There are more approaches to sell your home than any other time in recent memory. Choosing the best strategy is harder than it used to be. We’re regularly asked about how the “For Sale By Owner” process contrasts to the auction method. The two strategies offer the owner more authority over selling process, so it’s a typical question. There are a few major contrasts between “FSBO” verses Auction.
This guide will help you understand how marketing and selling a house at auction compares to private sales. Read on to learn more about the pros and cons of each choice and how to decide on the best strategy to sell your home.
Pros and Cons of Selling a House at Auction
The pros include:
- You enjoy simple sales process that requires no negotiating on your end.
- The buyer pays all the real estate commissions (and a non-refundable deposit!).
- The auction deadline creates buyer urgency.
- The typical timeline is 30 days or less which eliminates carrying costs faster.
- You set the terms and day of your auction so that you can plan your life accordingly.
- The sale isn’t contingent on inspections and appraisals.
- Buyers can’t ask you to do additional work or pay additional expenses since you’re selling as-is.
- The competitive bidding process helps you receive the true market value for your house.
- Experienced professionals handle all the marketing, promotion, paperwork and the auction event.
The cons include:
- Marketing for an auction requires seller participation (in lieu of a commission).
- Since bidders must meet stricter terms, the buyer pool is different than that for a private home sale.
- Some buyers mistakenly assume all properties are for distressed properties.
Selling Your Home or Property Yourself
Selling your house by yourself is usually referred to as “For Sale By Owner,” or FSBO. It’s different from auctions and most private real estate sales because you don’t have a professional to guide you or to handle the advertising and selling process.
FSBO sales appeal to motivated, do-it-yourself homeowners. One of the biggest reasons people turn to FSBO sales is to try to avoid paying real estate commissions. Realtors charge a commission (six percent is standard), and sellers are responsible for paying it when their home sells.
Selling a home, yourself is contingent on your skills, motivation and time. If you have plenty of time, don’t have a strict moving date, are familiar with real estate regulations/contracts, and are experienced at marketing, a FSBO sale can work well. Many people don’t fit this profile, so it’s no surprise that many FSBO listings don’t sell and when they do, the average FSBO home sold for less than other types of homes.
In 2013, a FSBO home netted $210,000, compared to $249,000 for agent-assisted sales. FSBO home sales tend to take longer than other sales options. One survey showed that one in five FSBO sellers.
Pros and Cons of For Sale by Owner Houses
The pros include:
- Owners know their homes better than anyone.
- You avoid paying some commission fees.
- It’s appealing to do-it-yourself homeowners.
The cons include:
- You must navigate the selling process without assistance.
- It is highly unlikely that all potential buyers will know about the property.
- Buyers and their agents will negotiate your asking price and terms.
- The complexity of requirements and paperwork involved in selling a home have increased.
- Most buyers net more money with an agent.
- Marketing and exposure are contingent on your time and expertise.
- Buyers have numerous “outs” even after signing a contract.
- Lack of access to Realtor networks and professional tools.
Is Auctioning a House a Good Idea?
Sometimes. Auctions are used to sell residential and commercial property, as well as land. The properties sold by professional auction companies are usually similar to those sold directly by owners. So how do you decide whether an auction is the right way to sell your home?
The National Association of Realtors suggests the two-thirds rule to determine whether selling a house at auction is the best decision for your situation. Assess the market, the property and your situation. If two of these situations favor an auction, it’s usually a good way to sell your property.
Auctions are a good way to sell homes in a variety of markets. To maximize the value of an auction, look for a market that:
- Is changing rapidly
- Has buyer interest but some inactivity
- Views your property as unique (custom architecture or unique views can make it appealing to the market)
- Has a high demand for sellers
- Has an inventory shortage (buyers will compete aggressively).
- Has an inventory surplus (buyers will be drawn to auction opportunities over traditional listings)
Consider an auction when the property:
- Has high equity
- Has high carrying costs for the seller
- Is unique or difficult to value accurately
- Needs specialized marketing or broader exposure to attract the right buyers
Ideal auction situations include scenarios when the seller:
- Is downsizing
- Has a moved scheduled
- Needs cash quickly
- Wants to liquidate an estate, possibly including contents
- Has some equity
- Would rather not do work on the property
- Is not interested in negotiations or other direct involvement
- Is not expert in real estate matters
- Has already purchased another property
- Prefers not to pay traditional Realtor commission
Marketing for an Auction Verses Marketing a For Sale by Owner
Orlando Auction Pros marketing department promotes an auction for a home, not the homeowner. This removes a significant burden (and risk) during the already busy process of moving and selling a home. For many people, marketing their home is the most intimidating part of the sales process because they don’t possess the specific expertise or have access to the necessary tools. Working with a professionally staffed real estate auction company removes these obstacles.
Compared to FSBO homes, professional real estate auctions are promoted far more aggressively across a wider variety of channels, helping to generate interest among potential buyers in a much shorter timeframe. This is possible because the sale date is predetermined, and the advertising is built on a fixed schedule and budget. The process cannot be replicated on an open-ended listing. Marketing for a home auction targets key buyers by combining:
- Extensive on site and directional signage
- A dedicated webpage
- MLS and auction-specific listings with promoted entries
- Online advertisements
- Print advertisements in journals, magazines and specialty publications
- Targeted direct mailings
- Promoted social networking
- Hosted open houses
- Email blasts
- Press releases
- Outreach to buyers’ agents
When we promote an auction for a home, we us a marketing strategy that targets interested buyers.
By contrast, FSBO sales have relatively few marketing channels available to them. The most popular techniques used by homeowners selling their homes include:
- Yard signs
- Word of mouth through friends, relatives and neighbors
- Open houses
- For-sale-by-owner websites
- Personal social networking
Few homeowners use every channel. Generic yard signs are the most popular channel for FSBO homes because the are easy and cheap, but only 42 percent of homeowners use them. Other proven marketing techniques, like direct mail were used in less than ten percent of FSBO listings. Professional networks and industry tools such as MLS are rarely available to FSBO sellers.
It is worth mentioning again, that in addition difference in advertising methods, there are also significant differences in the advertising message or “hook” offered to buyers. The FSBO message is simply that a home is for sale and there is an invitation to begin a negotiation on the buyer’s terms and timeline. In contrast, the auction message is that the home will be sold to the highest bidder on the specific date. Buyers understand that the property will, in fact, be changing hands and that they must act.