Defining the Terms: The 3 Main Types of Real Estate Auctions

January 11th, 2011 by PA - Bloger

With the popularity of real estate auctions continually rising, everyone from real estate investors to first-time home buyers are hitting the auction circuit. For those who are new to the auction process, some can be apprehensive about the terms and guidelines that are unfamiliar. This shouldn’t keep anyone from pursuing an auction – some simple research online can equip potential buyers and sellers with all the vital information needed to be a part of the auction action.

When dealing with real estate auctions, it is imperative to know the difference between the 3 main types of auctions, which are Minimum Bid, Published Reserve and Absolute:

A Minimum Bid is the lowest bid (decided by the seller prior to auction) the auctioneer will accept for a property. Once that bid is reached, the property will sell to the highest bidder.

A Published Reserve is the lowest amount that the seller must sell a property at auction, but the bidding can start wherever the bidders choose. If the Published Reserve bid is not reached, then the seller can accept, reject or counter the highest bid.

An Absolute Auction is where the highest bidder acquires the property, regardless of the amount. There is no reserve price below where it will not be sold. Absolute Real Estate Auctions tend to attract the highest amount of interest.

Determining these types of auctions is imperative in terms of bidding. According to Realty Marketing/Northwest,”The Minimum Bid and the Published Reserve are extremely important, because these are the figures at which the seller is committed to sell the property at the auction…The seller’s obligation to honor a Minimum Bid or Published Reserve applies only to the auction. Before or after the auction, sellers are under no such obligation.”

Finding the definitions of auction terms such as these are right at your keyboard, which is good news since the auction method of sale has become a driving force in the real estate industry. “Sellers include all those who sell properties through conventional brokerage firms…” Realty Marketing/Northwest reports, “builders, developers, trusts, institutions, non-profit organizations, governmental entities, lending institutions, investors… and the list goes on and on.” Potential buyers and sellers can easily educate themselves on the ins and outs of auctions to so they can capitalize on the financial opportunities that auctions have to offer.

And the opportunities are plentiful. Take LFC’s online Minimum Bid auction of a 2278+SF Warehouse/Office/Logistics Facility in Williamstown, West Virginia (minimum bid: $395,000; bid deadline: February 3, 2011); or Nicholls Auction Marketing Group’s residential property in Chesterfield County, Virginia, scheduled for Absolute Real Estate Auction in Virginia on January 15, 2011. From commercial to residential to open land, all types of properties are rapidly being bought and sold via auction.

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