Increasing number of owners desiring to
sell their real estate in a sluggish market are considering having their
properties auctioned rather than marketed in the conventional method. This
type of auction is far removed from an auction pursuant to a court order in
a mortgage foreclosure or bankruptcy.
A New Jersey real estate broker undertaking to obtain listing of properties
for marketing through the auction method should engage the services not only
of a qualified auctioneer but also of an attorney with detailed knowledge of
what is truly involved. The knowledge includes the special terms and
conditions that should be part of the listing agreement with the owner, the
terms and conditions of the auction, the necessary disclaimers of warranties
and representations by the owner and the broker/auctioneer, the procedures
for registration of bidders and real estate brokers representing bidders,
the materials concerning the property which are highly desirable or required
to be made available to registered bidders prior to the auction in a “bidder
package” made available to registered bidders, the terms and conditions of
the Contract of Sale which should be part of the “bidder package”, and the
elimination of post-auction contingencies which, if not satisfied, would
allow the winning bidder to refuse to close title (e.g. dissatisfaction with
results of a property inspection, discovery of zoning or building code
restrictions on planned use, and failure to obtain mortgage financing).
In recent years there has been a sizeable
increase in New Jersey voluntary (as opposed to foreclosure) auctioning of residential,
commercial and industrial real estate;
However, there are no statutory requirements or regulations and almost no case
law governing voluntary real estate auctions in New Jersey.
In order to avoid fruitless
efforts and after auction litigation, the owner and auctioneer must be sure
that:
the Owner/Auctioneer Agreement clearly details the
rights and obligations of the parties.
the information about the property contained in the
advertising materials and bid package is appropriate and accurate
the auction guide is comprehensive and easily
understood.
for
"public outcry" auctions, the special announcements are scripted and the auction
is video taped
appropriate disclaimers of warranties and representations are contained in
the auction materials
a
form of contract properly customized for an auction is included in the
auction package - use of a form of contract for non-auction sales is both
inappropriate and dangerous.
