The Pros & Cons of Real Estate Auctions

When it comes to real estate, traditional sales and auctions both have their place. However, we’ve found over the years that the pros and cons of auctions tend to be less understood than those of traditional listings.

Real estate auctions can offer several powerful benefits, but they do have a couple of drawbacks to keep in mind too. We highlight a few of the major points for buyers and sellers to keep in mind below.

Before we get started though, let’s make sure we’re clear on what we mean when we talk about real estate auctions.

What is a Real Estate Auction?

Real estate auctions can sometimes be associated with foreclosures. But while every foreclosure is an auction, not all auctions are foreclosures. A foreclosure is technically a legal proceeding and is usually associated with distressed assets.

When we speak of real estate auctions in the sections below, we’re not describing foreclosures. Rather, we’re describing the kind of high quality, non distressed properties that companies like J.P. King have sold for over 100 years.

As J.P. King’s president, Craig King states, “Our real estate auctions are more akin to the auction of a luxury car, high-end antiques, or other high quality assets sold at auction. We only handle quality properties for non-distressed sellers, and use the auction as a means to maximize value for the seller. We view ourselves as much as a marketing company as we do an auctioneer.”

The Pros of Real Estate Auctions

Extensive Marketing

Here at J.P. King, our real estate auctions leverage an extensive marketing component built to fit any seller’s budget. Since auction properties are more extensively marketed to a broader and wider base of interested prospects, this also tends to create more competition for the property than a private listing could.

To put it simply, in the words of our president, Craig King: “buyers are attracted by the opportunity to get an excellent price on an excellent property.”

Selling Without Contingencies

In real estate auctions, properties are sold as is, where is. In other words, auctions are non-contingent. In the case of traditional private real estate listings, contingencies can occur after a sale has already happened, and can prevent the deal from closing.

Since auctions are sold with no contingencies, there’s much less risk to the seller of the deal falling through. Buyers are required to do all their due diligence before going to contract, which is a big benefit for sellers.

Maximizing the Value of Country Estates & Rural Estates

Auctions can be particularly beneficial for certain kinds of properties, such as country estates and rural estates.

These include:

• Big land tracts
• Hunting properties
• Legacy ranches
• And more

“J.P. King has auctioned over a million acres of land,” says president Craig King, “and we always look at how to maximize the value of that specific property. Parceling up the land is one way to increase value for sellers.”

By creating different parcels for different customer demographics, an auction maximizes value by appealing to multiple types of buyers. One parcel might appeal to a homeowner, another parcel might appeal to a farmer, and yet another might attract a hunter, for example.

Since buyers can bid on any possible combination of the parcels, or on the property as a whole, this also offers a lot more flexibility than a private real estate listing.

“Some brokers will make you sell the whole property as a whole, which can minimize the bid,” says Craig King. “Instead, we want to maximize the value of country estates and rural properties so our clients can get top dollar for these properties.”

Cost Savings, Planning & Peace of Mind

Lastly, since the auction date is predetermined, (hence the phrase: “sell by auction”) this allows sellers to plan accordingly.

“The nature of the auction allows sellers and buyers to plan big lifestyle changes ahead of time,” says King. “Sellers often buy a house by the time they sign their listing with us and before their sale closes.”

In a private real estate listing, luxury properties can take a long time to sell. And keeping the properties in show-ready condition can take a lot of maintenance, especially if drawn out over six months or a year. The same applies to country estates, which could require maintaining huge swaths of land. With auctions, sellers don’t have to constantly worry about keeping the property in show-ready condition. Aside from the peace of mind, this can also bring large savings on maintenance costs depending on the property.

The Cons of Real Estate Auctions

Not All Companies Are Created Equal

The main con of real estate auctions is the possibility of dealing with an auction company that is not reputable. If you decide to embrace the benefits of auctions described above, it’s very important to not only find a company with a track record, references, and client wins, but to also make sure that the company has documented experience handling properties similar to what you’re looking to sell.

Selecting the Right Methodology

Different auctions and different properties require different approaches. That’s why the previous point about experience is so important. An experienced auction company can help you select the right methodology for your specific property, like choosing whether to market it with a reserve or no reserve, what kinds of buyers to market to, and more.

Lack of Realistic Expectations

Lastly, it’s important to be realistic in expectations from the beginning. When you sell a property using an auction, you’re selling the property under your terms, which offers many benefits (non-contingent sale, many buyers, convenience, etc). However, certain auction companies can sell “blue sky” opportunities that aren’t necessarily painted in a realistic light.

As J.P. King’s president Craig King states, “At J.P. King, we tell it to you straight. We’re a family business, and we talk you through it like you were a family member of our own.” When you choose J.P. King to auction your property, you can look forward to realistic expectations and total transparency in addition to all the other benefits of real estate auctions mentioned above. To learn more about buying or selling real estate with J.P. King, reach out to us today.