option of the seller to reject all bids. Now the same technique is being used to create this single home competitive environment when we are in a "Buyer's Market."
An Auction Example:
This home has been on the market for 149 days and was originally listed at $399,900 and did not sell. The tax market value is $340,500. This home is a "short sale" where the seller owes more money on the home than what they could receive from the sale. Mortgage Bank approval is required for the sale meaning the seller or the bank can reject all offers.
Here are the details for this auction:
- Buyers Premium is 7% (expenses of sale must be added to the purchase price - the seller is shifting the selling cost to the buyer ).
- Minimum bid of $200,000.
- Earnest Money of $5,000.
- Inspection period of 3 days (this is after acceptance and final signatures on the Purchase Agreement).
- Winning bid is subject to bank approval (this is a short sale and all bids can be rejected).
- Auction on Nov. 29th - on line.
This is an example. The criteria for each auction is slightly different because the seller can set the "rules" that will be used. I always check with the seller/seller's agent to get the criteria for each auction and provide this information to you.
Alternative to Auction:
As an alternative , we can provide the seller with a Purchase Agreement and make it good for only a specific number of days to expire before the auction. If they deem your offer acceptable, it will be accepted. Another lower offer can be provided prior to the auction if you still have a desire to purchase the home.
If you wish to have me represent you in this auction, I will develop a Comparative Market Analysis and estimate the true market value for this property. Also if an "As Is" addendum is required, a home inspection prior to the auction is also recommended. You must promise that you will not get caught up in the hysteria of the auction. Let me know if you would like to proceed. The next step will be to set up a showing of the home to assess the exterior and interior condition of the home to develop the Comparative Market Analysis.