How to sell a house by auction Turning real estate into fast cash

Mailbag

November 03, 1996|By Michael Gisriel

Dear Mr. Gisriel:

I am interested in possibly selling a house by auction sale. How do I go about it? What are the pros and cons? What fees are

imposed and what hidden costs may be involved?

John Benner

Baltimore

Dear Mr. Benner:

Selling a house by auction is an additional real estate marketing tool that has become more popular the last several years, while the market for resale has been slower than in the mid-1980s.

The primary reason to sell a house by means of an auction is for liquidity -- that is, to convert your real estate asset into fast cash. Also, your costs are generally lower than when you sell through a real estate broker.

Instead of paying real estate commissions, your cost for an auction sale can be limited to cooperative advertising as long as your auctioneer charges a buyer's premium -- passing the auctioneer fee to the buyer of the property -- or the advertising fee plus the auctioneer fee if the company either is unable to sell the property or does not charge a buyer's premium.

It's always a good idea to have a written agreement with the auctioneer that sets out exactly the advertising costs, auctioneer's fees and other expenses. The seller usually obtains the title insurance.

Properties are sold "as is" at an auction, eliminating warranties. The only issue left is price, so due diligence must be taken in advance of the sale -- such as preparation of information packages and inspection reports. A complete marketing proposal should be provided for your approval prior to your signing the auction contract.

One more item to mention -- if the highest bidder for your property is represented by a registered broker, you, as the seller, will pay a co-brokerage commission that will be either a flat fee or percentage of the sale price.

Although the real estate auction can be a win-win proposition for everyone involved, there are definite advantages to the seller in the auction situation:

You have the opportunity to dispose of the property quickly, thereby saving on long-term costs such as interest, real estate taxes and insurance.

The property is exposed to a large number of pre-qualified buyers at one time.

You know exactly when the property will be sold, you set the terms and conditions of the sale, and you are relieved of the negotiation process.

You will want to select the type of auction that best suits your needs -- an absolute auction, wherein the property is sold to the highest bidder regardless of price; minimum bid auction, where the auctioneer will accept bids at or above a disclosed price; or an auction with reservation, where a minimum bid may or may not be posted and the seller reserves the right to accept or reject the highest bid within a specified period of time.

Finally, be sure that you place the sale of your property with a qualified and experienced auction company that has a track record, and ask lots of questions.

Questions?

Michael Gisriel is senior vice president of Fountainhead Title Group of Columbia and host of the weekly radio show "All About Real Estate" on WCBM from noon to 1 p.m. on Sundays.

Send real estate questions to Michael Gisriel, c/o Mailbag, Real Estate Section, 501 N. Calvert St., Baltimore 21278.

You can also leave questions on Sundial, The Baltimore Sun's telephone information service, by calling (410) 783-1800 and entering the code 6170 after you hear the greeting. For more local Sundial numbers, see the notice on Page 2A.

Pub Date: 11/03/96

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