Going, going, gone! Home auctions are popular option
And it goes like this:
"Who'd like to open up the bid at $100,000? Do I see $100,000? Over there! Who wants to bid $125,000?"
Yes, just like the movies. At an auction sale, a rat-a-tat-tat of climbing offers follows the opening bid and continues until someone comes up with the winning bid. The purchase is done and you can go home and clean your house.
"It's exciting and scary," says Theresa Elizabeth, a Burbank, Ca., buyer who attended the Freddie Mac/New Vista auction at the Riverside Convention Center in Southern California recently. "It happens so fast. You really have to know what you're doing."
What makes this selling format more appealing today? Aside from the thrill factor, most Americans are comfortable using the Internet, which allows them to tour homes virtually and hone their bidding skill on EBay. And buyers often feel like they're getting a bargain.
The trend took off over the last decade. Gross sales of residential properties rose 47.7% nationally from 2003 to 2008, not including foreclosures, according to the National Auctioneers Association. That time period is the latest for which the auctioning trade group has data. Gross sales were $17.1 billion in 2008, not including foreclosures.
"Auctions force buyers to decide on that house they've been driving by every Sunday," says Chris Longly, spokesman for the auctioneers group. "They have to park the car, pick up the bid paddle, and buy the house, because after Saturday at 2:00, the house won't be there anymore."
The two most well-known types of auctions are "open outcry," in which an auctioneer calls out the bids to the public, and sealed-bid auctions, in which all bidders submit their offers to the auctioneer on the same day, without knowing the bids of other participants. For those of you tethered to computers, online auctions also have gained steam.
In open-outcry and sealed-bid auctions, the properties are offered under the following methods: absolute, in which the highest bidder wins the property, no matter the price; "published reserve," or "minimum," bidding, in which the seller and auctioneer have agreed to accept the published minimum bid or higher; and "unpublished reserve," in which the highest bid is subject to the seller's acceptance. Got all that?
If you can't attend an open-outcry auction, you can bid by telephone, proxy and via Web-cast.
Auctions are transparent. Unlike traditional home-selling -- in which buyers make a bid, sign a sales contract, then pay for home inspections -- auctions let them check it all out ahead of time. Auction companies usually allow 45 to 60 days for buyers to attend open houses and in some cases bring their own inspectors.
Of course, that's not everyone's cup of tea. Some buyers balk at spending time and money up front on reading title reports and hiring inspectors, without a guarantee of winning the property. In that case, auctions aren't for you.
And the sellers? They often are happy to sell their properties without all those contingencies that can send them up the wall, like financial deals, repair requests and termite eradication. One thing to keep in mind, though, is that you need to aggressively market your property or you'll get low-ball offers.
Not every home that is auctioned is in great shape, either. Be prepared to get the home as-is -- from move-in ready (rare) to "you've got to be kidding!" Show up at the auction with a price in mind and stick to it. Some bidders get caught up in the excitement and get in way over their heads.
Bidding on foreclosures is a whole other animal. They take place at the property site or on courthouse steps. The court's rep typically makes the first bid, up to the amount owed. If no one else bids, the lender gets the property, then sells it. Outside buyers must pay in full with cash or a cashier's check at the close of auction. These sales are complicated, so beware.
You online bidders can get in on the action too. Properties often are listed with online agencies for 14 days, during which time buyers are encouraged to visit the sites in person. Bidders place offers any time during the two-week period; all bids are displayed online. Winners receive contracts by e-mail. How else? You sign it and return it with a deposit check.
Auction-goer Elizabeth didn't end up getting the home she wanted the other day. But she "learned a lot about the process and will get one next time." Better safe than sorry, right?