RE58RC09: Auction: 101

A Description of Auctions for Beginners

I. INTRODUCTION

a. What is an auction?
b. Auctions through history
c. Types of auctions
i. Absolute
ii. Reserve
iii. Minimum bid
iv. Dutch High Low
v. Sealed bid
vi. On line

II. MASSACHUSETTS AUCTIONEER LICENSE (MGL Chapter 100)

a. Must be 18 years old
b. Pass a course of study by recognized auction school
c. Pass a written exam
d. Post $10,000 bond
e. Pay a $100 license fee
f. Submit two letters of recommendation signed by licensed auctioneers, members of the Massachusetts Bar or elected officials.

III. THE REAL ESTATE AUCTION

a. Distressed

i. Foreclosure

1. Foreclosure process
2. Foreclosure complete?
3. Favorable financing available from foreclosing lender?

ii. Inspection available?
iii. Multiple property auction

b. Non Distressed

i. The Non Distressed Real Estate Auction and the Seller

1. Benefits to the Seller

a. Knows when the property is expected to sell (often postponed, however)
b. Minimal or no contingencies for the Buyer

2. Disadvantages to the Seller

a. Starts at the lowest price
b. Attracts bargain hunters
c. Inconvenient to Buyers
d. Most buyers do not like auction process
e. Must sell at highest bid if absolute
f. Seller is responsible for all marketing costs
g. May be additional auction costs if not sold

3. Realtor Participation

a. Referral
b. Listing Agent

4. The Non Distressed Real Estate Auction and the Buyer

a. Benefits to the Buyer

i. May provide opportunity to purchased at lower than "market price"
ii. Motivated seller

b. Disadvantages to the Buyer

i. Sold "as is"
ii. Very little or no opportunity to negotiate contingencies (inspections, financing, etc)
iii. Often no preview opportunity
iv. No post purchase inspections
v. Auction "fever"
vi. Uncomfortable seller situation
vii. Buyer's premium
viii. Buyer may be responsible for other costs (delinquent condo fees, unpaid taxes, municipal charges, tax stamps, recording fees, etc.)

c. Buyer Agent role

i. Auctioneer cooperating with Realtor?
ii. Working with the Buyer

1. Obtain and review property information
2. Obtain and Review Bidders Packet
3. Prepare CMA
4. Ask about current lender's position
5. Register buyer
6. Arrange for property preview if available
7. Discuss bidding strategy

a. Auction fever
b. Highest price

8. Accompany buyer to auction
9. Follow through to closing

c. Components of Bid Package

i. Property Fact Sheet

1. Photographs
2. Plot plan
3. Plans
4. Multiple parcels

ii. Area Information

1. Map
2. Directions

iii. Tax assessor's card
iv. Legal description
v. Registration Information

1. Terms and Conditions

a. Reserve
b. Pre-auction inspection available?
c. Buyers financial obligations
d. Buyer's Premium

2. Registration Form
3. Auctioneers Purchase and Sale Agreement

IV. SAMPLE BID PACKET

V. GLOSSARY OF AUCTION TERMS