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What are Real Estate Auctions?

Real estate auctions are a way to sell your property without additional price negotiations at the end. Its a price discovery mechanism that is often used by homeowners, banks, governments and builders. Auctions often have a higher chance of selling a property within a given timeframe. When auctions happens, the property (if listed without a reserve price) will go to the highest bidder on that day. This way some homeowners sacrifice extra price discovery mechanism, such as negotiations, to get extra expediency during the sale of their property.

Each typical part that participates in real estate auctions have their own motivations for doing so. Governments auctions off property when someone fails to pay their taxes. Homeowners might auction off a property in bad shape. Builders might sell a portfolio of properties at the same time.

The most common types of real estate auctions are listed below:

  1. A Reserve Auction. The seller has a price in mind which if not reached he isn't obligated to sell his property. Its not known before auction starts.
  2. A Minimum Bid Auction. A minimum price below which the sale won't happen. Its known before auction starts.
  3. Absolute auction, or no reserve auction. Highest bid wins no reserves or minimums.