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Arizona Real Estate Auctions: Buying & Selling |
By Deb Weidenhamer
 Are you thinking about buying or selling a home at an Arizona real estate auction? This article is designed to provide you with the details on how real estate auctions work and how you can get involved while protecting yourself and your assets. Specifics may vary from auction to auction; however, the following information includes helpful and important guidelines from which everyone can benefit.
In 1994, twelve percent of all real estate was sold and purchased at auction. The auction field of real estate sales is growing, according to a Gallup Poll conducted for the National Auctions Association; in 1993, more than $40 billion in commercial and residential property was auctioned off, four times more than in 1980. Before you commit to your first real estate auction, examine why the popularity of real estate auctions is growing and what is required to penetrate this lucrative field.
Real estate auctions are no longer viewed as distress sales -- on the contrary many home sellers are viewed as savvy sellers who want to avoid "the unknown" that comes with traditional brokerage methods of
sale. The popularity of selling a home at auction has increased so much that Good Housekeeping published an article in its June '95 issue entitled "Auctions! The New Way To Sell You Home." The attraction of the auction is the possibility that a bidding war will drive up the sales price. It's not just sellers who are benefiting at auction, buyers who want to close quickly on a home are winning too. According to the article, "Speed is the greatest advantage of an auction: You (the seller) get to pick the selling date and the sale is over fast. So instead of spending money on a mortgage, insurance, and maintenance for the house you're waiting to sell, you can reinvest quickly in a new home."
For sellers who need to relocate, auction is a sure way to settle the sale of their home quickly. In a recent study by the Grewnt Group, a consulting firm that studies the auction industry, analysts expect real estate auction sales to double in the next five years. Obviously the method of sale by auction is continuing to grow in notoriety. In the July/August '95 issue of Real Estate Today; "... many believe that in the future, major real estate companies and franchises will have an auction department or an alliance with an outside auctioneer." The article entitled "What Does It Really Take To Get Into Auctions?" goes on to say, "Auctions is a fast-growing method of selling real estate."
There are two ways to enter real estate auctions, 1) as an independent auction company who obtains its own properties to sell or, 2) to partner with a real estate broker who provides you with properties to sell. As an independent there is substantial reward in a full commission, but exceptional investment of time and money to attract clients. Should you choose to partner with a real estate firm, the sale's commission which is usually eight percent depending on the area of the country in which you auction; the commissions are split between the companies.
In Arizona, depending on who you ask, you are not required to have a real estate licensee to auction property. The proposed Arizona auction law draft would however, require a license real estate agent to have an auctioneer's license. Even without the clarification of current laws, I suggest you err on the side of the law and obtain a real estate license. Attending real estate school can be as quick as two weeks and cost less than $500. Upon completion of school, you sit for the state exam. What you learn in real estate school will be invaluable during your real estate auction career.
The investment required to enter the real estate auction field varies on whether you are an independent or partnered auctioneer. Either way, expect to put some capital into marketing your services to home sellers or real estate firms. The advertising expenses of the auction are typically an up-front expense to the seller, and often these costs range from $1,500 to $6,000 which can be recovered for them in a buyer's premium.
The actual bid calling is only ten percent of the work to be performed with the auction. You will need to work with the seller to determine the method of auction. More buyers are attracted to the home sale if it is an absolute auction which can be risky but can often generate a higher than expected sale's price. Both the minimum bid and reserve auction are safer for the seller but attract fewer bidders. Once the sales terms are decided upon, you will need to execute a contract, hold an open house(s), help buyers obtain financing, promote and advertise, and assist in the home closing.
Even though the process of holding a real estate auction can seem overwhelming at first, the process is not much different from a general auction. With the tremendous growth in the filed there is room for competent auction companies to pursue the real estate auction business. And the best part of all -- you won't have to wear a gold blazer.
Deb Weidenhamer is CEO of Auction Systems, the Southwest's most active auction and appraisal company. Check out our website for the next scheduled Arizona real estate auction or call 800-801-8880 for more information.
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