Auction remains a viable option for both home buyers and sellers, despite many misconceptions about the process. While some believe only foreclosures or properties in bad condition are sold via auction, in reality all types of properties are sold on the auction block — including luxury homes and commercial buildings. Contrary to popular belief, properties up for auction can be inspected, with the exception of those auctioned by a county or those involved in judicial auctions. Buyers do not have to pay the full amount in cash, as some mistakenly believe; but they do have to present a 5 percent to 10 percent earnest money deposit and a mortgage preapproval. While sellers must pay a fee to cover the accelerated marketing process, auctions can cost them less than a traditional sale by moving the home quickly and minimizing carrying and maintenance costs. Additionally, sellers generally do not lose money at auction, as an auction typically determines the home’s true value and competitive bidding can even increase the price beyond that; they also benefit from being able to set terms other than the price, such as timing and lack of contingencies. Another myth tied to real estate auctions is the belief that agents and brokers cannot be involved in the process; however, they actually play a role by referring clients, serving as a cooperative broker/agent, or acting as a listing broker/agent, earning an average 2 percent commission. There are concerns about attracting potential buyers when a home fails to sell at auction; but experts stress that most properties do sell at auction, and pre-sales are popular. Finally, it is important to note that sellers only have to accept the final bid, regardless of amount, in a reserve auction; first-time buyers — not just investors — attend auctions; and many sellers choose an auction not because they have a hardship but because they want to take advantage of the accelerated marketing process and 30- to 45-day closing period. | Read More