Competitive Auction between Private Parties: transparency and rigor to maximise the sale value of a property

Auctions between private parties, managed by a notary, complement or integrate traditional sales methods, offering greater transparency, more certain timelines and a preliminary review of the documentation.

Competitive auctions between private parties have been growing steadily in number in recent years, thanks to specialised structures and a number of specific features that make this method very appealing both for those selling and for those buying.

First of all, by competitive auction between private parties we mean a sales procedure in which several prospective buyers can submit offers for the same property, following clear and identical rules for everyone, set in advance and made known before the start of the procedure. The property does not come from enforcement or insolvency proceedings, but the seller is a private party (an individual, company or entity) who voluntarily chooses this method. The entire procedure is organised and regulated in advance with the assistance of a notary, a professional who is famously impartial. In a competitive auction between private parties, the typical process is as follows:

• The seller turns to the notary’s office. At this stage, the property documents are collected (title deeds, cadastral searches, floor plans, any mortgages or liens, etc.) and the feasibility of the competitive auction procedure is assessed.
• The notary carries out a series of checks on the title deeds, on any mortgages or outstanding issues, on the consistency between the actual condition of the property and the cadastral records, and on planning and zoning matters, etc. The aim is to reach the auction with documentation that is as clear as possible.
• The notary and the seller agree on the auction rules, which set out how bids are to be submitted (for example: in sealed envelopes, or electronically), by what date and time, any deposit, the award criterion (for example the highest valid offer that complies with the rules), as well as by when and how the price must be paid and within what time the notarial deed of sale will be executed.

Buyers wishing to take part submit their offer according to the methods laid down in the auction rules (for example, with a sealed envelope filed at the notary’s office by a certain deadline, together with a deposit). When the deadline expires, the auction notary opens or checks the offers, compares them and identifies the best bidder. Everything is officially recorded, providing certainty as to the ranking and the award. At that point, the winning bidder pays the agreed price and the sale deed is executed, with all the guarantees provided by law and the subsequent registration in the land records.

In the context of auctions between private parties, the notary is an impartial public officer, meaning that he or she is not “on the side” of the seller or the buyer, but ensures the regularity of the entire procedure and makes sure that the rules are the same for everyone and respected by everyone, reassuring those taking part in the auction also through the preliminary verification of the property’s status. For those selling, a competitive auction between private parties with a notary makes it possible to maximise the price. When several interested parties compete for the same asset, within a transparent framework and with clear rules, it is the market that determines the best price at that moment. Moreover, the seller knows from the outset when the offers will be submitted, when the award will take place, and within what period the deed will be signed.

Finally, the competitive auction makes it possible to select genuinely motivated buyers, because a deposit or the possession of certain requirements is often requested, discouraging unserious bids. For buyers too, a competitive auction between private parties with a notary is a tool of great transparency and protection, thanks to the reassurance that the most important documentation has been checked before the auction, under the notary’s responsibility. In addition, the buyer also faces a guided procedure, with less improvisation and greater peace of mind than in informal or poorly structured negotiations.

In short, in the traditional method of real estate sale and purchase the seller is in a weaker position, because anyone interested in buying will try to secure the lowest possible price through a downward approach in the negotiation. With a competitive auction between private parties, by contrast, sellers have the opportunity to deal with several qualified buyers competing to purchase the property, pushing the price towards its true market value. In summary, competition managed with respect for transparency obligations and with absolute rigor becomes the tool for the maximum enhancement of the asset being sold.