- Citigroup Gets Burned in the Caribbean September 3, 2010The bank is selling its mortgage on the Viceroy Anguilla to Starwood Capital Group at a hefty discount, the latest example of capitulation by a bank that has nursed a troubled real-estate project for years. […]
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- Capital Freeze Thaws for Real-Estate Funds September 1, 2010Real-estate funds saddled with boom-time properties are getting relief from Wall Street firms and other investors hoping to capitalize on their need for cash. […]
- Corio's Turkish Strategy Stumbles September 1, 2010The Dutch company's expansion has yielded disappointing results due to the weak economy, competition and the difficulties of exporting Western shopping concepts to a country steeped in different traditions. […]
Absolute auctions
Of the three types of real estate auctions: absolute, minimum bid, and reserve, absolute auctions are probably the ones the casual observer is most familiar with. According to industry professionals, they definitely are the ones that generate the most excitement among spectators and bidders.
To explain briefly the differences between the three, in a minimum-bid auction, a seller sets a minimum price at which bidding must start. This gives the seller protection that the property won’t sell for an unacceptable price, but it can also deter people from participating if the minimum is set too high. A reserve auction, too, offers some protection to the seller, by giving him or her time to accept, reject or counter the highest bid. But reserve auctions tend to draw less interest from bidders because the sale is not guaranteed.
That leaves absolute auctions, also known as auctions without reserve, in which the property is sold to the highest qualified bidder with no limiting conditions or amount. Of course, sellers cannot bid on their own property, either personally or through an agent. This type of auction is understandably of most interest to bidders, and observers, because they create more excitement and participation. This benefits the people selling real estate too, by drawing more prospective buyers to the auction.
Often, during minimum bid and reserve real estate auctions, the seller will signal the auctioneer that the minimum bid and it then becomes an absolute auction. When the auctioneer then publicly announces that the auction has become absolute, the excitement in the room increases considerably. I witnessed this myself when I attended my first real estate, which OwnACondo.com held in November. Whenever auctioneer Vinnie Zaffarano announced that the reserve auction had become absolute on a particular condo sale, everyone in the room perked up and the excitement grew. I have seen it time and again at vehicle auctions also, with the atmosphere becoming almost electric as the bids keep increasing to the rhythmic call of the auctioneer. After all, these are the types of auctions people are most familiar with, from seeing them on TV if they haven’t actually seen them in person.
Auctioneers, or any real estate broker conducting an auction, will encourage those listing property to take a chance and have their merchandise sold by absolute auction from the beginning, just because the added interest from those buying real estate, or anything else for that matter, so often results in a higher selling price. This is true for Internet sites such as eBay, as well as brick-and-mortar auction houses such as RealEstateAuctions.com.