House Auctions

We had another house auction today. This one sold for $89,900 to a nice couple who are planning on using it as a real estate investment - buy it now, while the market is down, and either rent it or sell in a few years when things have recovered some more. This is the second house we've sold in a week. This was also the second time we had tried to auction off this piece of property. The first time we tried to sell it, the minimum was unpublished, meaning that we (the auction company) knew how much the seller was willing to sell it for, but we weren't allowed to make that knowledge public. When you aren't allowed to tell someone what your actual sale price is, it makes them hesitant to bid on the property - not knowing how much it will actually cost prevents some people from being willing to participate at all. Think of it this way - say hypothetically that you wanted to buy a new car. You go to the lot, and find one you like, but when you start to ask how much the car is (so you can begin negotiating the price down) the dealer starts asking you how much you would be willing to pay for it. This would be fine, if you were talking with them about buying a couch, or something smaller. But when you are dealing with a major investment (like a car, a house, etc) its usually better for the buyer to know what they are getting into. And if you have the attention of the buyers (like at an auction, when you want to have as many potential buyers as possible), the more open the discussion is, the more likely you are to be able to actually move the property, whether said property is real estate or roller skates. The more information you have available on a piece of real estate, the easier it will be to convince a potential bidder that the property in question is worth their time to investigate, and possibly to purchase.

Recently, we've sold about 3 houses in the past month or so. The first one was in Festus, MO. It had 3 acres, a mother-in-law apartment in the basement, a 2 car garage, and was very private - the house sat back behind its sub-division, with a quarter mile long gravel driveway, and was surrounded by trees and bushes. That property was sold with no reserve - meaning that whatever the high bid was, that was the final selling price. Basically, when a bidder hears the words "no-reserve" or "absolute auction", a knowledgeable bidder realizes that if no one else registers to bid on that property, it can be had for an extremely reasonable price, because regardless of the lack of competition, the property will absolutely sell. In turn, absolute auctions are among the most volatile, because the lack of a reserve that must be met results typically in high levels of competition, which brings a better value. On the opposite side of the spectrum, there are unpublished minimums - which was the case when we first tried to sell the property we sold today. In those cases, there is a firm minimum, but beyond the seller and the auctioneer, the general bidding public is unaware of what the minimum required for purchase is. The middle ground, and the way that the majority of our real estate sales have taken place, is a published minimum, where the seller sets a price that they find acceptable for their property, the auctioneer advertises the sale with that price made public for the bidders to know how much is required to purchase the property, and then the real estate is sold to the highest bidder at or above that minimum purchase price. All three methods are viable, but all three methods have times when they are better for a particular piece of real estate as opposed to the other two methods.