When you hear the word auction, you think of a farm sale, or maybe a fine art auction. When you put the words “real estate” in front of auction, you think distress.
Gaining in Popularity and Why You Should Consider It
By Bill Menish of Bill Menish Auctioneers Inc.When you hear the word auction, you think of a farm sale, or maybe a fine art auction. When you put the words “real estate” in front of auction, you think distress. I know I used to think that too. In fact, as the morning anchor for NBC 7/39, I remember interviewing John Nichols, and Barbara Bonnette, the 2006 International Auctioneer Champions. I figured that if they were bid calling champions, they must sell cattle or cars, but no, they primarily sold real estate and not distressed properties. They sold homes for motivated sellers and they had tremendous success.
Real estate at auction; It was new to me then, as it may be to you now, but globally speaking, it is not new at all. In fact, 85% of real estate, sold in Australia is sold at auction. Now we may not be selling 85% of our real estate at auction in the U.S., but it’s growing in popularity. In 2008, approximately $58.6 billion dollars worth of real estate was sold at live-auction. For six consecutive years, gross revenue from residential and land real estate auctions has increased. While traditional real estate sales languished in 2008, the auction industry witnessed an increase of 1.1% in gross sales revenue in residential real estate auctions. It continues to be the fastest growing segment of the auction industry according to the National Auctioneers Association.
Homes that have sat for up to 2 years without a single offer, are selling at auction and they are selling because of the auction method of marketing. The auction method of marketing is an aggressive approach to informing potential buyers about your property. This is not the passive, traditional real estate marketing, where they list the property on the MLS, place a sign in the front yard and wait for a buyer to come to them. The auction method of marketing uses all the marketing tools available today, and believe me, there are more available now than ever before. We use the Internet, video hosting sites, social networks, glossy magazines (like this one), direct mail and email and we use signs. No other sign grabs the eyes of a driver like a big red auction sign.
THE AUCTION ADVANTAGE
By Cory Shepard, President of Prudential CA Realty, South San Diego County &
Prudential California Realty’s Auction Division, which goes by the name “Real Auctions USA”
Auctions are designed to attract genuinely interested, highly qualified buyers. These buyers are focused on establishing the highest price they are prepared to pay in light of all of their alternatives – not how steep a discount they might get. As motivation on auction day is often bolstered by the environment that an auction creates, this also strengthens the natural form of competition between buyers.
“We are always looking for new strategies to offer our clients to get their properties sold,” said Michael Taylor of Prudential California Realty’s Rancho Santa Fe office. “We recently chose to partner with Real Auctions USA, Prudential California Realty’s auction program, and utilized their aggressive 4-week marketing plan, which had no upfront costs to our seller. Auctions are an ideal methodology for sellers to find out just how much their property is worth today, as well as an opportunity for buyers to feel like they are paying a fair price.”
Taylor and his business partner, Andrea Dougherty, recently used the auction process to sell a multi-million dollar property that had previously been listed for 421 days. “The auction strategy was a non-traditional way for the seller to differentiate his home from the over 30 homes on the market in his neighborhood,” said Taylor.
In the past, real estate auctions have mainly been used for distress sales. However, today, they work well for non-distressed sellers and properties that range from pristine to poor condition and from the highest price range to the lowest. They can work for any seller who would like to sell their home in 30 days even though the market time in their area is longer than that. Auctions are ideal for sellers who are moving up and need to eliminate their contingencies quickly in order to secure their new home, or for someone who has inherited a home and needs to dispose of it quickly too avoid paying the mortgage for too long.
WHY AUCTIONS WORK
• The word “auction” attracts the attention and interest of potential buyers
• An auction is a method of marketing that does not disclose the price
• A suggested opening bid below the true market value attracts many potential buyers
• A non-disclosed “reserve price” protects the seller
• Pre-determined deadlines create a sense of urgency and certainty
• Nearly 40% of those who register to bid were not in the market until they heard about the auction
BENEFITS TO SELLERS
• Live auctions held at the property provide an environment to get the highest possible price in a relatively short amount of time. Homes can be sold in 30 days or less
• Buyers come to an auction with the maximum value in mind that they are prepared to pay for the property, versus wondering “What’s the lowest price the seller will accept?”
• Through the competitive bidding process, the market value of the home is established
• The property is typically previewed by 50-200 people during the marketing period and many interested buyers are identified
• Properties are sold “as is” and the sales contract is written with all contingencies waived, with the exception of an appraisal contingency should the buyer be financing the purchase
BENEFITS TO BUYERS
• The bidding process eliminates any potential animosity between the buyer and seller
• All bidding is live and out in the open, so each buyer is in control of their own destiny
• The winning bidder leaves the auction knowing they paid a fair price for the property
• All important documents are available to the buyer for review prior to auction day, therefore easing the buyer’s mind about participating in the auction, and simplifying the real estate buying process.
• Buyers are dealing with a seller who is motivated to find the true market value of the property