Selling a House at Auction vs For Sale By Owner vs a Traditional Agent

By 

Jamie Ayers

Updated 

January 25th, 2019

SHARE

There are more options to sell your home than ever before. Owners are turning to options like house auctions and “For Sale By Owner” to sell their homes as an alternative to using a real estate agent. While there are benefits to using these selling alternatives, owners must be aware of the costs and timeframe differences.

Choosing the right approach to sell your house is an important decision. There are many options besides the traditional way of using a real estate agent. Owners are turning to alternatives like house actions or "For Sale By Owner" (or FSBO) to have more control over the selling process. But are these alternatives really better than using an agent?

On one hand, these selling alternatives are appealing to owners for many reasons. The typical timeline for a selling auction is 30 days or less, ideal for owners who want a simple sales process. Another option is to sell your property or land by yourself, referred to the "For Sale By Owner" or FSBO process. This option allows owners to avoid large commission fees.

Weighing each option is important to optimize your selling strategy. Here are some pros and cons of each option to help you decide what is best for you.

Option 1: Real Estate Auctions

Real estate auctions can take place online or in person at the property itself. Like a traditional real estate sale, you create a listing for your house to post a few weeks before the sale. This allows potential buyers can view the property ahead of time. There can also be restrictions on who can bid, so in some cases, bidders need to register in advance to attend.

A property listing for auction can be "with reserve" or "absolute" (no reserve). A reserve refers to the lowest bid that a seller will accept. The reserve is often determined before the sale date with the auction company. If the highest bid falls below the reserve, it's the seller's decision to accept or reject the bid.

In an absolute auction, the property will sell to the highest bidder. There are usually more bidders in an absolute auction, which results in a higher selling price.

Finally, the winning bidder must be willing to accept the property as is. Buyers can't ask sellers to do extra work or pay expenses on the property. A property sold at an auction isn't tied to an appraisal, inspection, or mortgage. There also can't be any conditions or contingencies from the bidder upon selling.

Pros of Selling a House at Auction

Cost Savings

At auction, it's on the buyer to pay the real estate commissions as well as a non-refundable deposit. The selling timeline is also shorter, so owners avoid high carrying costs.

A Simpler Sales Process

There is no need to negotiate when you sell your house at an auction, which is a big time saver.

Shorter Selling Timeline

An average auction timeline is 30 days or less, which can instill a sense of urgency for the buyer.

No Inspection or Appraisal Required

You save money as you aren't required to do an inspection or appraisal to sell your property at auction.

Marketing and Promotions Included

The auction house often does the marketing and promotions for their auctions.

Cons of Selling a House at Auction

No Sale Guarantee

Your property can't sell if no one places a bid, or if none of the bids reach the reserve price. This can be particularly risky if you rely on the proceeds of one house auction sale to buy another property.

A Smaller Buyer Pool

Some auction houses place restrictions bidders, resulting in a smaller buyer pool. With few people, it can lower the chances of getting a higher bid.

Selling a Home at Auction

A selling auction involves a lot of careful preparation before the auction date. The process has an average timeline of 45 days to complete, so it's crucial to do the legwork before the auction. To prepare, you will promote the property to prospective buyers through various channels. Here are the steps to make sure you're ready for your house action.

1. Establish a Timeline

When choosing the auction date for your home, there are a few important things to consider. Make sure you are available to promote your property at least a month before your auction date. This includes time to do a consultation with your auction house to determine your promotion strategy.

2. Promote Your Property

Executing a successful marketing campaign is a very important task. You'll have a relatively short time frame to attract potential buyers, so plan your time wisely.

Use a wide range of marketing channels to reach prospective bidders. Online channels like social media and a dedicated website can be very effective. Direct marketing such as signage, brochures, and print media can also cast the net wide for buyers. Your auction specialist should help you build the best ways to advertise your property.

3. Auction Your Property

On the date of the auction, you can collect bids either online, in person, or both.

If bidders submit bids online, they'll typically register online before the auction date. Online auctions can last several weeks so those interested can submit their bids. Onsite auctions can also take place in person and a winning bid can be determined on the same day.

Once a winning bid is chosen, the winner will submit a non-refundable deposit and sign contracts immediately to close the sale.

Option 2: "For Sale by Owner"

"For Sale By Owner" or FSBO is the process of selling your property or land by yourself. You handle the selling and advertising without the help of a real estate agent.

The main reason this option appeals to owners is to avoid the cost of real estate commissions. On average, a 6% commission goes to the realtor when a house sells. An FSBO can work well if you have the time and patience to navigate through the selling process. You'll also have to have some skill to market your property to attract potential buyers.

This option is not likely to appeal to many owners as it takes longer to sell an FSBO home than other alternatives. FSBO home sales also fetch a lower price than agent-assisted sales, so you may lose out on more money in the long run.

Pros of For Sale by Owner Houses

Low or No Commission Fees

You can avoid most commission fees when selling an FSBO home.

Total Control in the Selling Process

You have total control over the selling and advertising process of your home.

Cons of For Sale by Owner Houses

No Professional Help

There is no professional on hand to sell or market your property. You're on your own.

Working with Buyers & Agents

You'll likely be working with buyers as well as their agents to negotiate pricing and terms.

Complex Real Estate Regulations

Selling your home is no easy feat. You'll have to be familiar with real estate laws and regulations in your area to secure your sale. There are also contracts and paperwork involved in the selling process that you will have to be familiar with before engaging an offer.

Lower Profits

A FSBO home earned $210,000, compared to $249,000 sales that used an agent in 2013. It's difficult to get the price that you want for your home without the negotiation skills of a trained agent.

FAQs About FSBO & Auctions

Now that you have the facts, how should you decide to sell your home? Are the alternatives for selling through a traditional realtor worth using? Below are some frequently asked questions from sellers that face the same decision.

What are my options for marketing an FSBO home compared to an auction?

An FSBO home is not as aggressively marketed as a home selling via auction. The burden of marketing a house in an FSBO falls on the owner, who most likely will not have the network or expertise to execute a marketing campaign successfully. This is the main reason why FSBO homes take longer to sell than auctions or agent-assisted sales.

The marketing options for an FSBO home can include:

  • Word of mouth
  • Classified ads
  • Personal social media marketing
  • Open houses
  • Yard signs

When selling a house via auction, the auction house takes care of all the promotion and marketing for your listing. Using the auction company's network to market your property is a major advantage.

Some of the marketing options that an auction company might use include:

  • Onsite signage
  • Print ads in magazines and publications
  • Promoted social media ads
  • Email campaigns and blasts
  • MLS with promoted listings
  • Press releases
  • Outreach to buyer agents

What is the cost of selling at auction compared to an FSBO sale?

There are a few factors to consider when comparing the costs between an auction and FSBO sale.

Advertising

Having a well-planned marketing campaign is the key to getting bids during an auction. An auction company can create customized marketing tactics to ensure you get the highest bid for your property. This cost is fixed before the sale date.

An owner selling through FSBO might be savvy enough to invest in their own marketing tactics. They can also choose not to spend a dime on advertising at all if they'd like to take the risk.

Commissions

The buyer pays the real estate commissions in an auction, and the seller receives credit for the full bid with no deductions. In an FSBO, the seller pays commission to the buyer's agent if applicable.

Carrying Costs

An auction date fixes the time that a property will be held, assuming there will be bids during the auction. An FSBO sale can drag on longer than an auction and can have high carrying costs if the property does not sell.

Can I convert my listing from an FSBO sale to an auction if someone wants to buy my home ahead of the auction?

You can convert your listing to an auction during any point of the process. If a buyer makes an offer before the auction date, they can also submit an offer on the auction contract. It'll be up to you if you want to accept the offer and cancel the auction. You can also decline the offer and invite the buyer to the auction instead.

Will my home sell for less in an auction compared to selling it myself or through an agent?

Not necessarily. House auctions can attract a large pool of prospective buyers. This can make the bidding process more competitive and help you fetch the highest price. You also receive the full amount of the price (with no commissions deducted) compared to an agent-assisted or FSBO sale.

Option 3: Selling a Home Through a Traditional Realtor

The most common way of selling a home is through a real estate agent. Most people are familiar with this option, so we'll outline the advantages and disadvantages briefly. Ultimately, we'll also highlight why working with a Realtor is the best way to sell your home.

There are many benefits of hiring an experienced Realtor over selling through an auction or FSBO. Your agent can save you time and money by helping navigate through the confusing world of contracts and fine print.

A good agent will also have an expansive network of professional contacts. Having access to high-quality contacts such as lawyers, landscapers, inspectors, and contractors can help you get your home ready to sell. If your Realtor is well connected to other agents, they can also assist with bringing in more potential buyers.

In an agent-assisted sale, the sale date and terms are set by the buyer. This process also takes longer than selling a house at auction due to the negotiation phase. During the negotiation process, there are often contingencies in the offer. These are often based on things extra work or expenses related to the property. Not having to conduct these negotiations yourself can be a huge relief for most people. Your agent will negotiate on your behalf, which can often maximize your profit at the end of the deal.

Which Option Should I Choose to Sell My Home?

The best way to sell your home is to list with an agent through Clever to get the best of each option. Listing with Clever will provide you with our top-rated service and our selling process can also save you thousands of dollars in commission fees.

Related Articles

You May Also Like