Auctions: a unique way to sell a unique property
by Krista Goheen, Calgary Real Estate News | Vol. 23 No. 48 | December 01, 2005

In England, says Stan Leece a qualified auctioneer and licensed REALTOR with Realty Executives Chinook, over 75% of the real estate is sold by auction; it is the accepted method. And in parts of the United States it is very, very popular and successful, especially with celebrity homes. A house that was owned by Marilyn Monroe at one time has a different value than an identical, or similar, house that was not owned by Marilyn Monroe.

These types of homes, when put up for sale at auction, are the only way you can determine what the real value is.

Auctions often have a reputation as being associated with problem properties, a conception Leece says is founded by the traditional use of auctions, but one which doesn't hold much clout today. It probably comes from the fact that a lot of municipal districts, counties and towns sell their tax foreclosures by auction. But by the same token, million dollar mansions for sale in California are selling successfully.

There are two types of auctions- reserved and unreserved. In reserved auctions, the owner is allowed to set a minimum price and the property does not have to be sold unless it reaches that price. In unreserved auctions, the property is going to sell for whatever it sells for, Leece says. Auctions work especially well with unique properties; those properties whose market value is often difficult to determine.

"I don't know if it would be that advantageous to sell a property by auction where there's 50 other exact houses like that", he says.

It's not a magic way of getting a whole bunch more money for your property, but it could happen if you have a unique property where the market value is very, very difficult to determine, if there's no comparables to determine what the real market value is. The auction method determines what the real value is- it is the buyer, in the end, who will determine the fair market value.

For example, there was a unique property for sale a few years ago in Mt. Royal with an estimated selling price of $1.2 million. It sold for $2 million at auction, he says.

It had a staircase in the house that was a replica of the one on the Titanic, Leece says. Additionally, a real estate auction last week of an Eagle Ridge condominium appraised at a value of $500,000 actually sold at auction for $660,000.

The benefits of selling by auction include speed of sale. Leece points to an unusual commercial property sale in 1995 of 35 industrial units, on the market for four years with only a handful of units sold in that time. The owner was facing foreclosure and an auction seemed like the only answer.

"We ended up selling 35 properties in an hour and a half and they achieved 88% of the appraised value. Sure they didn't get full price, but if you sold by private treaty that may have taken over a year to get, the owner would have been subjected to all the carrying costs of those properties for another year and may have ended up with less money. The time factor in there probably did save them money."

Auctions must be initiated through real estate agents, who then work out a plan to administer the auction through an auctioneer to do the bid calling. All auction transactions must be conducted by a licensed real estate member.

The biggest factor in a successful real estate auction is proper marketing and exposure, he says, with the organization of the event itself fairly hassle-free.

What an auction does do, is it takes your property out of the traditional market and it puts it on a pedestal for that one day, he says.