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True Market Value is a term commonly used for a Real Estate e-auctions or online auction, as it creates transparency for the buyers and ensure that the seller maximises the price of the property to the true market value. The transparency creates a fair deal for all parties and is auditable if any twists around the deal should arise.
The concept is still not widely spread in the real-estate business, as it has only really been used from 2010 and onwards. [1] From 2010 to 2014, there are some Lead User companies who have used this for their corporate real estate divestments. One example is A.P. Moller Maersk Group, who successfully have done this in North America, Latin America, and Europe. [2] [3]
Buyers of real-estate are often presented with a situation where multiple buyers are interested in the same property. This creates uncertainties that can be split into:
By utilising a forward e-auction for the conclusion of the sales process and deal only real and approved buyers participate, so no faking another bid or bluff is needed, which removes one of the uncertainties for the buyer.
During the online auction the buyer can see the lead bid and will be able to adjust it as the auction progresses, therefore the winning price will be clear for all and the buyer will not have to guess what offers is the right to win. [4]
The time spend is usually not more than a couple of hours, which means that if the auction is not won, the time spend is much lower compared to the conventional negotiations. The fact that it is an online auction, the bidding can be done in front of any computer, which minimises travel time to and from the real estate agent.
The most common approach is to use a 3rd party consultant to ensure that the real estate agent can prove that the process have been conducted fair and that ethics of the online auction is maintained.
An auction is usually a process of buying and selling goods or services by offering them up for bids, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder. Some exceptions to this definition exist and are described in the section about different types. The branch of economic theory dealing with auction types and participants' behavior in auctions is called auction theory.
In contract theory and economics, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other.
A real estate agent, referred to often as a real estate broker, is a person who represents sellers or buyers of real estate or real property. While a broker may work independently, an agent usually works under a licensed broker to represent clients. Brokers and agents are licensed by the state to negotiate sales agreements and manage the documentation required for closing real estate transactions. Buyers and sellers are generally advised to consult a licensed real estate professional for a written definition of an individual state's laws of agency.
Market value or OMV is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and differ in some circumstances.
Procurement is the process of locating and agreeing to terms and purchasing goods, services, or other works from an external source, often with the use of a tendering or competitive bidding process. The term may also refer to a contractual obligation to "procure", i.e. to "ensure" that something is done. When a government agency buys goods or services through this practice, it is referred to as government procurement or public procurement.
An online auction is an auction held over the internet and accessed by internet connected devices. Similar to in-person auctions, online auctions come in a variety of types, with different bidding and selling rules.
A Vickrey auction or sealed-bid second-price auction (SBSPA) is a type of sealed-bid auction. Bidders submit written bids without knowing the bid of the other people in the auction. The highest bidder wins but the price paid is the second-highest bid. This type of auction is strategically similar to an English auction and gives bidders an incentive to bid their true value. The auction was first described academically by Columbia University professor William Vickrey in 1961 though it had been used by stamp collectors since 1893. In 1797 Johann Wolfgang von Goethe sold a manuscript using a sealed-bid, second-price auction.
An English auction is an open-outcry ascending dynamic auction. It proceeds as follows.
For sale by owner (FSBO) is the process of selling real estate without the representation of a broker or agent. Homeowners may employ the services of marketing, online listing companies, or market their own property. Typically, they represent themselves with the help of a lawyer or solicitor throughout the sale. As in most areas, there are detailed legal requirements pertaining to sellers and disclosures they must make.
Auction sniping is the practice, in a timed online auction, of placing a bid likely to exceed the current highest bid as late as possible—usually seconds before the end of the auction—giving other bidders no time to outbid the sniper. This can be done either manually or by software on the bidder's computer, or by an online sniping service.
A double auction is a process of buying and selling goods with multiple sellers and multiple buyers. Potential buyers submit their bids and potential sellers submit their ask prices to the market institution, and then the market institution chooses some price p that clears the market: all the sellers who asked less than p sell and all buyers who bid more than p buy at this price p. Buyers and sellers that bid or ask for exactly p are also included. A common example of a double auction is stock exchange.
Auction theory is an applied branch of economics which deals with how bidders act in auction markets and researches how the features of auction markets incentivise predictable outcomes. Auction theory is a tool used to inform the design of real-world auctions. Sellers use auction theory to raise higher revenues while allowing buyers to procure at a lower cost. The conference of the price between the buyer and seller is an economic equilibrium. Auction theorists design rules for auctions to address issues which can lead to market failure. The design of these rulesets encourages optimal bidding strategies among a variety of informational settings. The 2020 Nobel Prize for Economics was awarded to Paul R. Milgrom and Robert B. Wilson “for improvements to auction theory and inventions of new auction formats.”
Bidding is an offer to set a price tag by an individual or business for a product or service or a demand that something be done. Bidding is used to determine the cost or value of something.
A real estate transaction is the process whereby rights in a unit of property are transferred between two or more parties, e.g. in the case of conveyance one party being the seller(s) and the other being the buyer(s). It can often be quite complicated due to the complexity of the property rights being transferred, the amount of money being exchanged, and government regulations. Conventions and requirements also vary considerably among different countries of the world and smaller legal entities (jurisdictions).
In economics and finance, the price discovery process is the process of determining the price of an asset in the marketplace through the interactions of buyers and sellers.
Market design is a practical methodology for creation of markets of certain properties, which is partially based on mechanism design. In some markets, prices may be used to induce the desired outcomes — these markets are the study of auction theory. In other markets, prices may not be used — these markets are the study of matching theory.
A reverse auction is a type of auction in which the traditional roles of buyer and seller are reversed. Thus, there is one buyer and many potential sellers. In an ordinary auction also known as a forward auction, buyers compete to obtain goods or services by offering increasingly higher prices. In contrast, in a reverse auction, the sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.
Real-time bidding (RTB) is a means by which advertising inventory is bought and sold on a per-impression basis, via instantaneous programmatic auction, similar to financial markets. With real-time bidding, advertising buyers bid on an impression and, if the bid is won, the buyer's ad is instantly displayed on the publisher's site. Real-time bidding lets advertisers manage and optimize ads from multiple ad-networks, allowing them to create and launch advertising campaigns, prioritize networks, and allocate percentages of unsold inventory, known as backfill.
The art market is the marketplace of buyers and sellers trading in commodities, services, and works of art.
The Price of Anarchy (PoA) is a concept in game theory and mechanism design that measures how the social welfare of a system degrades due to selfish behavior of its agents. It has been studied extensively in various contexts, particularly in auctions.
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