Dear Dave,
I have a couple of rental houses, and I was thinking about unloading them at auction instead of renting them out again. What are your thoughts on selling homes at auction?
Shannon
Dear Shannon,
First, let’s take a look at the two types of real estate auctions, absolute auctions and auctions with reserve. With an absolute auction, whatever the house sells for, that’s it. When the hammer drops, you’ve sold the house. An auction with reserve is where the seller, or his agent, reserves the right to accept or decline any and all bids. A minimum price may or may not be disclosed, and the seller reserves the right to accept or decline any bid within a specified timeframe.
As a general rule, auctions are not going to bring retail price. People who go to them are looking for a deal, so you’ve got to be willing to accept less than what the property’s actually worth. Essentially, what you’re doing is drawing out the vultures and hoping one of them will get excited and pay a price close to retail.
Take a good look at your properties, the neighborhoods they’re in, and decide what you’re willing to accept. Then, talk it over with a quality auctioneer in your area. I’ve done pretty well selling properties at auction, and I’ve also found some great deals buying properties at auction. Of course, that meant someone else didn’t do so well!
—Dave
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