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Real Estate Auctions – A Dual Platform Approach

I’ve been in the real estate investment sales arena for a long time and I like to think of myself as a creative and effective marketer who knows how to generate results.  My firm’s job is to “make a market” for our sellers’ properties, identify the best buyers, and maximize price.  This is a pretty straight-forward undertaking in most instances; however, unique seller requirements, unusual property characteristics or challenging market conditions occasionally conspire against us.  In such special circumstances, we have found success by changing things up and collaborating with an experienced auction firm to ensure a successful outcome.  In other instances, we have been called in by an auction team to leverage our specific product or market expertise.  Either way, a professionally executed, dual-platform real estate auctions can be an extremely effective, albeit non-conventional, means of ensuring sellers achieve their disposition objectives, particularly in “special situations.”

One Plus One Equals Three

Broker/auctioneer collaboration can be extremely powerful, providing seller-clients with the optimal combination of broad market exposure, a proven auction platform, and specialized brokerage expertise.  Representing the “brokerage” side of the team, we still conduct our typical investment sales-style marketing, carefully coordinated with our auction partner who is simultaneously promoting the asset through their own channels.   The “dual platform” approach provides deeper market penetration than either of the individual platforms would generate on their own, resulting in more qualified bidders and superior pricing.

Why Sellers Love Real Estate Auctions

  • Speed of execution. Real estate auctions can be completed in 90 days, sometimes less.
  • Most auction contracts are “as is” with no contingencies.
  • All due diligence is conducted in advance of the auction.
  • All bidders are pre-qualified and must post a deposit to participate in the auction.
  • The winning bidder’s deposit is immediately non-refundable.
  • No contract negotiation.  Seller prepares the contract which bidders review in advance of the auction.  The winning bidder executes the contract immediately following the auction.
  • Since the commission is paid by the buyer in the form of a “Buyer’s Premium,” auctions commonly result in higher net sales proceeds to the seller.
  • Most auctions result in at least one formal backup bidder with backup deposit posted.

3 Reasons Buyers Love Auctions Too

  • The auction process appeals to buyers for a number of reasons, including:
  • Certainty of execution.  The seller is committed to transacting so buyers know they are not wasting their time.
  • Auctions “level the playing field.” All pre-qualified bidders are eligible to be the winning bidder.
  • Auctions are generally perceived as fair and transparent, encouraging bidders to participate.

Aren’t Auctions Just For Distressed Sales?

Absolutely not.  Sure, foreclosed properties or assets subject to bankruptcy, are frequently sold by some form of auction; however, an increasing number of traditional sellers are embracing the auction process, particularly when property characteristics or seller-imposed restrictions vary from the norm.

For instance, we recently sold a very desirable, well-located office building that was 50% occupied by one, non-credit tenant.  A portion of the space was oddly configured and not very functional.  Investors loved the building but the investment “circumstances” were challenging.  Although we received multiple offers, none were sufficient to meet the seller’s needs.  We then convinced our client to allow us to re-launch our marketing campaign in collaboration with an auction company.  The dual platform auction turned out to be a screaming success.  We closed 90 days later, well above our seller’s original price expectation.

Real Estate Auctions - Dual Platform

North Palm Beach office building sold by CapasGroup and Fisher Auction Co. utilizing a dual auction platform.

Pre-Auction Marketing

The auction process begins with a comprehensive, professionally executed marketing campaign consisting of high-quality collateral materials, broadcast emails, print and online advertising and international market exposure.  The object of the process is to attract as many qualified bidders to the auction as possible.  This is where the “dual platform” approach really pays off.

The pre-auction marketing period is generally 30 to 60 days during which time potential bidder support is provided by both teams through property and market tours, detailed property information packages and more.

Three Types of Auctions

In an Absolute Auction the seller agrees to sell to the highest bidder, regardless of price.  This certainty of execution generates buyer excitement and a high level of bidder participation.

In a Minimum Bid or Disclosed Reserve Auction the seller is only obligated to transact if the highest bid exceeds the pre-established and published minimum bid price – commonly referred to as the “reserve price.”  Bidder enthusiasm and participation is significantly influenced by the minimum bid price.

Subject to Confirmation Auctions give the seller the opportunity to accept or reject the highest bid price.  This format is least popular among prospective bidders.

The Auction Process

The auction process culminates with the auction itself which is typically executed in one of the following three formats.

Live, or Open Outcry auctions are commonly conducted by an experienced auctioneer in front of an audience of pre-qualified bidders.  The auctioneer’s job is to create an excited bidding environment designed to encourage bidders to compete with each other.  The personality of the auctioneer sets the tone and a good auction team will include several experienced assistants working the crowd to elevate enthusiasm and keep active bidders engaged.  Live auctions are frequently conducted at the property being auctioned but can virtually take place anywhere. Common alternative auction sites include hotel ballrooms for portfolio auctions, courtrooms for auctions resulting from legal action, or in office conference rooms.  Telephone and online bidding is typically available during a live auction.  Properly executed live auctions can be exciting and generate incredible results.

In a Sealed-Bid auction, offers are submitted discretely in a “sealed bid” format subject to a strict bid deadline.

Online Auctions are similar to live auctions but bids are submitted online rather than in person.

A Tough Decision for Some Sellers

First-time auction sellers are frequently faced with marketing expense “sticker shock” and agonize over setting the reserve price.

Marketing expenses associated with a broad, multi-media marketing campaign can easily range in the $20,000 to $30,000 range.  This expense is typically paid by the seller at time of engagement.  Although they clearly appreciate the benefit of such extensive marketing, most uninitiated sellers are initially taken-back by this cost.

Sellers unwilling to agree to an absolute auction typically opt for the Minimum Bid format making the sale subject to a reserve price.  An attractive reserve price is critical to maximize bidder turnout.  Conversely, setting the reserve price too high is certain to chill bidder interest.  Predictably, the optimal reserve price for marketing purposes is almost always lower than most sellers’ desired price.

Real Estate Auctions Work – Dual Platform Auctions Work Better

Auctions can be a highly effective strategy, particularly for sellers with unique transaction requirements or “special circumstance” real estate.  For these situations, a dual-platform real estate auction executed through collaboration between qualified brokerage and auction teams optimizes market exposure and offers the seller the highest probability of success.

Contact CapasGroup Realty Advisors to discuss your property disposition objectives.  We can help you determine the best marketing strategy – conventional or auction – and provide feedback about your property, market conditions and value.

Brad Capas, President | (954) 320-6031 |

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