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Posts Tagged ‘absolute auctions’
The History of Auctions
Auctions are increasingly seen as the best way to sell real estate, due to the benefits they provide for buyers and sellers, but the history of auctions is long and storied, dating back at least to Ancient Greece.
Auctions have likely been conducted from time immemorial, but Greek scribes in 500 B.C. were the first to leave a written record, telling of auctions being the only legal way to sell brides to prospective husbands. Particularly beautiful women were subject to vigorous bidding, and fetched the highest prices, while families of those judged less attractive had to add dowries or other extras to make the sale.
The word “auction” comes from the Latin word, augere, meaning “to increase” or “augment,” and Roman emperor and philosopher Marcus Aurelius was said to use auctions to sell family furniture, and others sold war plunder. Rather than the gavel used today, a spear was thrown down to signal the start of proceedings.
The history of auctions in America dates back to the Pilgrims’ arrival in the 1600s and became a popular way to sell land, crops, furs, livestock, and most notoriously, slaves. Just as today, they were seen as the fastest and most efficient means to convert assets into cash. During the Civil War, colonels regularly auctioned off the spoils of war and surplus, and auctioneers are still often called “colonel.”
Many auction schools started in the early 1900s in the United States, with the Jones’ National School of Auctioneering and Oratory win Davenport, Iowa thought to be the first. After World War II, the number of auctions held increased considerably, due to the ability to move real estate and personal property faster than the private market would allow. There are numerous types of auctions, but the ones commonly used for real estate are absolute auctions, reserve auctions and minimum bid auctions.
During the 1990s, technology was finding its way into the auction business. The online auction house of eBay was launched in 1995 and went on to become an “online leader” in the bidding business. With the increasing use of technology and the Internet, the future promises to be as interesting as the history of auctions. Many auctioneers today offer both live and online auctions to meet the needs of customers who could be anywhere in the world. Technology lets buyers participate in the sale without even being there, but as anyone who has attended an well-run auction will attest, being there is half the fun.
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.
How to Bid at Real Estate Auctions
Taking part in an event held by RealEstateAuctions.com is easy. Here’s how to bid at real estate auctions:
Before The Event
- Preview any and all properties of interest on any of the Open House dates that will be held prior to the auction.
- Carefully review the disclosures provided for each property, the terms and conditions, and the sales contract. Be sure you understand all the documentation. Seek the services of an attorney, if appropriate.
- Get a financing commitment from a lender if you will not be paying cash. Waiting to do this crucial step after you purchase could result in denial and loss of earnest money. A lender will be available at the auction event if you have not yet secured a pre-approval, but it is highly recommended you not wait until this point to check. You might not qualify for financing.
- Register on our website as a bidder. We’ll also take registrations at the door on the day of the event, but you’ll save yourself considerable time by registering online. If registering at the door or checking out financing with the on-site lender, be sure to arrive early.
At The Event
Check in at the door with the following:
- Driver’s license, state photo ID or passport
- A cashier’s check in an amount specified (varies per property)
- Personal check to supplement the cashier’s check, if needed
- A pre-approval letter no more than 30 days old from a mortgage broker or lending institution, if you intend to finance your purchase (vs. a cash transaction).
Among the registration items you’ll receive is a numbered card or paddle which you’ll raise at the appropriate time during the auction to indicate your bid.
Getting Started
Taking your seat inside the auction room, you’ll listen to the event facilitator review the legal terms and conditions, along with a basic explanation of how the event will proceed.
The auctioneer will take the podium and kick things off with the first property to be auctioned. A photo and relevant facts will be displayed on large screen. You’ll find the same information on a printed brochure available in advance and at the door. The auctioneer will announce updates on any new additions or deletions that are not part of the printed brochure, so everyone is fully up to date on how to bid.
Each property will be listed in the brochure as “Absolute Auction,” “Minimum Bid Auction” or “Reserve Auction.” The auctioneer will verbally confirm these designations. He then begins the famed auctioneer’s chant, soliciting bids from the crowd. As a bidder, you will raise your numbered card or paddle when you wish to place a bid at the price the auctioneer is calling. Scratching your nose or clearing your throat will not count as a bid.
Depending upon where you are seated in the room, the auctioneer or one of his official assistants standing in the crowd will acknowledge your bid. The auctioneer continues the process, with the price moving ever higher. You can make as many bids as you wish as the process moves along.
If You Win
- Proceed to the designated area to begin paperwork.
- A 5% Buyer’s Premium will be added to your winning bid, making your Total Purchase Price your winning bid plus the Buyer’s Premium.
- Tender the cashier’s check in the amount specified for the subject property. A receipt will be provided.
- Write a personal check, if needed, to make the required down payment on the property, which is typically 5% of the Total Purchase Price.
Properties with a Total Purchase Price of $10,000 or less must be paid for in full on auction day.
Your closing will be scheduled within 45 days of the auction.
Can You Change Your Mind About A Bid?
Yes, as long as you inform one of the official bid assistants while the bidding is still in progress and you have not yet been named a winner of the auction. Mistakes happen, of course, but the auction is serious business and you should be extremely careful about the actions you take during the bidding process. Know exactly what you doing. Do not bid if you are unsure or think you might want to retract.
The Official Bid Assistants
These professionals will be standing among the crowd during bidding. They keep watch over the same section of attendees and are there to help you.
For more information about how to bid at real estate auctions, please don’t hesitate to contact us.