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Real estate auctions are a popular method of buying and selling properties worldwide, and Abu Dhabi is no exception. Auctions can provide buyers with a unique opportunity to purchase properties at competitive prices, while sellers can benefit from a transparent and efficient sales process. This article will explore the five types of real estate auctions and how they are used in Abu Dhabi.
Absolute Auction
An absolute auction is a type of auction where the property is sold to the highest bidder, regardless of the final price, meaning that no reserve is set in place. In Abu Dhabi, absolute auctions are relatively rare as they can be risky for sellers who may end up selling the property at a far lower price than expected. For example, imagine the consequences of auctioning a property worth approximately 1,000,000 AED only for it to sell for 800,000 at auction. Unfortunately, this kind of auction does not guarantee that sellers will receive the market price for their assets. However, some sellers may choose this option if they are motivated to sell quickly, and there is high demand for the property.
Reserve Auction
A reserve auction is a type of auction where the seller sets a minimum price for the property, and the property will only be successfully sold at auction if the highest bid meets or exceeds that minimum price. The reserve price is clearly discussed with the auctioneer and included in their agreement before the auction begins. Then, while the auction takes place, the auctioneer will communicate to bidders when the reserve price is met and the property is officially on the market.
In Abu Dhabi, reserve auctions are the most common type of auction used for selling properties. This type of auction can benefit sellers as it ensures that the property will not be sold for less than its perceived value while also affording them the benefit of market competition that helps them achieve the highest price.
Minimum Bid Auction
In a minimum bid auction, the auctioneer and seller set a minimum bid for the property, and the property will only be sold if the highest bid meets or exceeds that minimum bid.
This type of auction is similar to a reserve auction, but the minimum bid is disclosed in marketing and announced by the auctioneer at the start of the auction, as opposed to it being withheld as is done with a reserve auction. Minimum bid auctions are not as common in Abu Dhabi as reserve auctions.
Sealed Bid Auction
In a sealed bid auction, potential buyers submit their bids in writing, and the highest bidder wins the property. This type of auction is often used for luxury properties or properties with a unique value and that have very few comparable properties, making it difficult to determine their value. The theory behind a sealed bid auction is that the market and its bidders will decide the asset’s value. In Abu Dhabi, sealed bid auctions are not as common as other types of auctions, but they can be used for high-end properties.
Online Auction
Online auctions are becoming increasingly popular in Abu Dhabi, especially since the COVID-19 pandemic, which made it challenging to have in-person auctions. Furthermore, while there have been travel restrictions, there were bidders overseas who still wanted to partake in auctions – online auctions made that possible.
In an online auction, bidders participate using a secure online platform. Online auctions can be conducted in real-time or over a period of days or even weeks. This type of auction allows bidders to participate from anywhere in the world and can increase the pool of potential buyers.
Online auctions can have different structures, but typically they will have a set minimum bid and minimum bid increments. Several well-respected sites conduct online auctions of Abu Dhabi real estate.
Each auction type has advantages and disadvantages for buyers and sellers. Whether you are buying or selling a property, it is essential to understand the different types of auctions so you can choose the one that best suits your needs and, even more importantly, so you fully comprehend your obligations before entering an auction.
