Abstract
This case study is designed to provide students with an entertaining exposure to the auction mechanism in real estate transactions. Borrowing liberally from an actual real estate auction, the case delves into (a) reasons why a property owner might choose the auction mechanism, (b) strategies the property owner and the auctioneer can use to attempt to maximize auction prices, and (c) the logistics of promoting and conducting a real estate auction. The case addresses several strategic issues commonly used in the real estate auction industry, including "absolute auction," "buyer's premium," "choice groups" and owner financing. In the absolute auction format, the seller agrees to sell the property at the auction without imposing a minimum bid or reservation price. Sellers who agree to this structure bear the risk that the property could sell for a price lower than they would accept through traditional transaction methods, but this risk is offset by the increased number of potential bidders who may interpret the use of the absolute format as a signal of the seller's eagerness to transact.