What is auction?
An auction is an event that is help publicly where properties and other assets are sold to the highest bidder. A lot of people flock to these events hoping to find good deals at cheap prices.
Before the auction, announcements are made to notify as many buyers as possible. If it is a house that is being auctioned, it will be marketed on the listing website together with the date of the auction. Some sellers also put signs in newspapers and around the property.
Example of an auction
Good examples of auctions are car auctions, livestock auctions, farm equipment, etc. During the auction, interested buyers will submit their prices and outbid each other. In the end, the person who submitted the highest price will win the asset.
What happens at the auction?
Buyers can either meet at a physical location or online. This is done to facilitate all kinds of buyers. Those who submit their bids online must have access to the internet and get updated as prices change.
If the auction is being conducted at a physical location, buyers must be at the location at the specified time. The auctioneer will conduct the sales event.
Every item being sold will have a minimum starting price. Prices will be increased in order to find the highest bidder. Once the highest price is reached(no more bidding) the auctioneer will tell the crowd that the item has been sold.
What happens when the seller does not receive the price they want ?
There are times when a seller has a minimum price they will accept on the asset. A good example can be a house being sold at an auction. Moneylenders such as banks take the house from their clients through foreclosure when the client can no longer afford to make their mortgage payments. The bank must recover their funds using the fastest route possible which is selling the house at an auction.
During the auction, the bank must at least recover its remaining balance. If none is willing to pay the minimum amount the bank wants, the property will be added to its portfolio and becomes a real estate owned(REO) property.
The bank can use other means to sell the house such as using a real estate agent or sell it directly to its clients.
