Summary:

Despite common “wisdom” that auctions are only for desperate sellers and repossessed properties, it could be one of the best alternatives to traditional listings. Sold.com launching soon will let show home sellers a better way to sell their home.

How Do Home Auctions Work?

Home auctions used to primarily attract investors looking for a house to flip but this avenue of selling and buying has been working its way into the mainstream for the past few years. It’s an attractive option for sellers because sales close the day of the auction, leaving little room for the buyer to back out. Buyers like it because they feel the process is more transparent than the traditional brokered deal.

Online auctions such as auction.com or for sale by owner sites that have such as Fizber.com provide the added benefit that you can reach buyers who might not be local. This would apply to anyone relocating to the area or someone who wants to buy a second home but doesn’t live within easy driving distance.

Auctioning a home isn’t for everyone in every situation. But here are a few situations where it might make sense.

How to Sell My House at Auction

1) You Need Certainty of Sale. Maybe you’ve already found your next home or you need to pay off your mortgage by a certain date. Or maybe you’ve been through a few rounds of accepted offers only to have the sales fall through for one reason or another. Whatever the reason, if you need or want to know that your sale is going to happen for certain on a specific date, the auction is for you.

Properties listed at auction sell on the date of the auction (usually 45-60 days from listing) and sell almost 100% of the time. Buyers must pass a pre-approval process so the sale won’t fail due to lack of funds, properties are sold as-is so there’s no risk to losing the sale because of a bad home inspection. Additionally, buyers have to pay 10% of the sales price as a nonrefundable deposit the day of the auction.|

2) Your Property Needs a Little TLC. Most buyers in the traditional market expect the homes they buy to be move-in ready. They want a gourmet kitchen, fresh paint, and updated fixtures, among other things. So unless your home has been recently remodeled, you’ll probably have to spend a fair amount of time and money just to get it ready to sell. So if you’re short on either or both, auctioning your home could be the way to go.

Buyers at auction expect your home to need some updating. In fact, a lot of buyers go to auctions specifically looking for fixer-uppers and since there’s no home inspection and buyers are purchasing as-is (see above section), you don’t have to fear lurking structural issues.

Tip 1: The state of the home almost always affects price so if you want to receive top dollar at auction, you should update some of the cosmetic details like paint and fixtures.  These are quick, inexpensive fixes that will make your home look more valuable to buyers.

3) It’s a Down Market.  A few things tend to happen in down markets. First, the lack of home sales (i.e. lack of data) leads to an initial mispricing of the home and second, it’s difficult for sellers to pinpoint the rate that market prices are falling so they end up dropping their home price too little, so homes end up lingering on the market for years.

The great thing about selling your home at auction is that it will sell on the date of the auction for its true market price. And if you’re selling via an online auction, you’ll cast the widest net possible since no one has to rearrange their schedule to physically be there. The more prospective buyers you have bid on your property, the higher the sales price is likely to be.

All pre-approved buyers are given the opportunity to bid on your home and they are all treated equally (so you don’t have to worry about your real estate agent steering you toward an offer represented by a friend), and those interested are all going to bid. Even in down markets, 11% of homes sold at auction sell for a higher amount than they were listed for on the traditional market.

4) It’s a Hot Market. And you want to sell your home for the absolute most you can get for it. In a competitive market where buyers are constantly outbidding each other for traditional listings, selling your home at auction could end up getting you the highest price. In these markets, auctions tend to attract serious buyers who’ve been frustrated by getting outbid for traditional listings. Auctions also play on people’s emotions, getting them in the mindset that they want to “win.” In hot markets, buyers at auctions will almost always pay more for a home than they would on the traditional market.

Tip 2: Selling at auction can also be less disruptive to your life. You don’t have to prepare for and host open houses, nor do you have to leave at random times during the day because prospective buyers want to see the property.

What Happens If My House is Sold at Auction

Selling a home at auction isn’t for everyone but it could be a great alternative for that selling in a down market and those whose homes aren’t in impeccable condition. And even if your home is move-in ready, with all the contemporary upgrades buyers want, selling at auction could save you time and get you a much higher price than the traditional market.