There are maybe (as we believe) 50,000 auctioneers in the United States. The Association of Real Estate License Law Officials (ARELLO) estimates there are over 3,000,000 real estate licensees. That would mean there are about 60 real estate agents for every auctioneer (and one real estate licensee for about every 86 adults in the United States.)
Of course, many auctioneers are licensed real estate agents (salespersons or brokers.) Some of those — but not all — are members of the real estate trade association with access to the Multiple Listing Service (MLS.) The MLS was “the only game in town” for decades until the Internet became widespread.
As such, some auctioneers work with real estate licensees to pay fees for representing buyers, while others do not. Many auctioneers report that oftentimes the auction buyer is not represented, but there is evidence that buyer-broker compensation increases the bidder pool.
Technology has allowed auctioneers, agents, and sellers to market a myriad of other ways digitally — and otherwise allows for direct targeted mail, drone video, and other marketing methods. Merely listing in the MLS and putting a sign up (like in the early 1990s and before) is malpractice today.
Some states allow auctioneers to “bid call” a real estate (real property) auction without holding a real estate license. Otherwise, most all other real estate activity requires a license all across the United States. Therefore when an auctioneer is just bid calling, a real estate licensee and/or an attorney is needed to complete all the other tasks.
It would seem to us that any auctioneer — even just bid calling — would be serving their client better as a real estate licensee. Knowledge and training in real estate concepts including basic topics, law, finance, appraisal, etc. would benefit all involved.
In particular, auctioneers can earn more income selling real property at auction with a license than without one. These real estate licensed auctioneers can handle the entire project from initial contract signing to closure, and as such can earn a commission well in excess of a typical “bid calling” fee.
In some markets, auctioneers and real estate licensees work and play together whereas, in other markets, they seem to view each other as adversaries. This may depend in part on what type of “market” buyers and sellers are experiencing.
In a seller’s market, real property can often sell quicker through traditional means, whereas in a buyer’s market, auction marketing can accelerate the selling process and as such, reduce holding costs.
Traditional real estate sales and auction marketing use two different models — methods — to arrive at a price and terms:
- In traditional sales, buyers make offers, and sellers can accept or reject those offers — possibly countering rejected offers with their own offers. The property sells when the buyer and seller come to an agreement.
- At an auction, the terms are set in advance and the auction takes place on a certain day and time. Bidders compete to buy the property, [usually] selling to the highest bidder.
Auctions can be formatted as absolute auctions, where the property is indeed sold to the highest bidder, or with reserve where the seller can basically set a minimum bid or reserve the right to accept or reject the highest bid.
For sellers, auctions are almost always more favorable in regard to terms and closing costs, but the ultimate price is one bid more than the second highest bid. In traditional sales, terms are negotiated, but the offer is not typically dependent upon any other offer — maybe higher or maybe lower than that “one more bid.”
When is an auction a good idea?
- As far as property, auctions are more beneficial for any property in almost all cases when sufficient marketing is in place with a trusted experienced auctioneer/broker. Sellers benefit from favorable terms, firm timeframes, lower seller commissions replaced with buyer’s premiums, larger good faith deposits, and prices as high or higher than traditional marketing.
- As far as sellers, auctions are particularly beneficial to sellers of property when those sellers have sufficient equity, some urgency, and reasonable expectations. Lacking any of these key characteristics, sellers may benefit more from traditional sales techniques or be better to retain ownership until they have all three of these attributes.
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, Brandly Real Estate & Auction, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.