Auction

Auction Definition

A real property auction is a sale open to the public where bids are taken for a specific parcel of land or a fixed structure.

Explanation

Real property auction sales vary with geographic location. Some auction companies focus on live auctions while others specialize in online auctions.

Some state auction houses also operate as licensed real estate brokerages.

Important auction types include:

A sealed bid auction is where auction companies require bidders to qualify and then submit bids for a property by a specified deadline.

The highest sealed bidder receives the property. Financing must be in place within a set period of time after the gavel comes down in these auctions.

An auction with reserve lists a starting price where the bidding process begins.

Some reserve auctions start at a low bid, but if the final bid doesn’t meet a stated reserve price, the auction closes without a buyer for the property.

An absolute auction is sometimes called a “classic auction” since it’s a traditional bidding format. The real estate being auctioned in an absolute auction must sell.

Absolute auctions are sometimes used in foreclosure sales where the lender simply wants to sell, regardless of the final gavel price.

An absolute auction begins at a low price and accepts bids from the bidder pool. There isn’t a reserve, so the real property has a chance of selling at an extremely low price.

A Dutch auction has the auctioneer start at a high price and then reduces the price until a bidder from the buyer pool accepts the price.

A lender-confirmation auction requires the highest bidder to receive approval by the mortgage holder on the property before being declared the auction winner.