Auction has been described as “sale by outspoken competition”. Buyers at an auction compete with other buyers and the vendor himself who reserves a right to bid for the property. Subject to having reached a reserve price, the property is knocked down to the highest bidder. If the reserve price is unattained, the property is usually withdrawn for private treaty or re-auction, although the latter may prove unproductive if negative publicity has been generated at the first auction by the lack of interest.

Provided that the property is not too restricted in its appeal, auction overcomes the private treaty problem of over-optimistic vendors setting unrealistic prices, by ensuring that the price achieved is, or is close to, the market value.

Auction is also very often perceived to be the best that can be done for a Probate Realtor Tucson property, especially in a situation where fiduciary duties are involved, for example, sale by order of mortgagee, trustee or executor of an estate. Indeed, as being the method of sale prescribed in certain situations by statute law, auction is deemed to be the most objective method of selling a property.

By its very nature, auction concentrates competition between prospective buyers in the short span of time when the auction takes place. Where the property is “hot”, this has the psychological effect of stirring up heavy bidding and driving prices upward. Also, the sale can be concluded quickly once the hammer is knocked down to the highest bidder.

There are, of course, weeks of preparation leading up to an auction. Necessary steps include preparing the conditions of sale, listing the particulars of the property, advertising in the local press, physical arrangements to be made for the auction room, determining the “reserve” price subject to the vendor’s consent, etc. It is a good practice for the auctioneer to obtain the client’s signature on the draft of the sale particulars or, at least, have him confirm the particulars in writing. These steps can be more costly than a sale by private treaty. The time involved may range from four to eight weeks, during which market conditions could well have altered significantly.

In recent years, auctions have grown in popularity and acceptance as a method of disposal. During a period of rising property values, some vendors may tend to have excessively high expectations as to how much their property can fetch. Unless their expectations are matched by the enthusiasm of prospective buyers, the bids usually fail to reach the reserve price. Recent auction experiences confirm this observation. During other times, the vendor deliberately sets a high reserve and merely wishes to “test the market”.