Virtually any property is salable by auction; however, not every property is suitable for auction. So what makes a good property for auction? The National Association of Realtors along with the National Auctioneers Association suggests that there are three points of view to consider when looking at a property for auction. There is the seller’s point of view, the buyer’s point of view, and finally, the point of view of the property itself. If any two of the three combine to make sense, then the property could qualify as a good property for auction.
From the seller’s point of view:
- Is the seller in need of immediate cash?
- Is the seller involved in either a partnership or marriage break-up requiring
quick disposition of the property?
- Is the seller moving out of the area?
- Has the seller already purchased another house?
- Has the seller inherited real estate from an estate that they do not wish to
keep or maintain?
- Is the seller tired of having to pay high carrying costs for the property?
- Has the seller been involved in an auction before and understands that
benefits of the auction method of real estate sales?
- Has their property under a listing and has been unsuccessful in selling the
property though conventional methods?
- Is the listing on their property about to expire?
- Is the seller retiring?
- Does the seller have financial problems requiring liquidity of his/her
investments?
From the buyer’s (the market’s) point of view:
- Is it a changing market? If demand is high for a particular type of property the competitive environment of an auction creates new market values. If the supply is too great or the market is deflating, an auction allows the seller to “freeze” the market at an auction day price reducing further price erosion.
- Is it a dull market where there is too much product, yet buyer interest is expressed?
- Is it an emerging market/new project? New developments could kick off a sales program once some of the properties were auctioned.
- Is it a seller’s market where there is known high demand and a great deal of competition could take place through the auctioning of property?
From the point of view of the property itself:
- Does the property have a great deal of equity (25 percent or greater)?
- Is this a unique property (lake, mountain, etc.) where there is not enough property of this type on the market in order to properly value it?
- Does the property require high carrying costs for the owner?
- Is the property vacant? Vacant properties encourage vandalism.
- Is the property for whatever reason difficult to appraise?