Many sellers and owners are unfamiliar with the auction process. Here are some frequently asked questions.
Q. What are the different types of auctions?
A. ABSOLUTE AUCTION and RESERVE AUCTION
Q. What is an Absolute Auction?
A. An auction at which property put up for sale is sold to the highest bidder, where the seller may not withdraw the property from the auction after the Auctioneer calls for bids, unless no bid is made in a reasonable time, where the seller may not bid himself or through an agent and where the seller will deliver marketable title.
Q. What is an Auction With Reserve?
A. An auction at which the seller or his agent reserves the right to establish a minimum bid, to accept or reject any and all bids, and to withdraw the property at any time prior to the completion of the sale by the Auctioneer.
Q. How are auctions conducted?
A. 1) Live Auctions are auctions conducted on site or auctions held off-site where an Auctioneer calls for and accepts bids from the bidders in the audience.
2) Live Simulcast Auctions are where an Auctioneer calls for and accepts bids from the attendees plus the auction is broadcast over the internet where approved bidders can enter a bid from anywhere in real time over the internet.
3) Timed Auctions On-Line Only – Real estate or personal property is offered at auction on-line only without an Auctioneer calling for bids. Bidding is open for a fixed time period. A Timed Auction may allow for an extension of the bidding time, if someone bids in the last few minutes, to allow everyone to bid their maximum.
Q. Does the owner have to sign an employment agreement or contract?
A. Yes. The Tennessee Auctioneer License law and statues requires an Auction Company or an Auctioneer to have a written employment agreement or auction contract to sell personal or real property at auction. The agreement must be signed by the owner or by the legal representative.
Q. What information does the auction employment agreement contain?
A. 1) Name of the Auction Company and Auctioneer
2) Name of the Owner and Seller
3) Type of auction: Absolute Auction or Auction with Reserve
4) Description of the real estate and personal property to be sold
5) Date of auction or time frame to conduct the auction
6) Lien holders and amount of liens
7) Commission fees or fee due the Auction Company and/or Auctioneer
8) Who pays for the advertising and promotional expenses
9) Will the auction be conducted live on-site or at a difference location
10) Will the auction be conducted live and simulcast (broadcast on the internet)
11) Will the auction be a timed on-line auction
12) Itemized additional costs that will or may be due to be paid
a. Labor to clean up property
b. Labor to set up auction
c. Labor to inventory the property
d. Termite clearance letter
e. Survey cost, if needed
f. Repairs, if needed
13) When the seller is paid
14) When the Auction Company is paid
Q. What is a Buyer’s Premium?
A. A buyer’s premium is a percentage added to the final bid to reach the total selling price of the real property or personal property being sold.
Q. What is the Buyer’s Premium for?
A. 1) A buyer’s premium is a way to spread the cost of conducting an auction to the Purchaser.
2) A buyer’s premium can be the Auction Company/Auctioneer’s commission.
3) A buyer’s premium can be used for promotion and advertising.
4) A buyer’s premium can be divided however the seller and Auctioneer agree.
5) A Seller can receive all of the buyer’s premium.
Q. Why do some people not like a buyer’s premium?
A. Most people realize the buyer’s premium produces more money for the seller.
Q. Can the seller decline to charge a Buyer’s Premium?
A. Alexander Auctions & Real Estate Sales allows the seller to make the decision if they want to charge a buyer’s premium. Most sellers like a buyer’s premium because the buyer’s premium increases the sales price and cuts down on their expenses.
Q. Do all Auction Companies and Auctioneers charge the same?
A. No. All Auction Companies do not charge the same. All Auction Companies do not provide the same services, knowledge and degree of professionalism.
Q. Why should I have an auction?
A. 1) Auctions cause action. Buyers are required to make a decision. They have to bid now or miss the opportunity. Competitive bidding produces higher sales prices.
2) Auction promotion and advertising exposes your property locally and nationally.
3) Auctions keep you from being at the mercy of a few buyers.
4) All your real estate and personal property is sold at the same time therefore you receive your money at one time.
Q. Do all Auction Companies and Auctioneers promote and advertise the same?
A. No. Some Auction Companies/Auctioneers do very little promotional advertising. Some Auction Companies/Auctioneers do not keep up with the new outlets for promotions and advertising and never take advantage of the internet and websites.
HOW TO HAVE A SUCCESSFUL AUCTION
Q. How should a seller compare Auction Companies?
A. 1) Check on the Auction Company’s reputation and integrity.
2) See if the Auction Company is known to provide service and have successful auctions?
3) Compare apples to apples.
Q. What is one of the largest mistakes a Seller can make?
A. Taking advice from someone who is not in the auction business.
1) Auction attendees do not know how to conduct auctions.
2) Their opinion may be totally wrong because most purchasers desire an advantage to purchase items at a discount.
3) Take advice from professional Auctioneers.
4) Prospective buyers do not have your interest at heart.
Q. Should a seller look for the cheapest commission?
A. No. Definitely Not! Sellers need to consider how they will receive the most net money, not what cost they pay to get the auction done.
1) Many sellers want the cheapest commission available and that’s all they consider, therefore they sell their property for less.
2) Many sellers want a quote over the phone even before the Auction Company or Auctioneer inspects the real or personal property. Every auction has different features and different requirements in order to be successful.
Sellers should use professional Auctioneers and professional Auction Companies.
If you want to sell and you want a realistic market analysis with no surprises, call Marvin Alexander at Alexander Auctions & Real Estate Sales (731) 587-4244 or (731) 225-7368.