Buying at auction, Firm offer


Dear David,

We see quite a few homes going for auction. What are the advantages or disadvantages of going this route versus using a Realtor? – DROPPING THE HAMMER

DEAR HAMMER: When it comes to auctioning a property versus selling it on the MLS system, a key difference would be the ability to draw an audience. A listing posted on the MLS system can be searched and seen by millions of potential homebuyers, while a property sent to auction will be seen by those who know where to look for it.

When it comes to pricing, the advantages and disadvantages depend on whether you’re buying or selling. A seller may choose to auction their home because they feel they can control the date on which it will sell (provided they get the reserve they are looking for). As a Realtor, I accomplish the same thing by holding offers on a specific date.

Some buyers like the transparency of the auction process. Generally speaking, a live auction may allow bidders to see who they are competing against and track what they will need to bid in order to win. Bids tend to rise in predictable increments, in lock step with the competition. In this scenario, a buyer could potentially snag a deal on a home with a low reserve, especially if the pool of potential buyers is relatively small. Of course, this means that the seller would probably end up selling their home for less than they might have on the open market.

The multiple offer process is less transparent. Ethical regulations prevent Realtors from knowing the details of offers they are competing against, which ensures that negotiations are taking place on an even playing field. Buyers in competition must put their best foot forward by offering what they would actually be willing to pay for a home. In this situation, a seller may receive one or more offers that rises above the rest. Personally, I’ve seen up to a $100,000 spread between lowball offers and highly-motivated ones submitted for the same property.

Pro Tip: If you’re thinking of shopping an auction, be sure to do your research ahead of time. An auction purchase may not provide the level of protection offered by a Realtor’s comprehensive Purchase Agreement.

Dear David,

Can you put in a firm offer on a house (no conditions) and still be protected? – UNSURE

DEAR UNSURE: You can absolutely still be protected.

A wide variety of offers come across my desk in multiple-offer situations. Many have very little protection for the buyers, and there’s no reason for this. As a Realtor, I can write all sorts of contingencies into an agreement that are not conditions per se, but will still protect buyers from unscrupulous sellers and can provide for several layers of protection. #AskDavid