Real estate auctions were once considered to be the last resort to unload unwanted junk properties onto an unsuspecting public.  With the addition of broader portfolios and better marketing, however, the use of auctions is now gathering momentum in [Profile.market2] as an effective sales tool in the real estate community.

One recent Sunday afternoon in Santa Clara, Calif., Maria Hagan of Dividend Development Corp. sold $8.2 million worth of real estate in less than two hours. However, there were no real estate brokers, for sale signs or multiple listings--and the only fast talking was done by an auctioneer.

The Santa Clara-based development firm put 50 townhouses of the 103-unit San Tomas Court project on the block. Homes in the development had been selling for $169,500 to $215,000 through conventional real estate brokers for the last year.  There was no minimum bid for the auction, which attracted 1,000 people, including 450 registered bidders.

Real estate auctions in [Profile.market2] are becoming an increasingly popular way to sell real estate.  One reason is that foreclosure rates, the traditional reason for real estate auctions, are on the rise. However, there also is a new breed of auction--offering new, often high-priced properties--that is gaining favor among developers and consumers alike.

The new breed of auction begins with weeks of advertisement on television and radio and in newspapers.  Glossy brochures and fliers are part of the sell, and the day itself has a party atmosphere, complete with catered buffets and live music.

Though real estate auctions are more common in the Midwest, the new style of auctions is a [Profile.market2] phenomenon.  The public really likes buying at auctions.  There's a certain equity that comes from selling in an open forum--you feel good about what you just bought because you know there's someone else out there who was ready to buy it for just $1,000 less than you.

Although buyers do have a chance to purchase property for far below asking price, experts say that, on average, the price paid for real estate at an auction is usually market value. The reason is that auctions bring together everyone who's interested in a property at one time.  The effect of potential buyer bidding against potential buyer ultimately sets a fair-market price.

In the Midwest, it's common to auction individual houses.  In [Profile.market2] it rarely happens, except for homes in the million-dollar estate category.  Developers are attracted to auctions because they represent a quick way to liquidate remaining units in a large project after the initial sales momentum has worn off.  During real estate auctions, bidders are usually pre-qualified:  They tour models, inspect partially completed dwellings and assess how much they are qualified to borrow.

While banks and other institutions with foreclosed property on their hands and developers looking for a quick turnover are the usual source for auction property, individual home sellers can put their homes up for bidding.  This can be done by contracting an auctioneer to sell the house as part of a larger auction, or by auctioning the house by itself.

Auctions aren't for everyone and there are pitfalls to look out for.  As a seller, there is usually a 10% premium to the auction company to cover their advertising and auction costs that is taken off of the final bid price.  As a buyer, for properties that everyone wants, the bidding usually rises higher than market value.  You can get caught up in a buyers frenzy and EGO's get in the way of logic.  Beware!  Always, always preview the property beforehand or at least go see the property and walk around it even if you can't get in it.  Check with a Realtor to get comparative prices in the area and to find out things that the regular public may not know about the area.  Realtors can also represent you at the auction to ensure that you aren't paying too much.  As a buyer you will usually have to pay 10% of the price at the auction and come up with the remaining balance within usually 48 hours.

As a seller, what happens if the final bid on your home is far less than you think it's worth?  Well, you must handle this condition up front.  Are you selling the home with no minimum bid or do you have a minimum bid?  Some auctions allow a minimum and some don't.  Make sure you do your due diligence prior to submitting your home to an auction.

There is a lot of free information available to you about buying, selling or investing in [Profile.market2] real estate.  For complete information about the [Profile.market2] real estate market including current homes for sale, property values and more, please visit the most complete website online dedicated to everything Cape Coral real estate at www.livingincapecoralnow.com and www.dancraddock.com.  Please feel free to contact me with any of your real estate questions and I will be happy to answer your queries.  Call me on my cell at [Profile.cell_phone] or email me at [Profile.email_link].

Have a Prosperous Day!