We are wondering whether we should try to sell our home by auction. What should we know about this type of sale?
In a typical transaction done through a real-estate brokerage, Ontario law prohibits one potential buyer from seeing an offer from another potential buyer.
In an auction, the bidding process is open. Potential buyers can submit a bid knowing the amount bid by other potential buyers. Some would argue this makes the process more transparent.
It also means you won’t get the protections that come with working with a registered real estate professional.
Why would a seller choose to sell through an auction? It may be a faster way of selling your property: You will quickly learn what someone is willing to pay for your property, good or bad. However, there is also no ability to deal with individual bids once the auction has begun. As soon as that hammer comes down, your property will be sold to the highest bidder, assuming it reaches any reserve bid.
While working with a brokerage may not bring such rapid results, one of the benefits of working with a registered salesperson is that they usually bring opportunities to negotiate individually with prospective buyers.
Another difference is the level of protection available to consumers.
In Ontario, all real-estate salespersons and brokers must be registered. They must also comply with the Real Estate and Business Brokers Act, 2002, and its Code of Ethics, and they offer their services through a registered brokerage. In addition, a buyer’s deposit is held in a real estate trust account of a brokerage and is insured against fraud, insolvency or misappropriation by the brokerage.
Auctioneers are not licensed in Ontario. However, there are a number of rules and legal requirements that apply to their services and auctioneers can also choose to be a part of existing professional associations that have codes of conduct members must follow. There are also some auctioneers who are registered real estate salespeople.
If you decide an auction is the way to go to sell your home, there are companies who offer this service. You may want to consider interviewing several, ask if their auctioneers are members of a professional association and request references.
You should also be aware of your rights and obligations, and fully understand the process.
For example, what services will be provided to you and at what cost? How will you and the auction house set the starting price for your home? Do you want to set a reserve bid — the lowest amount you will accept?
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.
How you sell your home is a personal choice, so do take some time to weigh your options and invest the time to make the right decision.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.