Steve Koerber's Old Blog

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Why auction in a buyer’s market?

Posted by Steve Koerber on May 1, 2008

If an auction is “correctly” run, the top bidder (even if there’s only 1 bidder) will pay the highest figure they are prepared to pay…not a few dollars more than the next highest bidder. And not necessarily on auction day.

Sellers pay agents handsomely to achieve a sale at the best price available in the marketplace. If a seller is keen and desires a quick result, auction is a fantastic method of determining the value of a home within a short timeframe.

If a house has an asking price of $800,000 and the best buyer over 4 weeks sees value at a maximum of $700,000, in my experience that buyer is unlikely to make an offer at all.

Time is precious to everyone and buyers don’t want to waste their time with over-priced houses.

If the same house has no asking price, is taken to auction after 3 or 4 weeks, in my experience if the higest interest is $700,000, a bid at auction is likely.

In the above scenario, via auction, the value of the home (within the timeframe) is more likely to be established than if it was priced. If a seller is not happy with the established value (best bid), they have the option of remaining on the market with (say) an $800,000 asking price to see if the next 3 weeks or 3 months produces a better buyer.

So why not just price a home correctly from the start? Easier said than done! Especially in a “buyers market”.

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2 Responses to “Why auction in a buyer’s market?”

  1. Auction Law said

    You make some very good points. Especially in today’s market. This is all the more reason to consider an auction for real estate properties. A properly marketed auction will bring in the interested buyers and quickly determine the real value, in a short amount of time. Not only is this the most effective way to realize the market value, but reduces the holding costs and marketing costs and brings about a sale without the haggling.

    Of course, if the seller has unreasonable expectations, then they may be waiting a long time for the “right” buyer. If they wait long enough, the market may turn back to their favor (and how long will that be?) or it may get worse and they continue to lose value in the property.

  2. Totally agree, thanks for your input!

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