Real Estate Auction Lingo
FAQs - General
Written by Gary Gilbert   

Buzz Words and Their Definitions Regarding the Luxury Real Estate Auction Business.

 

Questions? I am here to helpReach out anytime. 

 

Reserve Auction

Absolute Auction

Green Apple Auction

Published Minimum Bid

Suggested Minimum Bid

Sealed Bid

 Multi-Parcel

 

 

     

 

Reserve Auction:  A reserve auction is one in which the seller decides to accept the high bid price or not.  From a marketing standpoint, a reserve auction is inferior to a legitimate absolute auction.  Potential bidders and buyers may not feel as compelled to engage in the process if they feel that the seller is not serious about selling the subject property.  Without a doubt, when I am involved in a reserve sale, the first question from interested parties is "What is the reserve?" Under the reserve umbrella, a better option may be a published minimum or suggested opening bid.  Please see below for more color on this subject.

 

   

 

Absolute Auction:  Selling to the highest bidder regardless of price. This is the definition of a legitimate absolute auction.  

 

 

   

 

Green Apple Auction:  One in which the auction company advertises the sale as "absolute" or uses the wording "selling without reserve" only to cancel the event or say that private negotiations are going on pre-or-post sale (which is smoke and mirrors for what is really going on- there weren't enough bidders or the prices were not high enough for the seller's expectations). The true results are often spun in the media. Beware of claims that the event has been postponed due to overwhelming interest or that a sale that is pending.  This often leads to litigation which no one wants to be involved in.  Let's be smart by working together to get out in front of this serious,  prevalent issue and not let this happen to you or you as an agent and your client.

 

 

   

 

Published Minimum Bid:  This methodology is such that the auction company advertises the auction as selling to the highest bidder at or above a minimum price of a pre-determined amount.  To engage bidders and buyers, the published minimum amount, in my opinion, needs to be about half of the listing price, preferably the highest asking price when the listing was new.  By creating the "illusion of a bargain", potential bidders are more likely to engage in the process. By this, I mean an interested person from out of town physically touring the property weeks before.  Often times a second visit is in order with a spouse or business partner with finally, another visit on sale day. 

 

Suggested Minimum Bid:  By suggesting a minimum opening bid amount, the seller is not required to sell the property for this amount.  This is sometimes  also referred to as  a "teaser" bid. If a number is published, it needs to be significantly less than the last asking price again creating the "illusion of a bargain".

     

 

Sealed Bid:  Interested bidders submit their bids in an anonymous manner with the highest bidder prevailing.  This is not a very effective model for an asset like a high-end home.  It is more prevelant and successful with commercial real estate assets or those properties that are very unique in nature.

     

 

Outcry Event:  An auction that is held live, onsite with an auctioneer "crying the bid".  For our niche business, I feel that the live event is superior to an online only luxury home auction or the telephonic bidding platform.  Yes, online and phone bidding are great if the bidder if not able to attend in person as every bidder is critical.  However, the person bidding live, onsite is more likely to get caught up in the moment which often results in them bidding higher. Remember, greed is a good thing at an auction.

 

     

 

Budget:  Usually refers to the amount the seller is required to fund for the advertising and marketing of an auction. This is paid upfront, in advance.  For some firms, this is the seller's total and only commission while with others, the financial model may be structured differently.

     

 

Multi-Parcel:  A bidding method which is used when multiple offerings, usually land, are offered in as an entirety and also in combinations sold by whichever method achieves the most money for the seller.

 

 

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