Auction FAQs & Auction Terms - Nicholls Auction Marketing Group

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AUCTION FAQs & TERMINOLOGY

Question: What situations warrant using the auction method of marketing?

Answer: When the clients objectives are to sell the property in the shortest possible time frame, truly see what the market will bear under terms and conditions favorable to the seller, and desire a marketing saturation of their property then auction is the way.

Question: Is the auction method ever used as a first selling method?

Answer: Yes, the auction method is not only the best but should be the first choice. An auction does not create the price ceiling that a conventional listing does. The seller can set the conditions for the sale and eliminate endless negotiations. . .

Question: Are real estate auctions only for distressed properties?

Answer: No, most of our auctions do not result from repossessed properties, but rather are the result of the smart seller. A smart seller chooses the cost effective, accelerated method of selling property rather than listing the property for an undetermined length of time. Usually listings require long term marketing periods with multiple unscheduled, showings and creative, contingency offers. The auction method sets the date the property will sell and eliminates these hassles.

Question: Can there be a reserve or a minimum bid on an item or piece of property?

Answer: Yes, the seller has the right to execute a reserve or minimum bid. This figure is discussed with the auction professional during early negotiations of the contract and is not disclosed to any potential buyer under any circumstances. When a high bid is reached at the auction the seller has the right to accept of reject the high bid.

Question: If the high bid is less than my predetermined minimum value can I accept it?

Answer: Yes, the seller always has the right to sell the property at the highest bid price.

Question: How long will the whole process take?

Answer: Ideally, the contract must be signed at least 3-4 weeks prior to the auction day, the closing takes place approximately 30 days after the auction date.

Question: Where will the auction take place?

Answer: On single properties the auction typically takes place on site, either in a tent, on the front porch, or in the living room. For multi-property or vacant land auctions a ballroom setting is typically more appropriate for the auction setting.

Question: How long after the auction occurs will I get paid?

Answer: Approximately 30 days after the auction, a closing date will be set. At that time the property owner will be paid and turnover possession to the buyer. The closing will be insured by a professional title company. If it is a personal property auction, you will get paid on auction day.

Question: What factors determine the success at an auction?

Answer: Many factors contribute to a successful auction, the desirability of the property being sold i.e. location, condition and surrounding properties. Secondly, and most important, realistic expectations on the part of the seller. Every property has a value, when a property is properly advertised and promoted and two or more approved bidders are in attendance the high bid achieve is true market value. If the seller realizes this and is truly motivated to sell at the achieved price under stated terms and conditions a successful auction occurs.

Question: What are the terms of an auction?

Answer: The terms and conditions are devised to protect the seller and the process of the auction method. Properties are sold “as is, where is” with all faults. The purchase agreement is produced with no contingencies, including those for inspections and financing.

AUCTION TERMINOLOGY

Absentee Bid - A procedure which allows a bidder to participate in the bidding process without being physically present. A bidder submits an offer prior to the auction.
Absolute Auction - The property sells to the highest bidder regardless of price. This typically generates a much greater interest among potential buyers resulting in greater attendance at the auction , and a higher final sale price for the item in question.
Appraisal - The act or process of estimating value.
AS-IS - Selling the property without warranties as to the condition and/or the fitness of the property for a particular use. Buyers are solely responsible for examining and judging the property for their own protection. Otherwise known as "As Is, Where Is" and "In its Present Condition.
Auction - A method of selling an item in a public forum through open and competitive bidding.
Auctioneer - The person whom the seller engages to direct, conduct, or be responsible for a sale by auction.
Bank Letter of Credit/Guarantee - A letter from a bank certifying that a named person is worthy of a given level of credit. Most often this is required when paying with none certified funds.
Bid - A prospective buyer's indication or offer of a price he or she will pay to purchase an item at auction. Bids are usually in standardised increments established by the auctioneer.
Bid Assistant - A person who assists the bidder and the auctioneer. Calls out bidders' bids, answers questions, and makes the bidder’s comfortable with the auction process
Bidder Number - Individually numbered card with your unique bidder number. This will identify you to the auctioneer as the successful bidder.
Bidder Registration - The process of registering your identity and ability to pay for successful bids. This is essential before bidding.
Broker Participation - An arrangement for third-party brokers to register potential bidders for properties being sold at auction for a commission paid by the owner of the property or the auction firm.
Buyer's Premium - An amount (usually a percentage) that is added to the winning bid (hammer price) to determine the contract selling price which the buyer pays for the property being sold. The use of the buyer's premium is so effective because it benefits both the buyers and the sellers. Sellers benefit because it helps to defray many of the expenses associated with conducting an auction. The buyer benefits because without the use of this tool, there may not have been an auction. The open and competitive bidding process might not exist if the buyer's premium were not used to offset some of the auction related expenses.
Choice - When selling choice, the auctioneer is offering more than one item up for auction at a time. The winning bidder then has the choice to take one item or multiple items. If the bidder wishes to take more than one item, the bid price will be multiplied by the amount of items the bidder chooses.
Clerk - The person employed by the principal auctioneer or auction firm to record what is sold and to whom and for what price.
Conditions of Sale - The legal terms that govern the conduct of an auction, including methods of payment, terms, buyers premiums, possession, reserves and any other announced by the auctioneer prior to the start of the auction.
Consignor - The person or authorized agent or entity that consigns goods to an auctioneer. The consignor is usually the seller.
Due Diligence - The process of gathering information about the condition and legal status of assets to be sold.
Hammer Price - The highest bid which is accepted by the auctioneer
Multiple Property Auction - When selling choice, the auctioneer is offering more than one item up for auction at a time. The winning bidder then has the choice to take one item or multiple items. If the bidder wishes to take more than one item, the bid price will be multiplied by the amount of items the bidder chooses.
On-Site Auction - An auction conducted on the premises of the property or items being sold.
Personal Property - All goods and interests other than real property including chattels and commodities. Title for personal property sold at auction passes when the auctioneer accepts the final bid and announces the item sold (at the fall of the hammer).
Preview - Specified date and time items or real estate is available for prospective buyer viewing.
Real Property/Real Estate - Land and all interests therein, including all improvements to the land, such as buildings, fences, and fixtures. Title for real estate sold at auction passes at closing with delivery and acceptance of the deed.
Reserve Auction - The seller establishes a confidential reserve price and has the right to accept or decline the highest bid if it falls below the established reserve. If the reserve auction method is chosen, it is imperative that the reserve price be realistic.
Sealed Bid Auctions - Each bidder submits a single, irrevocable bid without knowledge of the other bids. When the bidding period is closed, the bids are opened simultaneously, and the winner is the highest bidder.