Auctions, bidding, and other deals...

With the real estate market going through some painful changes, I have come across a few items that I thought were worth mentioning. Last week I met with an auctioneer from the Watertown area. He has been doing real estate and personal property auctions for years and has noticed a considerable increase in business in 2009. I suppose that makes sense with the downturn in the economy. I have also spoke with a number of attorneys that site 2009 as being an especially busy time for those that focus on bankruptcies.

The point of it all is to discuss the role of auctions within real estate. Historically, most Realtors have focused on trying to, "get the most money in the least amount of time." However, this may or may not always be the easiest thing to accomplish. One method of selling properties is to price it at or slightly above fair market value and then adjust the price downward or improve the condition, if it has not sold within a specified time frame. Auctions deal with this situation in reverse. They start with a price that is far below the estimated fair market value and attempt to entice multiple bidders to compete, thus raising the price.

Last month J.P. King completed an auction in Sun Prairie with some developer close-out properties. In fact, there is another auction coming up in Wisconsin Dells with a number of luxury condominium units on Lake Delton that will be sold on June 21st. My guess is that there could be some great values. In fact, I'm planning to attend the auction with a few registered buyers. Another property that I came across is a large fraternity house located on Lake Mendota. This property has a tax assessment at $1,286,000 and is taking bids up until June 26th, 2009. In this situation, it's a sealed bid auction and buyers are encouraged to submit their highest and best offers. Click Here if you're interested in more information about these upcoming auctions.

Similarly, I recently helped a friend purchase a home in the Oregon area, that was listed by a local real estate broker at an extremely low price. In fact, the home had 10 showings scheduled the first day that it hit the market, and received 4 offers by the end of the day.

The bottom line with real estate auctions, they are designed to put a deadline on the sale. A very low price tends to attract multiple buyers and if there are a lot of buyers, then the price can easily climb upward. For any home seller's out there having a difficult time, one possibility is to consider trying to sell your home "auction style". If there are concerns about selling too cheap, then you could build in a "reserve" price that is the minimum. This is different than an absolute auction, which are sold to the absolute highest bidder. Whether listing with an auctioneer or traditional real estate broker, this alternative method of selling might work for your situation. Especially if you have a deadline by which you must sell.

A word to the wise with auctions, they can move very quickly and I would suggest studying the local market very well before making any bids. Otherwise you risk paying too much for a property and it may take years to recoup your investment.