There are a lot of ways to do an auction these days, and various auction companies tend to favor one or the other. This can be confusing to someone who wants to sell, whether it's a single property or an entire portfolio.
To touch on the ultimate question of which is best, the answer is that it depends. Let's walk through the major ones one by one and consider the various advantages and disadvantages. While all of the methods can be used for either real estate or other assets (such as personal property or machinery), I'm going to focus on real estate, because that's our main business at John Dixon & Associates.
Before I describe the various approaches, let me say that regardless of the one you go with, you need to make sure that your auction company meets several criteria:
Up to the marketing challenge. Use one that will actively market your property and provide detailed information to bidders. No matter which format you use, it's critical to remember that people buying real estate always need to see the property and do their “due diligence” research, even if they're buying online. That means you need to use a company that will make provisions for inspections and provide the necessary documents. The property needs to be presented favorably with good photography, of course, and bidders need to be properly qualified to ensure the integrity of the process.
Properly equipped. Ensure that your company has the right tools for the format it is using. For example, if you're doing an Internet-only auction, you'll need to make sure the company has a proven, secure, user-friendly system for displaying your property, qualifying bidders, and taking bids. If it's a live auction with simulcast, ensure that the audio, video and connectivity are reliable, and that the bid assistant communicating with the online bidders is qualified to handle any questions that come up, whether technical or related to the property.
Properly licensed. License requirements for auctioneers and real estate brokers vary from state to state. Make sure your company is properly licensed for your sale.
Now, let's move on to some of the auctions available.
Before we move on to the various types of auctions involving the Internet, it's important to note that even today, the live, public-outcry auction continues to be the heart and soul of the auction industry. This is where my roots are, and even when we make use of the Internet, the overwhelming majority of our sales involve a live auction, where people gather into a room and enter their bids while a bid caller conducts the sale. This is also a favorite for most of our bidders and is most assuredly the most fun!
Timed Internet Auction
When it comes to auctions using Internet technology, this is probably the format with which most people are familiar, because it bears similarities to the format on EBay. Your property is shown with full information, photos and other critical information, and bidders may enter their bids within a defined timetable. This timetable can be for weeks or just a few days, but lately, more auction companies seem to favor shorter time periods.
Here are some of the advantages of a Timed Internet Auction:
Bidders may choose any time to enter their bids within the allotted time frame.
A bidder may enter a maximum bid, with the system raising the bid up to that amount as needed.
Costs may be lower because the auctioneer may not incur the costs of a live auction.
A common concern, of course, is that many feel that the more relaxed time frame and the absence of a live auctioneer can reduce the urgency and ability to get the highest possible price.
Timed online followed by live auction
In this hybrid arrangement, an online Internet auction is conducted in the days leading up to the live auction, then the high bid serves as the opening bid for the live auction. Its use for real estate appears to be declining, but there are still a number of companies using it. It's still very common in auctions of personal property. Since we rarely sell personal property, we've had few occasions to use it.
One reason often given for using this method is that it caters to both the bidder who prefers an online format and the one who prefers to participate in a live auction. Since most serious bidders are going to want to participate up to the very end, most would probably participate in the live event regardless of whether they had entered online bids, which would seem to make the online unnecessary. However, the online portion might provide a “security blanket” of bids going into the live event.
Live auction with simulcast
This is the format we use most commonly at John Dixon & Associates, because it allows bidders to be either live in the room or bidding via the Internet, depending on which they prefer. (Older bidders seem to prefer live bidding, while younger ones are more likely to bid online.) Either way, they compete head to head, at the same time, for the same properties.
It's common for us to sell 30, 40 or even 50 percent of our properties in a major portfolio auction to online bidders. This can vary widely, of course, depending on the number, type and value of assets being sold.
Whatever you do, make sure it's done well
There are more possibilities and twists, but these are the major ones. Ultimately, the most important thing is to do it well, and to work with a company that has a strong track record for professionalism, integrity and solid results.
We'll be talking about these and other options in a webinar on May 8, from 3 to 4 p.m. Eastern. You can register here.
Meanwhile, we can have a dialogue without waiting until we can meet in real time, so I invite you to offer your comments on this post.