Going…going…gone. If you’re selling real estate, these words might be music to your ears. Real estate auctions are an accelerated process for selling properties through public sale, with many potential benefits to the seller. While auctions are often used to sell distressed properties, they can also be a fruitful way to sell non-distressed lot and land properties. Here are some of the points to consider about selling land at an auction:
Real estate auctions solidify the timeframe for the sales process. You set the date for the auction and terms for closing (often 30 days), and the timeline for your sale becomes much clearer, and typically, much faster. Whether you’ve been trying to sell your property for a long time and are tired of carrying the costs, or you’ve just put the land on the market but need a quick sale, an auction may provide the certain timing that you want. Since the sale of lots and land often takes much longer than the sale of a home, for example, a shorter, definitive timeline and process may be very appealing to you. Uncertainty is one of the most frustrating aspects of selling real estate and the auction sale eliminates much of that ambiguity – and contract extensions!
Sense of Urgency
An auction is an exciting and intense process for both sellers and buyers. The format of the auction with a set date and a competitive bidding situation creates a sense of urgency among buyers that helps focus – and energize – the sale. Whether online or in person, auction buyers are forced to prepare for bidding on a particular date with their due diligence completed and financial resources lined up. Buyers know that if they aren’t participating and prepared to buy on the date of the auction, they may miss out on the opportunity to own your lot or land. If you have a nice homesite or development project in an area of low inventory, this sense of urgency can really play to your favor in an auction sale for land. In contrast, the traditional sales process for land often extends over many months and can break down at various points along the way.
Real estate auctions create a competition among buyers and help eliminate the issue of pricing too high or too low. A minimum bid can be set to start the process, but the high bid may well exceed the price set for a traditional sale depending on the number of bidders and their enthusiasm. In a regular sales process, pricing too high can cause a property listing to languish; pricing too low can leave money on the table. The intention of selling land at an auction is to arrive at a true fair market value for your lots or land.
Carrying costs can represent a serious drain on your property’s equity and your cash flow over time. Many land sellers who prefer a traditional sale do so because they hope or believe that the best offer will come with time, and are afraid that an auction may force them to take a lower offer. This is certainly a point to consider carefully, but lot and land sellers also should take into account the carrying costs of the property, including taxes and maintenance, throughout a longer sales route. Plus, it often is more difficult to extract income from vacant land since it is not as easily leased. These carrying costs can be significant enough to warrant serious consideration of a real estate auction.
Real estate auctions allow the seller to set the terms and conditions of sale from the outset and eliminate the hassle of negotiations. You’ve already set the time of date of the sale, now you also can set the timeframe for closing, the amount of earnest money deposits (typically 10-20%), whether the sale is “as is” and so on. Buyers come to the sale prepared to buy on your terms and thus avoid the hassle of negotiating, which sometimes becomes emotional and frustrates buyers or sellers…to the point of killing the sale.
Experienced auction houses are adept at marketing real estate to potential buyers. Most use a full campaign of marketing, public relations and direct sales efforts to notify a broad pool of qualified buyers who would be interested in the auction of your property. When you are selling vacant land at an auction it’s key that the marketing efforts reach lot and land buyers, which is a more distinct audience. And with an auction you’re marketing not only the features of your property, but the event of the sale on a particular date. Also, many auctions are arranged to include multiple properties, providing even greater visibility for your lots or land and attracting an expanded network of buyers.
If you are interested in exploring the use of an auction to sell your residential lots or land, we at LotNetwork.com encourage you to research auction companies that would best meet your needs and talk with a real estate professional who is experienced in auction sales. There are national companies and local auction houses, online auction services and traditional companies that can help you plan to sell your land at an auction.
Terms to know related to real estate auctions:
Absolute Auction: This is an auction in which the seller agrees to accept the high bid, no matter the price. Absolute auctions can attract a higher number of bidders, but also may be difficult for some sellers to use when they have costs they need to clear or a minimum profit they’d like to make. If you’ve got the financial flexibility you may wish to consider an absolute auction, but for some sellers this may not be an option.
Minimum Bid: Sellers often set a minimum bid price to ensure that the sale at least covers the costs owed or to prevent buyers from colluding to purchase the property at a deflated price. If the seller has a large amount of equity in the property and sets the minimum price well below market value, this can spur great interest from buyers. However, if the property is unique or otherwise difficult to price, market value will be a matter of perception. Setting a minimum price too high – in the eyes of buyers – will drive off some bidders.
Selling with Reserve: The seller maintains the right to reject any and all bids. This can mean that the seller has a minimum price in mind, but didn’t necessarily publish. Selling with Reserve also can mean that the seller reserves the right to bid on his own behalf (or on behalf of a lienholder) during the auction sale.
These are all terms that can be discussed with auction experts and incorporated into your contract with them. If you choose to pursue an auction to sell lots or land, we wish you the best.
We have much more information and other great tips about selling your property on our Lot and Land Seller’s Resource Page.
Real estate pros, be sure to see our Real Estate Agent and Broker Resources to see how LotNetwork.com can help you sell your lot and land listings. And homebuilding and development pros can go to the Homebuilder and Developer Resources Page to find out about our features and powerful online tools that were created to meet your needs, and will help you buy and sell lots and land so you can sell new homes.
Check out our other resource pages for tips and information on the following topics:
It’s easy and affordable to sign up for a Listing Plan so you can sell your property on the nation’s premier site for residential lots and land:
- How to Sell Lots & Land (and Why it’s Different from Selling Homes) – LotNetwork.com
- Online Listings to Sell Lots & Land: 5 Tips to Help Spur a Successful Sale – LotNetwork.com
- Sell Land, Development Projects and Portfolios of Residential Lots with “Project Listings” – LotNetwork.com
- Photos Sell Real Estate: Tips for Great Photos for Lot & Land Listings – LotNetwork.com