Saturday, January 24, 2009

Why is there an Auction Sign in my Neighbors Yard?

My good friend emailed me the other day and was worried because a house down the street had an auction sign in the yard. I know from other conversations with this friend that this particular house has been on the market for well over a year. I do not know the particulars of the situation but I tried to share with her what types of auctions there are and the basic information regarding how they work. Ironically, since she emailed me, I have seen about 4 Auction signs in various locations around Tulsa and Broken Arrow and it got me wondering how many others were out there asking, "Why an Auction and how does it work?"

While I am no expert on auctions, here is some information that I have gathered.

A real estate auction is a method of selling real estate. It is an intense, accelerated real estate marketing process that involves the public sale of any property through competitive bidding.

There are Three Types of Auctions:

  • An Absolute Auction, which is an auction without reserve.
  • A Minimum Bid Auction.
  • Reserve Auction,which is a an auction subject to Confirmation

In an Absolute Auction the property is sold to the highest bidder, regardless of the price. This means a sale is guaranteed and typically generates the maximum response from the market place. Many individual sellers, financial institutes and governments agencies use this method.

In a Minimum Bid Auction, there is a published/advertised minimum bid that must be met.This reduces the risk for the seller as they know the property will sell for at least the minimum bid and the buyers know they must be able to buy at or above the minimum. The minimum bid price must be low enough create a buzz and excitement and get bidders to the auction.

In a Reserve Auction, the high bid is in effect an offer not a sale. No minimum bid is advertised or published and the seller can choose to accept or reject the highest bid within a specified time period, which is typically anywhere from immediately following the auction to up to 72 hours after the auction concludes. There is usually a predetermined price at which the property will be sold and the seller has no obligation to accept a sale unless it is acceptable to them. The biggest drawback in this type of auction is that many buyers will choose not to invest the time and energy to bid on this type of property if there is no certainty they can purchase the property if they are the highest bidder.

I hope this helps. If you see a home for auction in your area and want more information about that property, shoot me an email at and provide me the property address and I will email you back any details I find.

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