Absolute Auction means highest bid wins, regardless of price. The typical result? More money for the seller because of the competitive nature of bidding. Competition typically heats up most intensely at Absolute Auctions because bidders know that by besting a rival across the room or online, the property can be theirs. But of course, other bidders have the same strategy and desire. Absolute Auctions typically get the most bidding. For the seller, the risk associated with an Absolute Auction is greater than the other types of auctions, but so is the potential reward.
Minimum Bid Auctions begin at a minimum price established by the seller. Bidding must begin at least at that minimum before there can eventually be a sale. The minimum bid is published and announced by the auctioneer at the start of bidding for that particular property. These auctions offer a certain level of safety to the seller but are not usually as attractive to buyers as an Absolute Auction. A key strategy for a Minimum Bid Auction is for the seller to set the minimum bid low enough to attract the interest of buyers. Setting the minimum bid too high will discourage initial bidding.
Reserve Auctions allows the seller to accept, reject or counter the “winning” bid, for any reason. Sellers typically make this decision before the auction event ends. This gives sellers protection so their properties will not be sold below what they consider acceptable. However, sellers should be aware that Reserve Auctions typically generate the least amount of interest among potential buyers, because buyers know their "winning" bid can ultimately be rejected.
In a Sealed Bid Auction, bidders privately submit their one best offer, in writing and in a sealed envelope. The bids are opened privately by the auctioneer and seller who do not reveal the bids to any of the participants. The seller can take one of the following courses of action: Accept the highest or best bid; reject all bids and call for a “Best and Final” bid from the two highest bidders, or just commence serious negotiations with all the identified bidders.
Sealed Bid Auctions are often used for properties that do not have a broad market or appeal. Furthermore, keeping the bids private helps ensure that if all bids are too low for any of them to be accepted by the seller, the property will not become stigmatized by having a perceived low value in the marketplace.
The TwoStep Auction is one in which sealed bids are sought from bidders (the first step) and if the seller does not accept the highest bid then the top five bidders are invited to participate in live bidding on an absolute or reserve basis (the second step) to determine the highest bidder.
With distinct advantages to each of these common types of real estate auctions, sellers are encouraged to consult with the specialists at Fred Wilson Auction Service LLC for the best fit for each particular property.