Myths About Real Estate Auctions

We recently read an article a colleague wrote about Dave Ramsey's response to a reader asking him if it was better to rent a couple homes she had or sell them at auction.

Her letter and his response are below:

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 gavel 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 time frame.
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 and 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

Let me start out by saying, several of us in the office are Dave Ramsey fans, and we are not out to bash him. We actually agree and try to follow MANY of his thoughts.

We do, however, feel he missed the target when it comes to Auctions. Auctions and Real Estate have been our business for thirty years, and we have had GREAT success. Dave states in his response to "Shannon" that you are not going to receive retail price at an auction. This is a common misconception we hear often. Quality auctioneers work hard to market real estate and draw a crowd of buyers, we have often found that people will give market value or sometimes above market value at auction because the bidding war is going on right in front of them. As our colleague stated in his article, traditional real estate listings don't generally bring the full asking price, there is much negotiation that goes on before a contract is signed and more often than not, the price paid for the property is lower than what the seller was asking. This price, would be market value; what someone is actually willing to pay for the property on a given day and time.  There is a lot of misunderstanding when it comes to auctions, but we work hard to market each of our properties to draw the best potential buyers and the highest price possible.

We have had great success with this method of selling real estate.