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Guidelines for Property Sellers - 10 Issues with Property Auctions

Many property sellers do not consider property auction as an ideal way to dispose off the property. It is said that property auctions are a great way for real estate agencies to sell property but not so much for individual property sellers. But the fact remains that property auction has been successfully taking place for several decades.

Whatever the divergent opinions, property auction is a simple, transparent and easy way of sales/purchase. In today’s fast-paced environments, many favor online auctions as an easy method. The prospective buyers do not have to visit places and they can know where the auction is taking place through internet.

It is however worthwhile to know the objections people – particularly property sellers – have for property auctions

• The auction system, more often than not, does not guarantee a fair market price for the seller. Fair market price is possible only after protracted negotiations between a willing seller and a willing buyer without bound by rules.
• The auction campaign usually allows for a timeframe of 3 to 4 weeks which is too short for buyers who may have to sell their existing house first, or arrange for home finance, or raise money otherwise. As such these prospective buyers may not come forward to participate in property auctions.
• When real estate agents recommend going to auction, they seldom have any idea how many buyers may participate in the auction. The agents invariably act in haste and in an ill-informed manner.
• There is nothing to substantiate that auctions fetch a higher price for a property than sale through private efforts and after negotiations. As a matter of fact, many hardcore professionals will assert the exact opposite is true.
• Interestingly, quite often properties do not sell at auction and they sell either before or after auction. This makes one suspect the soundness of an auction method itself for selling property.
• By the time the auction takes place, a property seller must spent nearly all the marketing budget and becomes totally helpless if the property does not sell. This means tremendous pressure to a seller to accept any live offer on auction day - even if price offered is well below the market fair price.
• Property seller 'conditioning' takes place prior to an auction. The auction reserve price is usually determined just prior to auction based on estimates from potential buyers. To get this feedback, the agent asks potential buyers what they think the property is worth. This provides the prospective buyers the best chance to deflate the price.
• Another biggest drawback is - many properties remain unsold in an auction with either no bidders present or no bids from potential buyers who are present. In these circumstances the auction process has already determined a maximum price level in a very public way, much to the disadvantage of the seller.

One thing can be said that if a person wants to sell the house quickly and willing to accept a below market price, property auction is the best. In property auction a lucky seller may get a much better price through competitive bidding as the bidders may progressively increase the price of the property.