On a sunny afternoon in Florida, an energetic crowd gathers on the lawn of a luxurious estate. Loud, anxious chatter between an auctioneer, a group of bidders, and assistant bidders fills the air. For several minutes, the auctioneer asks for the next highest bid, and the bidders respond. Suddenly, the bidders fall silent. The highest bidder holds his breath waiting to win the auction. The auctioneer asks for one more bid. In a loud, clear voice that gets the audience rolling, he says, “Fair warning, last chance,” the auctioneer pauses, “SOLD!” And in less than 10 minutes, another multimillion-dollar estate has changed ownership.

Successful real estate auctions like the one above are happening all over North America and the Caribbean. Real estate auctions have been on the rise recently, the rise in popularity due in part to rising inventories and fading buyer confidence. Properties that used to sell in weeks using traditional methods are now languishing on the market, unable to attract buyers even with the lowest seller prices. Many say the real estate boom is over, but savvy buyers and sellers are benefiting from real estate auctions.

Real estate auctions work in rising or falling markets.

Regardless of market trends or cycles, real estate auctions provide an open and transparent process for buyers and sellers. Properly conducted real estate auctions attract ready and willing buyers and motivate them to act now.

The auction method eliminates the “wait and see” attitude that serves to further depress real estate values. Buyers are always worried about overpaying. Buyers gain confidence with their purchases at real estate auctions because they can see what others are willing to pay.

When market demand is high and inventories are low, real estate auctions can offer sales prices well in excess of what a willing seller would have accepted in a private treaty negotiated sale. In sales-friendly climates, many homeowners use traditional real estate methods; Dealing with one buyer at a time leaves thousands of dollars of capital on the table. During bull markets, real estate auctions are the best way to set the highest market price.

Evaluation of your real estate property for auction

Not all properties or sellers are good auction candidates. First, sellers must be ready to sell now and for current market value. Also, a real estate auction will not fix the problems caused by a drop in the market value of your property, so if you owe more than a willing buyer will pay, be prepared to come to closing with your checkbook.

Properties that do well at real estate auctions have a high uniqueness factor. Ask yourself: “What makes my property different from most others?” Maybe you own a resort property or a high-end luxury home, commercial properties and land work very well at auction. Real estate auctions thrive on uniqueness. If your property is like everyone else’s, the best thing you can do is offer the most competitive price.

Most importantly, sellers must be reasonable when setting a minimum offer. A seller should look for the lowest and most current offsets and the price below that to generate the interest and urgency necessary for a successful real estate auction. Once the auction starts and qualified bidders start competing against each other, you can watch the sale price increase.

Locate a Qualified Real Estate Auctioneer

Start by checking with the National Association of Auctioneers, the best real estate auctioneers belong to this organization. These real estate auctioneers are well trained and adhere to a standard of practice and a code of ethics. Many attend the annual International Auctioneers Conference where the latest techniques and innovations in the real estate auction industry are presented.

Find out if the company you are interviewing is a full-time real estate auction firm. Many real estate agents are obtaining auction licenses but are inexperienced with the auction marketing method. Running a successful real estate auction is nothing like traditional (private deal) real estate sales. Go with a real estate auction professional.

You’re probably better off with an auction house that specializes in real estate auctions. There are many qualified auctioneers who have generations of experience selling personal property; furniture, dishes, garden equipment and the occasional odd painting. Selling real estate at auction is a complex matter that should only be attempted by experienced full-time real estate auction professionals.

Commissions and fees may vary, sellers must pay all marketing expenses upfront, and buyers typically pay 10% of the sale price to the auctioneer, with a portion going to participating realtors.

Types of Real Estate Auctions

Auctions are effective because they create a seller’s market. Professionally conducted real estate auctions create urgency, a reason to buy today and compete for the property. Terms and conditions of sale are established prior to the auction. Real estate auctions will follow one of three approaches:

Absolute Auction

The property is sold to the highest bidder regardless of price; using this process often yields the highest selling price.

Minimum Bid Auction

Seller agrees to sell at or above the minimum published offer price; this method is useful for Internet auctions.

Seller Confirmation or Reserve Auction

With a reserve auction, the seller “reserves” the right to accept or reject any bid, usually within 48 hours of the auction. Reserve auctions are used when there is a lien on the property by a lender or a court-ordered sale with a minimum sale price.