Many say that the live auction, online-only auction and simulcast auction are “tools in the toolbox” where auctioneers choose the right tool for the job. Here’s our opinion where each of these tools is suitable.
First, is an auction (live, simulcast and/or online-only) suitable at all? Generally, we have held that auctions are suitable [only] when the seller has sufficient equity, urgency and reasonable expectations; otherwise, maybe some other method of sale may be more appropriate.
For sellers who have the prerequisites, what tool should the auctioneer propose to solve the seller’s problem? So what is the seller’s problem? What is the seller’s objective? Until the auctioneer understands the seller’s goal, no particular tool should be offered.
The vast majority of sellers either want to sell in order to maximize net [not gross] proceeds, eliminate holding costs or to transition to a new phase in their life. In other words, auctions (sales of any type) involve a desired change in circumstance of some sort.
Relatedly, for the most part, anyone who doesn’t need the money, doesn’t mind the holding costs and wants to stay where he or she is in life — probably doesn’t need an auction nor any other method of sale.
Further, can a qualified seller satisfy his goal himself? Can he essentially “do it himself?” Said another way, are there sellers who might need/want an auction but don’t need an auctioneer?
Another situation where none of the above tools may be appropriate and a “sealed bid” type event is likely more suitable is when the property is:
- Complicated, unique or possibly undesirable, where you expect interest — but possibly not enough interest to conduct an open competitive auction
- Valued significantly different by different interested parties — where there may not be much of a consensus of value
We wrote in more detail about sealed bids here: https://mikebrandlyauctioneer.wordpress.com/2017/03/07/is-accepting-sealed-bids-an-auction/ as we discuss in the National Auctioneers Association‘s Accredited Auctioneer of Real Estate (AARE) Designation Class.
Once we have identified a qualified seller and have established the seller’s goal(s) including he doesn’t want to (or can’t) do it himself, and there will be likely sufficient demand and a consensus of value, a particular tool can be proposed.
As we alluded earlier, those tools are typically seen as a live auction, an online-only auction or a simulcast auction. Here’s an overview of these three tools:
- Live auctions are more shopping than just buying — an event as much as an auction is some respects. Bidders from anywhere can participate by bidding in person, absentee and/or by phone. Live auctions require a suitable location (space, parking, restrooms, food, weather-resistant) and this could be onsite at a home, warehouse or the like, or at an auction house or gallery. As well, a live auction generally requires enough in quality and/or quantity to attract a sufficient crowd size.
- Online-only auctions allow bidders from anywhere to bid electronically with Internet access. These types of auctions can easily be scaled to accommodate one item, a few items, or thousands of items. An online-only auction can be coordinated from virtually anywhere — where the lot/property can be stored, photographed and held for shipping/pick up. Bidders enjoy the convenience and can remain anonymous to the other bidders. However, with less opportunity for in-person preview, lots of photographs, video and detailed descriptions are required by today’s discerning buyer.
- Simulcast auctions are both of the above — live and online-only meaning bidders can bid from anywhere including in-person, absentee, phone or via the Internet. A simulcast auction is more so a live auction supplemented with an online bidding component, rather than an online-only auction adding a live component. In essence, simulcast auctions are live auctions where bidders far away may want to bid electronically. Many consider simulcast auctions the most expensive to produce since both the live costs and online-only costs must be accommodated; thus the subject property value must be such that justifies and/or makes prudent the additional expense.
Given the above three tools, sellers and auctioneers can decide which is the best fit. With each having its own costs including commissions and fees and an estimated gross return (which can be provided by most auctioneers,) as well as a timeline or schedule and to what extent this allows the seller to turn this page in their life, the seller and auctioneer can decide which meets the seller’s goals — money in hand, eliminating holding costs and/or moving on …
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, RES Auction Services and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, an Instructor at the National Auctioneers Association’s Designation Academy and America’s Auction Academy. He is faculty at the Certified Auctioneers Institute held at Indiana University and is approved by the The Supreme Court of Ohio for attorney education.