Introduction

According to The National Association of Realtors, agents should offer an auction marketing strategy as a viable option for a real estate sale if it passes The Two-Thirds Rule.

The Two-Thirds Rule tasks real estate professionals with a simple, yet crucial evaluation of their client’s property. To pass the test, the property needs to appropriately meet criteria for two of the following three areas: Market, Sellers, and Property.

Market

Given the current market, would an auction be an effective manner of attracting ready, willing, and able buyers?

Consider the following:

• Direction
  Regardless of whether the market is shifting in the favor of the buyer or seller, an auction sale can be beneficial to a seller for different reasons. While an auction sale in a seller’s market allows for the property to achieve its best and highest price at auction, a buyer’s market allows sellers to sell their property for its true market value without having it sit on the market waiting for a buyer to come along.
• Volume
  If the property type is unique to your market, an auction sale allows buyers to express their interest all at once for it its true market value. No longer will your sellers question whether their property is being listed at an appropriate price.

Sellers

Given the seller’s current situation, would an auction be assistive to meeting their needs?

Consider the following:

• Time
  Does the seller need to part ways with the property quickly? Most auction sales settle in 30 days or less. Compared to traditional listings that may take 120 days or more to list, market, sell, and settle the property, auction properties are often settled within 60 days of being listed.
• Approval of Multiple Parties
  The sale of real estate often involves the approval of multiple parties. Often times, those sales are do not always occur on amicable terms. Divorces, partnership dissolutions, and estates all involve uncomfortable, yet necessary, conversations. Knowing a property is selling in on the auction block, in an open and transparent marketplace, can remove some of the stress associated with those awkward conversations.
• Difficult Situations
  Retiring? Relocating? Moving into another house you just purchased? Many real estate transactions are complicated. Without concessions or contingencies, an auction sale can help relieve some of those stressors by establishing clear terms for which the property will be sold.
• Expiring Soon
  Have a seller that is getting antsy about their listing sitting on the market for an extended period of time? Worried your listing may expire? Discuss reviving your listing as an auction sale.
• Financial Concerns
  Is the property a financial burden on the seller? Maybe it has a high carrying cost, or an extensive list of liens or violations that are continuing to accrue with interest, fees, and penalties. Auction sales are a great way to sell your property an avoid foreclosure or worse.

Property

Given the property and the circumstances surrounding its sale, would the terms of sale ease the conveyance of the property?

Consider the following:

• No Contingencies or Concessions
  Selling the property in as-is condition at a public auction may ease the sale of a property that may be in a distressed state or need of repair.
• Uniqueness
  A property’s uniqueness can have a lot of bearing on the sale of the property. While one-of-a-kind properties can pique the interest of many buyers, they can also generate their own set of complications in a traditional sale. Sellers can avoid many of those problems, such as difficulties surrounding the appraisal of a property without many comparable properties nearby, by selling their property at a public auction.
• Equity
  Properties with 25% of more equity allow for a seller to make a swift decision regarding the sale of a property.
• Exposure and Risk Mitigation
  Is the property exposed and at a higher risk for factors that are beyond the seller’s control? Vandalism, squatters, and a deteriorating condition are all hazards that jeopardize the value of a seller’s asset. A public auction can help sellers mitigate their risk and achieve the greatest possible return from their asset.

References  Saturley, Thomas. “Grab the Auction Opportunity.” http://www.nar.realtor, National Association of Realtors, http://www.nar.realtor/auctions/grab-the-auction-opportunity.