I own a unique property that I need to sell soon. I’m considering selling it via auction instead of listing it with a real estate brokerage. What do I need to know before I make a decision?
Selling a home can be an emotional and stressful experience, especially if you’re on a tight deadline. It’s understandable that you are weighing your options to determine which approach will be best for you.
While selling a home through an auction isn’t the most common way in Ontario, there are companies that offer this service and it’s your choice. As I always emphasize in this column, the best way to reach the right decision is to know all the facts and be informed.
Whether you choose to sell your home by auction or through a real estate brokerage, it’s important to remember that the sales price will ultimately be what someone is willing to pay and what you’re willing to accept on a given day. How you get there is a matter of your personal preference and tolerance for potential risk.
Much like interviewing real estate professionals before listing your home, you may want to consider interviewing several auction companies. You’ll want to understand what services will be provided to you and at what cost. You’ll also want to understand your rights and obligations. For example, how will the starting price be set for your home? Will there be a reserve bid (lowest amount that you will accept)? What happens if you change your mind about selling or don’t receive the sales price you’re looking for? And what will be the process once the auction is over? Will the buyer have an opportunity to place conditions (such as financing or an inspection) on a bid? And who will be responsible for all the paperwork involved? As always, be sure to fully understand your contract before signing on the dotted line.
While auctioneers are not subject to a mandatory province-wide licencing system to practice their craft, there are a number of rules and legal requirements that apply to their services. Auctioneers can also choose to be a part of existing professional associations that have codes of conduct members must follow. If you do choose the auction route, you may want to confirm that your auctioneer is a member of a professional association. As with anything, ask for references, especially from someone who may have sold a home by auction.
While there are different options available for selling your home, it’s important to understand that there are certain elements of consumer protection that will only be available when working with a registered real estate professional.
In Ontario, all real estate salespersons and brokers must be registered under the Real Estate and Business Brokers Act, 2002 (REBBA 2002), comply with a strict Code of Ethics and offer their services through a registered brokerage. That being said, there are some auctioneers that are also registered real estate professionals.
Through education and experience, a real estate professional will be prepared to help you navigate the selling process, including determining how best to market and show your home to buyers, assisting with paperwork and negotiating on price and terms. As a client of a brokerage, that brokerage has a duty to promote and protect your best interests.
You will also have peace of mind knowing that the buyer’s deposit will be held in a real estate trust account of a brokerage, and is insured against fraud, insolvency or misappropriation by the brokerage. In the auction process, as well as when you work with a real estate professional, there is also the option of paying a deposit in trust to a lawyer, if you choose.
At auction you will probably learn within a few minutes what someone is willing to pay for your property – good or bad. It is an open process, and, as soon as that hammer comes down, your property will be sold to the highest bidder, assuming it reaches the reserve bid. While working with a brokerage may not bring such immediate results, depending on the level interest in your home, the many benefits of working with a registered professional will usually bring opportunities to negotiate with prospective buyers.
It’s a personal choice, so take some time to weigh your options. If you decide to work with a registered real estate professional, invest the time to find one that’s right for you.Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.