Auctions: How it Works and Benefits
An auction is a public sale where a large number of people come together to bid on items that are up for bidding. The goal is for the interested buyers to outbid each other until finally, the item is sold to the highest bidder. Many people living in the Kansas City metro and surrounding areas hold auctions to sell their properties and personal belongings.
An auction can be held for many items that you may want to dispose of and liquidate. Today, anything from houses to rare antiques to concert tickets can be put up for auction. The internet itself has made it very easy to hold auctions, but for large properties such as homes, farms, cars, and so on, onsite auctions are the best and most preferred method.
The great thing about auctions is that they provide a definitive time and date for the sale of your assets. This means that you can have peace of mind knowing that by the specified date, your items will be liquidated, not to mention that it makes planning your life much easier.
Which items are mostly up for auctions?
Auctions are a great way to sell your properties quickly while ensuring that you get the best prices, sometimes even higher than their market value. Many people liquidate these properties through auctions:
- Car auction
If you need to get rid of your car, an auction can help you attract plenty of interested buyers who will bid on your vehicle, fetching you a great price. For this reason, those who need quick cash often hold a car auction.
- Farm auction
A farm auction usually attracts plenty of bidders who are ready to pay very high prices for your farm. Today, ‘land’ is something that investors and other people are always on the lookout for, and farms are definitely a great investment. You can be confident that you will receive a great price through a farm auction.
- Commercial building auction
If you have a commercial property that you would like to sell, then a commercial building auction is one of the best ways for you to get the full value of your property. If your building is up to date, safe and has a sound structure, has aesthetic appeal, and is in a great location, an auction may be the best way to get the best price for it.
- Property auction
A property auction is an auction where you sell your home as well as personal belongings and items to bidders. There may be different reasons for this, such as relocation, bankruptcy, divorce, and so on.
How do auctions work?
Before the auction starts, interested buyers are generally allowed a preview period, where they can see which items will be on sale and examine their conditions carefully. The preview period may be the day before the auction is held or several hours before it is scheduled to start.
After the preview period is over and interested buyers have decided that they wish to place their bids on the items, they have to register with the auctioneer. Apart from their name, they have to provide their personal details such as phone number, address, and proof of identification like their driver’s license or passport. Once they are registered, each bidder is given a card with a number on it. This number is used during the auction for identifying the participants.
To mark the start of the auction, a bell is rung. The auctioneer provides a brief description of the item that is up for bidding, listing out any special history or value it offers. Then, they announce the starting price, which is generally low and reasonable so that it will attract more bidders.
After this, the bidders can call out their bidding prices by holding up their bidding cards, and each bid is higher than the last. In other words, the goal is to subsequently increase the price of the item so that eventually, there are no more bids, and the highest bidder gets to take home the item.
An auction sale is complete when the auctioneer engages in customary auction completion announcements, such as the fall of the hammer. Until the hammer falls, the bidder can revoke their bid.
If you want to hold a car auction, property auction, or any other kind of auction, you have to hire an experienced auctioneer. He/she works as your agent and works to increase the bidding prices of your items to the highest possible.
Types of auctions
There are different types of auctions. According to economist William Vickrey, there are four different types of single-unit auctions. These are described below:
- English auction
Also referred to as an open outcry auction, an English auction is the most common type of auction held today. Here, participants try to outbid each other as the prices of the items keep increasing with every bid.
The process of an English auction ends when the auctioneer accepts the highest final bid. Usually, items such as antiques, luxury items, artworks, wine, and so on are auctioned using an English auction. Property auctions are carried using this method as well.
- Dutch auction
This is the opposite of an English auction. In a Dutch auction, the opening price starts very high, and the auctioneer keeps descending the asking price until one of the bidders accepts the price of the item, or when your reserve price is achieved.
The items that are up for sale are allocated depending on the bid order. This means that the first highest bidder chooses their items, after which the second-highest bidder chooses, and so on until the order is finished. Usually, perishable items such as tobacco, flowers, and sometimes, investment securities are sold using Dutch auction.
- First-price sealed-bid auction
This is also known as a blind auction because all the participating bidders submit sealed bids at the same time so that no one gets to know how much their competitors have offered. In a first-price buyer-bid auction, each bidder gets to submit a single bid only once, and they are not allowed to change their bid price later on.
The first-price sealed-bid type of auction is commonly used when serious contracts and opportunities such as foreign exchange, refinancing credit, government contract tendering, military procurement, and mining leases are up for bidding. They may be used for farm auctions and commercial building auctions as well.
- Second-price sealed-bid auction
The second-price sealed-bid auction is almost similar to the one discussed above, but the difference is that the highest bidder gets to take home the item at the price offered by the second-highest bidder. For example, in a car auction, if the highest bidder wins for $10,000, and the previous high bid was $9,800, then the winner has to pay the $9,800 instead of the actual amount he/she bid.
Usually, a second-price sealed-bid auction is used in automated contexts, such as online bidding.
When should you consider auctions?
There are many reasons why you may want to conduct an auction to get rid of your properties. Whether it is a farm auction, a car auction, a property auction, or a commercial building auction, here are some of the most common reasons why you may hold an auction:
- Divorce
If you are divorcing your partner, an auction is a great way to liquidate your items. You may want to sell the house you once shared along with the items in it, and a property auction and a car auction can help you liquidate your properties easily. Besides, knowing that your belongings will all be sold by a specified date gives you peace of mind and helps you plan the next phase of your life better.
- Relocation
If you are planning to move somewhere else, an auction can help you get rid of all your items, including your home, in an efficient manner. You can be assured that you get the best prices for everything, and sometimes, bidders are even willing to pay well above the market price for items that they really want.
- Rare items and antiques
If you have a collection of rare items, antiques, and other valuable items such as original artworks, first edition books, or paintings and sculptures by famous artists, you can sell them for high prices through a property auction. Since these are very rare items with high value, an auction will attract plenty of potential buyers who would be willing to pay high prices.
- Debt/bankruptcy
Another common reason why people in the Kansas City metro and surrounding areas hold auctions is because of debt or bankruptcy. If you are bankrupt, and you don’t have enough money to pay the outstanding debt that you may have, liquidating your belongings through farm auctions, commercial building auctions, and so on can come to the rescue. Sometimes, a court may order an auction to help pay for your debts.
- Death
If someone dies without leaving any form of will, then the state steps in and organizes an auction to liquidate the belongings and properties of the deceased person. The money from the liquidation sales then goes to the state.
Benefits of auctions
An auction offers plenty of benefits to the seller, from fetching the best prices to the assurance of liquidation. These benefits are discussed in detail below:
- It is a quick way to liquidate your properties
If you are looking to sell your assets quickly, then an auction is the best way to get the job done. There is a legally binding fixed timescale for the completion of the auction – from the time your assets are listed by the auctioning team to the date of the actual auction, the time limit is usually 28 days.
This means that if you are under financial pressure and in debt, or relocating, or under any sort of time constraint, an auction is the quickest possible option to help you liquidate your assets. If you want to sell your commercial property, a commercial building auction is the quickest way. If you want to sell your farm or your home, then a farm auction or property auction is the quickest way for you.
- You can be confident that your items will be sold
Auctions attract plenty of interested buyers, thus giving you a better chance of selling the items that you wish to sell. Moreover, many shoppers are always on the lookout for auctions offering great items; so, if you advertise right, you can be confident that you will attract buyers.
The aim of an auction is to generate keen interest from the participating prospective buyers, leading them to keep bidding against each other in something that is sort of like a competition among them. The winner gets to take home the item.
- Items are sold at the best possible prices
Items that are available at auctions are sold at prices higher than the original price that you set. Participating bidders are sometimes so determined to take the items home that they keep trying to outbid each other, even offering exorbitant prices for the items. This is called “auction fever,” and it can help you guarantee that you, as a seller, have achieved the best possible prices.
Sometimes, bidders even offer a pre-auction price for some items if they are extremely interested in it and do not want other potential buyers to bid on them. Generally, these pre-auction prices are very high – often higher than numbers you would expect to see in the auction room.
- Auctions are legal and binding
Once the hammer has fallen, it means that you, the seller, have exchanged contracts with the buyer, making them legally committed to complete the purchase. They cannot go back on their word and choose not to pay for the item. This means that selling through auctions is extremely secure.
Auctions in the Kansas City metro and surrounding areas offer an excellent opportunity to convert your assets into cash within a short period. Competitive bidding helps you sell your items at the best possible prices. The perception of the value of assets isn’t always the same for everyone, and an auction puts this difference in perception to use for the seller.