Find out if your listing is a good candidate for a real estate auction

What makes a real estate auction successful? An experienced auctioneer can generally tell if a prospect is a good auction candidate or not by running through the following 6 questions:

1. How long has the property been on the market? Why do you feel the property hasn't sold? Any showings? What feedback are you getting from buyers? As any good agent knows, most homes don't sell because they're overpriced or the price wasn't reduced fast enough to keep pace with the changing market.

2. What is the motivation of the sellers? Are they price-oriented (holding out for a particular price) or are they now goal-oriented (ready to finally sell at a price the market will bear)? Auctions work best for goal-oriented sellers. The magic words to an auction company are, "Get it gone!"

3. What is the market value of the property and how did you come to that valuation? Where is the main competition located? Listing agents can usually answer these questions quickly.

4. What is the total debt owed on the property? If the total debt is close to the current list price an auction won't be successful. An exception might be if the property is so unique it is difficult to value. Unique properties can be a perfect fit for auction.

5. What is the lowest price the sellers would accept (factoring out all commissions)? Auctions are the exact opposite of conventional real estate in that a floor price is set rather than a list price. If a seller wants their auction reserve price set close to the current MLS list price, buyers won't be attracted to the auction. It will look like simply another price reduction rather than the potential of a great deal.

6. Are the mortgage payments current? If not, how behind are they? An auction may still be a great solution if the sellers are behind on the mortgage. But this info needs to be shared with no holds barred so that a correct analysis can be made. Additional questions may include information on whether or not there's a viable hardship and the names of the mortgage companies in case a short sale needs to be set up. Short sales work great with auctions because the terms of an auction keep the buyers feet to the fire with high non-refundable deposits.

7. Who is the likely buyer? The answer to this question allows an auction company to create a draft of the accelerated auction marketing campaign. The cost of this marketing is usually approved by the seller and funded upfront. Some unique trophy homes might require an international marketing effort whereas a typical suburban home would probably only require a regional marketing effort.