Why Do Auctions Work?

This should be the question you’re asking yourself right now. If auctions work why doesn’t everybody use them to sell their homes?

That’s like asking why isn’t everybody a millionaire?
Because human beings very rarely think outside the box!!!

So much of what we do in our daily routine has been passed down through traditions that we never bothered to question. Take the diamond engagement ring for instance.

Although diamonds were used in engagement rings before the mid-20th century, it was an advertising campaign by De Beers that made the diamond the standard it is considered today. The campaign slogan. “A Diamond is Forever” was written by Frances Gerety in 1947 (she was never married). The DeBeers Family commissioned the slogan in an effort to drive up the price and demand for diamonds. By 1965, 80 percent of American women had a diamond engagement ring.

Auctions:

The famous auction house, Sotheby’s, is known for auctioning priceless works of art. Start noticing how often world records are set and why. Usually there are two to three serious bidders who drive the price up to record-breaking heights.

EBay is another site that during the dot com bubble everybody thought would lose tremendous value and yet they only made more and


more money. Why? Because auctions work. Look through eBay and you’ll see auctions work on Pez dispensers, cars, bird cages, car parts,
just about anything and everything imaginable. And yes recently homes, although they have a long way to go.

Auctions are being used to sell off vast amounts of mortgages and now lenders are using them to sell hundreds of houses at a time.
Don’t think that you get homes at a bargain at an auction. Usually, if the auctioneer has done his job, he is receiving close to 100% of the value of the property he is auctioning. Don’t forget most auctioneers get a 10% commission in the form of a “Buyer’s Premium.” Therefore if they sold a piece of property at 80 or 90 per cent of its actual value, they still add on their 10% commission! They are getting the true value of a piece of property. Are you really getting a deal if you buy a property 85 - 95% of value? As an end user, maybe. As an investor you are definitely not getting a deal.

But are you getting a deal if you are the investor conducting a similar event on your own property? Absolutely YES!!!