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3. Proposal to Closing• Understanding components of

auction proposal and listing agreement

• Differentiating between types of auction

• Discussing tasks involved in marketing and conducting property inspection

2

Proposal Components• Auction schedule• Recommended type of auction• Advertising and marketing budget

(paid by seller upfront)• Agreed-upon terms by seller and

broker• Name of recipient of earnest money• Length of listing agreement• Broker/auction firm commission

information

3

The Listing Agreement• Terms of sale• Broker commission• Date/ time of auction • Earnest money/recipient• Names of listing broker• Advertising/marketing expenses• Auction location (not mandatory)• Proof of a good and marketable title• Length of listing (60-90 days)• Escrow fees and payer of those

expenses

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Three Types of Auctions

1. Absolute auction

2. Minimum bid auction

3. Reserve auction

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Absolute Auction• Also known as auction without

reserve

• No minimum bid

• Property sold to highest bidder, regardless of price

• Advantage: More buyers, more participation and excitement

• Disadvantage: No safety net for seller

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Minimum Bid Auction• Also known as minimum published bid

• Minimum bid pre-determined by auction firm and seller

• When bidding reaches minimum amount, property sold “absolute”

• Advantage: Safety net for seller

• Disadvantage: Limits number of interested buyers

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Reserve Auction• Seller reserves right to accept or reject

highest bid within a specified time period.

• Time period may be immediately after auction to 72 hours after close.

• Advantage: Seller not obligated to accept bid

• Disadvantage: No guarantee to buyers that seller will accept bid

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Other Types of Auctions• Sealed bid

• Dutch/high-low

• Multi-par, which allows bidding on one parcel or combination of parcels

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Online Bidding• Continues to grow

• Today’s buyers more experienced with electronic bidding

• Online bidding will become more prominent in real estate auction

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Online Bidding

Falls into two categories:

1. Static―Sale happens at one point with one reporting medium

2. Dynamic―Bids simultaneously reported to all bidding locations

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Problems of Online Bidding

• Deposit requirements

• Registration procedures

• Disclosure items

• Purchase contract execution

• Licensing requirements

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Purchase and Sale Agreement

• No contingencies

• Agreement made available at auction

• Major terms read on auction day

• "As is, where is"

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Progress Reports

• Put system in place for monitoring marketing

• Communicate to seller

• Frequency determined by two parties

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Bidder’s Packet

• Auction firm packages all property information in bidder's packet and distributes to interested buyers

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Marketing Costs• Most cases, seller is responsible

upfront

• Cover concentrated promotional/advertising effort

• Illustrate seller’s commitment

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Marketing Budget

Varies between 1%–10% of sale price. Budget based on:

1. Quantity and type of property sold

2. Number of staff required

3. Local, regional, or national marketing needs

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Marketing Tasks• Promotion• Brochures and property information

packets• TV, radio, and newspaper ads• Media planning and public relations• Preparing signs• Scheduling• Direct mailings/e-mail campaigns• Property inspections and pre-

auction seminars

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Property Inspection

Auction staff:

• Registers all attendees• Presents brochures • Provides bidder packets• Answers questions• Monitors interest and preparedness

of buyers• Communicates buyers’ interest to

seller

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Buyer’s Financial Requirements

• Earnest money, usually a non-refundable deposit

• Lender commitment and/or pre-qualification to register

• Buyer’s premium is amount paid by buyer to cover seller’s marketing expenses or auctioneer’s fee

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Auction Strategy

• Based on results of marketing plan

• Response from market

• Firm plans needed adjustments

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Closing• Similar to closing in negotiated

sale

• Documents vary from state to state

• Attorney or title company representative usually attends closing

• Earnest money can be held in escrow account until transaction closed

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Split Commission

• Common for brokers and auction firms

• Must be included in listing agreement

• Licensed broker, not agent, accepts a split commission from auction firm

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Auction Process in Review1. Analyze property, seller and

market

2. Obtain property information and complete due diligence

3. Develop marketing strategy

4. List property for auction

5. Set sale terms and conditions

6. Prepare sales contract with terms and conditions

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Auction Process in Review

7. Monitor marketing results and communicate to seller

8. Compile and package property information

9. Prepare real estate broker agreements

10. Begin marketing property

11. Hold property inspections and pre-auction seminar(s), if necessary

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Auction Process in Review

12. Pre-qualify buyers

13. Develop auction day strategy

14. Sell property on auction day

15. Close sale

16. Pay commissions