Why Not Auction
An auction can be a real asset to the Seller when time is an issue and financial outcome is not. A strong push for a one day outcome can be just the ticket. The auction can create an atmosphere that elevates urgency, and promotes the “fear of loss and hope of gain” mindset that gets people to make a decision.
The worse case scenario is if some or all of the asset is sold Absolute. The Seller knows neither the low or high end for the property sold until the end. When no units are sold Absolute, the Seller can insist on a minimum, but the maximum bid is established by a small group of Buyers on the day of sale. Even with a big crowd, there often will be a handful of quality Buyers and the rest are spectators or bottom feeder. The Seller may be able to reject these offers, but has realized lost time and marketing revenues.
The auction is promoted for a sale date. After that date, what comes next? Does the Seller try another auction? Do they revert to using a Broker again? In either case, any sales that were realized have established the new baseline for future Appraisals. If the results were poor, it will be an uphill battle to recover a higher Market value.
An auction is best suited for a small quantity of units. When the number of units begins to exceed a certain amount, then it becomes problematic to manage the logistics of bringing in the necessary qualified Buyers who can make a purchase. This is especially true in a depressed market where financing is difficult or non-existent. The Marketing cost necessary to achieve this goal is significant and can result in a bust on auction day due to weather, bad economic news, poorly targeted Marketing and Sales effort, or several other factors.
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