Fact or Fiction: Debunking Common Auction Myths

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April 26, 2018
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The auction method of marketing and selling real estate is the world’s oldest and most misconceived method.

The auction method of marketing and selling real estate is the world’s oldest and most misconceived method. An auction is simply a forum where assets are sold through competitive bidding with the highest bid winning the rights to own.

While the process is straight forward, many times perception clouds reality. For the uninitiated, this can feel a little overwhelming and confusing.  We’re going to de-mystify the auction process and give you a closer look at some of these misconceptions.

Myth 1: All properties at real estate auctions are foreclosures and/or distressed assets.

Fact: A majority of auctions today do not result from foreclosure or distress situations, but rather are the result of a seller choosing a cost-effective, accelerated method to sell a property. Auctions allow sellers to eliminate virtually all long-term carrying costs, providing predictable sale date with predetermined terms. An auction is truly a win-win situation: sellers obtain immediate cash and buyers purchase properties at fair market value, determined by open, competitive bidding.

Myth 2: If I buy a property at auction, I must buy it sight-unseen, without an inspection.

Fact: It is true that auctions are almost always sold “as-is” with no contingencies but buying a property at auction does not mean a buyer must forgo due diligence. Most auction companies offer open houses and inspection periods before the auction date where buyers are invited to bring a contractor or inspector with them. Typically, an auction company will provide a complete property information package including preliminary title work, inspections, surveys, sample contracts, terms and other due diligence documents well before the auction date so bidders are fully informed prior to bidding.

Myth 3: Buyers must pay in full with cash at real estate auctions.

Fact: While paying in cash is certainly an option, many properties can be financed through traditional loans.  Buyers are usually required to put down a non-refundable deposit or earnest money and prove they are approved for financing on auction day. Buyers typically have 30-45 days to secure financing or risk losing their deposit.

Myth 4: Only experienced investors can really compete at real estate auctions.


Fact:  Today, more than ever before, auctions are providing results for buyers and sellers from all walks of life.  Auctions are taking place in communities large and small across the country with more than a quarter trillion dollars in assets being sold via auction each year. The rising popularity of real estate auctions is partially because of the increased acceptance of online auctions as well as the fact that auctions create a sense of excitement and competition in the marketplace.  Sellers know their property sold at prices truly representative of market value, and buyers walk away savoring their victory in the competition. Everyone wins at an auction.

Myth 5: An auction will cost me a lot more than if I hire a real estate agent.


Fact: Most of the cost for a real estate auction is associated with the accelerated marketing of the property. These costs cover direct mail, signage, newspaper, magazine, online advertising, videos, press releases and property information packages. It is this mass marketing that makes auctions so successful and motivates a buyer to act. So, while the marketing costs may be slightly higher than traditional home sales, the seller is receiving rapid results and saving the costs of carrying and maintaining the property.

Myth 6: If I sell my home at auction, I will get a lower price than market value.


Fact: One of many auction types is a reserve auction. A reserve auction allows the seller to set a pre-agreed upon minimum price they are willing to accept for the property. The seller is only obligated to sell the property once the bid amount meets or exceeds the reserve price. If the auction does not reach the reserve price, the seller has the option to accept or reject the highest bid price reached.

Myth 7: There is no place for traditional agents or brokers in real estate auctions.


Fact: Plenty of revenue producing roles are available for brokers and agents in the auction process. You don’t need to become an auctioneer to benefit. Real estate brokers and agents are often involved in referring clients, acting as a cooperative broker/agent or acting as a listing broker/agent. In addition to the average percent of commission that can be earned in these roles, brokers and agents will enhance their image as a full-service professional by offering their clients new selling programs and purchasing options.

United Country Real Estate is the largest integrated network of conventional and auction real estate professionals in the United States. For more information about auctions, visit www.UCAuctionServices.com.