When many agents are asked about the role of auctions in the home buying and selling process, they usually respond with a statement about distressed properties or foreclosures. Actually, nothing could be further from the truth.

RE Technology took some time to learn about Auction.com, how it works, who uses it and the role it plays in luxury home sales. They totally debunked the myth. As it turns out, auctions are a primary way that the world's hyper-wealthy buy lots of things, ranging from luxury homes to art, yachts, and planes.

To understand the auction process, we interviewed Auction.com's Vice President of Business Development, Julie Han, and Ruth Ann Fisher of Del Realty in San Diego to learn more.

Auction.com is the leader in residential and commercial real estate auctions, especially luxury home auctions. The company has more than 1 million registered website users, spends more than $30 million in advertising each year, and employs more than 1,000 people. I make note of this because it seemed unreal that they have sold over 100,000 homes in the last five years alone.

As to the myth of using auctions for distressed properties, nothing could be further from the truth. In fact, the stronger the market, the higher the values fetched from auctions. One element of auctions that I did not think about was agent lead generation. When you post a listing to auction, you not only sell that house for maximum value, but you generate leads of other buyers in the market.

We are not sure how auctions work with other companies, but we were surprised to learn that with Auction.com, they cover the costs of brochures, print ads, online ads and emails. They are the top advertiser in the Wall Street Journal's real estate section and also help agents market properties online in the broadest possible way. They even have a 15-person team responsible for staging homes for "showcase events" that can include catering, valet parking and can draw hundreds of potential bidders.

Interview with a first-time Auction.com User

RE Technology interviewed San Diego Luxury Real Estate Agent Ruth Ann Fisher of Del Realty to learn about her Auction.com experience. Ruth Ann is a first-time Auction.com user, so we wanted to understand her perspective as a first time user of the service.

Ruth Ann has an amazing listing in Coronado Island. Coronado Island is in the middle of the Port of San Diego, a four minute bridge crossing from heart of downtown San Diego and the famous Gaslamp District. Although San Diego has many luxury enclaves, Coronado is among the most coveted because of the island lifestyle and its proximity to the city. The famous Hotel Del Coronado is the island's crown jewel and has been home to the vacationing lifestyle of the world's wealthiest for more than 100 years.

Take a moment to view Ruth Ann's listing that will be auctioned off in a few days. The starting bid for the property is $1,900,000. REALTORS® Property Resource has established an RVM of $3,937,480 for this 6-bedroom, 5.5-bath property with 4,616 square feet of living space separated from the ocean by Sunset Park. REALTORS® can pull up the details of the property on RPR with the following address: 1070 Coronado Ave, Coronado, CA 92118. If you look on Zillow, you will see the Zestimate range for the home is $1.97M to $4.26M with a current Zestimate of $3,404,558. Bids open December 3, 2012.

RE Technology: How did your seller react to the idea?

Ruth Ann: This seller has had the property on the market for a couple of years. We were not getting the right buyer. Auction.com offers access to an international group of buyers. In the international community, auctions for luxury homes are not strange. Take Australia, for example. Auctions are the customary process for resale. This is more like a luxury car sale, not at all a distressed property sale. It gets buyers off the fence. The luxury homebuyer does not need to buy a home, they buy them because they can. Buyers and sellers feel like they win--both are satisfied with the transaction. It's emotional in a good way.

RE Technology: Auction.com does a lot of the property marketing for your listing. Were you and your seller pleased with the results?

Ruth Ann: Interestingly enough, the property staging, open house, videos, photos, etc. came after the auction decision was made to market the property through an auction. All of that came after the decision was made. It only added value and seller appreciation. This home already had been staged and already had great photography. Auction.com added the cherry on top.

RE Technology: How has the lead generation experience been relative to other marketing approaches to selling a home?

Ruth Ann: We took an interesting approach to lead response for this auction. Normally when an agent gets a property inquiry, we show the buyer the subject property and other properties that are similar. But in this case, we stayed focused on the subject property.

As for leads, this property is still on LuxuryRealEstate.com, in Sandicor MLS, on REALTOR.com, and other pubic sites. Auction.com has definitely generated more leads than all other sources combined. There were 70 people through the first open house and 67 through the second open house (and it was a cloudy, cold day). Normally we see about half that amount.

RE Technology: How many buyers are registered for the auction?

Ruth Ann: Eighteen registered buyers and six registered brokers (if the broker wants to represent their client and get broker-co-op 2.5%). There is an offer of compensation and we are allowed to put in language about the auction in our MLS in the REALTOR® remarks section. For the auction, all buyers must provide a deposit ($10,000) and proof of funds up to the highest amount that they are willing to bid in advance.

RE Technology: What can you tell us about the starting bid price and the reserve price of the auction?

Ruth Ann: The initial bid is public at $1.9 million. The reserve is confidential. The best news is that no auction properties have ever fallen out of escrow.

The auction is in six days. You can view the property on Auction.com here.

How the Auction Process Works

Auction.com was helpful in letting us know more about the mechanics of the auction.

Here is how the Auction.com process works for Buyers:

Here is how Auction.com works for Sellers:

Next Steps

• Visit Auction.com's website for more information
• View a video of the luxury property mentioned in this article
• Learn more about the company in our Directory