by Thomas Saturley, CAI, AARE Auction Properties, Ltd. Portland, ME

Across the country, real estate professionals are increasingly turning to the auction as a winning marketing tool. If you properly qualify your situation as a potential auction scenario (we’ll tell you how), you have an excellent chance at turning over a property quickly.

Auctions offer clients and customers new options, enhance your image as a full-service professional, expose the property to a wide market of potential buyers, and turn profits for your firm. Plenty of revenue-producing roles are available in the auction process. You don’t have to become an auctioneer to benefit. You can earn a fee as a referring agent/broker, a cooperating agent or a listing agent. However you participate, you’ll add one more marketing weapon to your reserves of professional techniques.

The Two-Thirds Rule

Not all properties should be sold at auction, but certain properties and situations will benefit greatly. A dependable way to determine whether a property lends itself to auction is this: If two of the three main components of a transaction (market, the seller and the property) lean favorably toward auction, then it should be offered to a seller as a sales option.

Here’s a checklist to figure out if the Two-Thirds Rule applies to the property you are handling:


Do these characteristics describe the market?

  • a changing market
  • a dull market -- too much product but with buyer interest
  • not enough of the particular property type (unique, lake front, etc.)
  • an emerging market -- for example, a new development whose sales could take off once some properties are auctioned
  • a seller’s market with high demand and high competition


Do these characteristics describe the seller?

  • needs immediate cash
  • going through a partnership or marriage break-up
  • is moving out of state
  • wants to liquidate an estate
  • is retiring
  • is an auction-minded seller
  • has a listing that is about to expire
  • has already purchased another house
  • knows auction will bring a fair market price
  • has financial problems
  • has high carrying costs on the property


Do these characteristics describe the property?

  • carries a lot of equity (25% or more)
  • unique -- enough market interest to encourage competition
  • burdening the owner with high carrying costs
  • vacant -- vacant properties may encourage vandalism
  • difficult to appraise -- unique properties are difficult to appraise

Applying the Rule

For example, you are marketing a model home in a successfully sold-out development.

The house is two years old, fully decorated, with four bedrooms and two and one-half baths, a whirlpool and two fireplaces. It’s located on a two-lane highway across from a park and baseball field. When the development was under construction, some buyers showed interest, but more recent prospects say they would rather purchase the brand new homes in the development.

Using the Two-Thirds Rule, fill in information for each of the main categories. Add up the elements in each category and make a judgment of whether or not the category is favorable or not for auction. Would you recommend an auction in this situation?

__Yes __ No The key is to give auction serious consideration. If you do, you’ll expand options for the seller and for yourself.

Two Thirds Rule Checklist

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Now ask: What are the advantages and disadvantages of selling this property by auction?