With the work we do in estate transitions, we are seeing a rise in selling houses at auction. It’s a little surprising, since for many people auction sales were a painful aftermath of the 2007 real estate market collapse. But we are finding that selling houses at auction may have some distinct advantages over a typical real estate listing process. This is especially true when dealing with a property coming on the market because the owner died or can no longer live on their own.

We’ve found that, in many cases, a properly managed auction can generate a higher price for the seller while dialing down the stress of what can be a particularly painful transition. It is important to note we have found savvy, entrepreneurial real estate agents can be great partners in an auction process and there is no need to view working with an agent completely exclusively from entering into an auction process. Here are some pros and cons to consider!

Pro: House auctions can move the house quickly…

Even in today’s fast-selling market, the average home stays on the market for more than two months before closing, according to Zillow. If the house needs some work or isn’t in a prime location, it could take much longer. With an auction you have more control over the timeline of the sale, which is particularly important when a house is empty, because vacant houses pose a wide range of risks for owners. (Click here for more about the risks of vacant houses.)

Con: …but you can’t time your sale according to market temperature.

The winning bid only needs to be higher than the competition on the day that the bidding process concludes. You’ll never know if the market could have risen a few months later, or another buyer would have paid more at a later date.

Pro: House auctions alleviate the dreaded “death by a thousand cuts”…

From inspections to appraisals to loan approvals, sellers can be nickeled and dimed to death after the original contract is signed. When you sell a house at auction all of the bidders are pre-qualified and have already done their due diligence. Once the virtual gavel falls (we recommend online auction processes), the deal is done.

Con: …but you may have less control over price.

To generate interest you typically have to set a pretty aggressive minimum bid (read: “low”). And you run the risk that that’s the only bid you’ll get. With an auction the seller can’t make a counteroffer, so you may have to settle for less than you expected. 

Pro: House auctions can draw a wide range of bidders, which could boost the sales price…

Depending on the location and condition of the house, auctions tend to attract three types of bidders.

  1. Developers who just want the land and will raze the house to put up something else
  2. Speculators who want to snap up a bargain and flip it, and
  3. Traditional buyers who want to live it in.

The more competition you bring in, the higher the potential for bidding. We usually recommend a thorough clean out and clean up, but seldom more than that. The goal is to make the property easy to see, walk through and complete due diligence on.

Con: …but they can also turn off other potential buyers.

There are plenty of buyers out there who are intimidated by the auction process. So intimidated that they’ll never consider your property. Depending on who shows up, you could end up selling the house to a speculator when you were hoping a family would move in.


When selling houses at auction earns more value

We’ve found that auctions can be an attractive alternative for houses in a wide range of prices and neighborhoods. Consider the Maryland couple that was ready to move into an assisted living community. They hired us to clean out the house and prepare it for sale.

The house was originally appraised at less than $475,000. At the auction, the final sales contract came in at $660,000 with a surprising number of bidders making over 20 separate bids throughout the process.In another example, an older woman in Virginia became disabled and had no family, so a conservator was brought in to manage her affairs.

A flipper offered the woman $72,000 for the entire property, including all of the house’s contents, but the conservator called us for a second opinion. When we came in we discovered that she owned some valuable antiques. We sold those separately, raising nearly $11,000. And the real estate auction yielded a final price of more than $123,000 with several different bidders placing over 40 separate bids.

Even after our fees for cleaning out the home and setting up the estate sale, the client received nearly $40,000 more than the original offer.

As in most things, there are no guarantees in real estate. But we believe most sellers should weigh the pros and cons of each type of sale. A house is often a family’s largest single asset, and understanding all of your options can help you maximize its value.