The 101 of Selling Your Home through Real Estate Auctions in the Current Portland Market

Posted on: May 21, 2007

I recently spoke to a fellow from California who inquired about real estate auctions in the Portland market. It seems that these are becoming more commonplace to the south due to the slowing market. I told him that this was still a rare occurrence and would probably not be coming to the Portland market any time soon. Despite the fact that our market has slowed, we are still seeing homes appreciate.

In retrospect, it is something of a surprise we don’t see more auctions as a means to sell real property. Even in a normal market, it is a valuable tool that should be considered by home sellers, especially if they want a quick sale and possibly at a higher price than they would get via more traditional means. Did I just say a quick sale, and a higher price? Read on, oh frustrated sellers.

First, let’s examine what an auction actually is. Most people envision a scene involving a very fast speaking and almost incoherent man with a microphone or bullhorn in hand driving a crowd of people into a buying frenzy. This calls for considerable logistical planning and promotion. I have seen it used to sell larger parcels, maybe industrial or commercial sites, but it is impractical for a single family residence.

In a hyperactive market, home auctions occur almost accidentally. We saw plenty of these several years ago when the market was blazing hot. We were in an environment where we had more buyers than sellers, and well priced properties attracted multiple offers. This created a bidding frenzy, effectively leading to an auction scenario. Overall, the sellers loved it. The downside was these are often uncontrolled and spontaneous. Many buyers forfeited some of their contractual rights in the mistaken attempt to “get to the front of the line.” Also, we saw a significant increase in sale fails due to buyers’ remorse at having bid too much. Fortunately, the market has changed. Is it still possible to auction property in a normal market? Absolutely!

The auctions I’m talking about are considerably more constrained. They are conducted in my conference room via sealed envelopes, only after the property has had a significant amount of exposure in a reasonably short period of time. I set up a meet with the seller(s) and we review the signed purchase proposals. We can select the top two or three, then review and respond to them based upon their individual merits. We have all of the options available to a typical seller. That is, we can accept, reject or counter any and all proposals. Just like a typical deal. The buyers are protected. They are entitled to the traditional closing conditions of due diligence, inspections, bank financing, clear title, etc. The real estate broker representing the buyer gets his or her commission. Everyone’s happy. So where’s the catch? I’ll post more on that later.