Auctioning Real Estate
March 16, 2018 |
Auctioning of real estate has become an increasingly popular way to sell real estate. Distressed properties are auctioned as a matter of course, but the market is starting to see more traditional real estate auctions. The pros are that a higher sale price and a quicker sale. Cons are a no sale and resulting stigma. Although becoming more popular, many real estate agents don’t understand how to actually go through the process of auctioning real estate.
Ohio real estate auctions blend both real estate and auction professional disciplines, with real estate regulation through the Ohio Department of Commerce, Division of Real Estate and auctioneers through the Ohio Department of Agriculture, Auction Program. There are special requirements for the auctioning of real estate, which are important to understand if you are considering adding this service for your clients.
Only a professional with dual licensure as an auctioneer and real estate salesperson or broker may enter into a contract for the auction of real estate. A real estate salesperson or broker may list property but if it is to be auctioned, the auction contract may only be signed by a dual licensee. When advertising the property for auction, the advertisement must contain the name of the dual licensee and his/her brokerage firm. A real estate brokerage cannot market itself as sponsoring auctions (i.e. referencing its auction division) unless the brokerage obtains an auction company license.
An absolute auction is defined in state law. It means that the property is to be sold to the highest bidder without reserve, that a minimum bid is not required, competing bids are not required and the seller cannot withdraw the property once the auction is opened. If a property is to be auctioned as absolute, the same must be reflected both in the auction contract and the advertising.
The definition of a reserve auction is also provided in state law. A property being sold with reserve means that the seller reserves the right to set a minimum bid, to accept or reject bids and the right to withdraw the property from auction. Typically, the reserve amount is not made public. Like an absolute auction, the auction contract and advertising must state that the auction is a reserve auction. Few know that an auction can only be reserve or absolute, not a hybrid of the two. For example, auctioneers cannot advertise an auction as absolute with a minimum opening (reserve) bid.
At the auction, the auctioneer must verbally disclose to the audience that the auctioneer represents the seller in the transaction. At the conclusion of the auction, the auctioneer is to provide the successful bidder with the agency disclosure statement. Auctioneers are required to have all of their contracts in writing and disclose that they are bonded in favor of the State and that any aggrieved person may initiate a claim as a result of an Auctioneer’s actions.
Auctioning can be an effective way of selling real estate, provided it is done correctly with the right professionals involved. The goal, of course, being a frenzy to beat out competition and become the highest bidder, bringing the highest and best sale price for the seller.