Elements of a Successful Auction

There are many elements required in order for an auction to be successful. These include strong demand, motivated seller, adequate information for a buying decision, an ability to sell at the current market price, and the ability to promote adequately in the marketplace. Not all elements must be present for an auction to be successful, but some combination of these elements must be present. We will address these elements one by one.

Strong Demand

The greatest source of frustration for real estate auctioneers is the perception on the part of many sellers that the only properties they want to consider for auction are those for which there has been absolutely no interest in the course of ordinary brokerage activities. Sometimes, this misperception is even fueled by real estate listing brokers, who may hold the belief that allowing bidders to competitively set the price on a high demand property does not maximize the seller’s revenues.

In fact, nothing could be farther from the truth. It is no accident that the highest prices attained for such diverse assets as fine art, collectibles, Treasury securities, cattle, firearms, and many other asset categories are attained at auction. Whenever we have had the opportunity to sell assets with high demand, we have always outperformed ordinary brokerage prices. Examples include a house we sold for a prominent bankruptcy for $1.05 million where the highest price previously paid in the neighborhood was $400,000, and an industrial building we sold for $2.75 million, over $10/sf higher than any previous sales in the park. Both were cases where the demand proved to be high, and where ordinary brokerage practice would have been to set an asking price based upon “comps” which would have resulted in far lower sales prices. There are many similar examples of this.

If an asset has high demand, an auction will yield the highest possible price, since there is no subjectively determined asking price setting the upper limit.

We love doing auctions of high demand assets. It's where we can really shine!