Putting a house on the auction block
Consider this alternative if your house has been sitting on the market to help it go once, going twice...Sold!
NEW YORK (CNNMoney.com) -- As more and more people get frustrated with the sluggish housing market, people who want to sell their homes are looking at a different tactic...auctioning off their home. We'll tell you what you need to know if you're thinking about putting your home on the auction block.
According to the National Auctioneers Association, residential real estate auctions are on the rise. From the time the group has started collecting statistics in 2003, growth of residential real estate auctions have grown almost 40 percent.
Last year, $16 billion was brought in on these auctions. You have to keep in mind that these numbers are really just a fraction of how many existing homes were sold last year. But this could be a trend to keep our eyes on.
1: Gauge your need
If you're home has been on the market for months and it doesn't seem to be budging, and you need to sell quickly, you may consider putting your home up for auction. It may take as little as three weeks or over a month to sell your home, according to experts.
If you need to sell your home at a specific price, say $300,000, you may want to stay away from the auction block. That's because an auction will give you the market value of the home as it is on the day of auction and that could be 5 percent or 10 percent or 20 percent less than what you require.
2: Find a good auction house
To find a good auction house, start at the National Auctioneers Association at Auctioneers.org. This is a trade group for professional auction houses. You'll want to look for an auctioneer who has received a Certified Auctioneers Institute designation. This requires that members have at least two years of professional auction experience and take continuing education classes.
You'll want to interview the auction house. First ask how many auctions have been done in the area in the past month. Ask for references and make sure to follow up, says Tommy Williams of the National Auctioneers Association. This is your most important asset and you'll want to do as much research as you can.
3: Know the expenses
You can expect to pay a sellers fee that can be anything from 5 percent to 8 percent of the purchase price to the auction house. Some auction companies also require that you advance money for marketing purposes, and this can be 1-2 percent of the purchase price of the home.
In some cases, the marketing money is rolled into the sellers fee...so make sure you know what exactly you're paying. You will also be responsible for a home inspection and closing costs which can cost $2,000.
4: Curb your enthusiasm
There are two ways in which a house can be sold at auction. There's the absolute auction where the home is sold to the highest bidder of the day..no matter what. And there's a subject to confirmation auction where the seller is presented the highest bidder and you can either accept or reject the offer.
If you reject the offer and the prospective buyer won't budge, you'll be left with the house you were trying to auction off, plus, you'll be out the marketing fees you paid to the auction house.
And of course, remember that the auction company doesn't vet prospective buyers either. So if the buyer can't secure a mortgage, or the lender falls through at closing, you are still left holding the bag.