"The Auction Advantage"
I always tell folks that the true value of land is what a person will pay for it on any given day. But what if an investor must sell land quickly? An auction and the research leading up to it will provide the best method to determine the true value of land. If a seller needs to liquidate property in a timely fashion, the auctioneer can be counted on to provide a valuable service. Remember, an auction establishes true market value at that time and place. Whoever said that Land is not liquid?
Have you ever-wondered why auctions work? Why would anyone sell anything at auction? Why would anyone buy at an auction? This chapter will answer those questions, and give you an overview of the whole process. Don’t get me wrong, this is not a check list for conducting an auction, or a quick manual on how to hire an auctioneer. After reading this chapter you sure will not be an auctioneer! But you will have an idea about the benefits of auction marketing. You may, after reading this, consider selling or buying at auction.
Auctions have been around for centuries. Real estate, machinery, equipment, antiques, livestock and many other assets are sold at auction. Auctions are no longer simply a way to dispose of bankruptcy or foreclosure type properties: They are a proven way to sell real estate.
Auctions vs. Brokerage
Ø Must have a real estate license is most states.
Ø The auctioneer should be a REALTOR® but this is not required.
Ø Should belong to professional associations, both REALTOR® and Auctioneer.
Ø Should have professional designations in their related field of expertise.
Ø Must make disclosures: agency, property conditions, and so forth.
Compare the Facts about Auctions and Traditional Brokerage
> Need to be licensed X X
> Should be a member of professional association X X
> Should have professional designations X X
> Must make disclosure: agency, property conditions X X
> No maximum sales price X
> Seller determines sales date X
> Marketing campaign focuses on one property X
> Price is negotiated up X
> Property can be sold “AS-IS” X X
> Multiple offers at one time X
> Pre-sale due diligence X
> Cannot determine sale date X
> Buyer may have multiple contingencies X
> Post offer due diligence X
> Possibility of no offers X
What Do Most Sellers Want?
Ø To sell their property for market value
Ø To get the most money possible
Ø To convert assets into cash
Ø Stop maintenance, insurance, repairs, vandalism of assets
Ø Sell in a short period of time
Why Do Auctions Work for the Benefit of Sellers?
Auctions have a deadline! That’s right, a deadline. You are probably saying, “So what?” But think about it! That deadline creates urgency. It means that if buyers have any interest in purchasing a property, they must do so by a designated date, time and place. And think about this, too. At the auction, sellers get competing offers all at once! Each bid is an offer to purchase.
What Are The Seller’s Responsibilities?
The seller’s responsibilities are similar to those in any real estate transaction. Examples are:
Ø Provide the auction company with title information
Ø Provide the auction company with property descriptions
Ø Provide the auction company with appraisals, surveys, etc.
Ø Provide details about existing mortgages and liens
Ø Provide marketing expenses
Ø Provide information about previous attempts of marketing
Ø Make disclosure of known defects
Ø Provide closing assistance
Ø Be realistic about the value of the property
How Does the Seller Know What Market to Sell In?
Sellers really need to be aware of current market conditions. And who better to advise than the professional auctioneer? Sellers can rely on the auctioneer they choose not only to advise on market conditions, but also preferred markets in which to sell. Interestingly, auctions work in most markets.
Slow markets – auctions may create the special focus your property needs
Hot markets – auctions can prevent you from under selling in hot markets
Changing markets – new developments, shifts in the economy, and more
Is a Sale Mandatory even with a Low Price?
A number of my clients have expressed concern about property sold at auction and mandatory sale, even if they are offered a low price. I explain that that all depends upon the type of auction conducted. The auctioneer will advise the sellers on the type of auction best suited to their property.
Many auctions today are held as “Absolute Auctions”. In an Absolute Auction the seller must sell the property to the highest bidder. Consequently, some of the most successful auctions, from the perspective of a sure sale, are Absolute Auctions. Again, the auctioneer will advise the sellers whether or not and Absolute Auction is right for their property.
Another type of auction is one conducted with “Reserve”. An auction with Reserve gives the seller the opportunity of refusing the high bid. Many auctions are conducted with Reserve. And again, auctioneers can advise on the best type of auction for the seller.
What the Auction Company Does
Ø Determines the Objective of Sale
Ø Uses a due diligence checklist
Ø 1 or 2 staff members inspects property
Ø Meets with planning and development office, planning board, surveyors, attorneys
Ø Looks at the local community and neighborhood
Ø Looks at the retail, housing, attractions, and selling features
Ø Creates a unique marketing plan that may include local, regional, or national media, radio, brochures for direct mail, trade journals, signs, open houses or previews, internet placement and more
Ø Auctioneer may offer broker referrals
Ø Conducts the auction
Ø Assists in follow-up and closing transaction
How Long Does it Take to Prepare for an Auction?
Ø In most cases 4 to 8 weeks are needed
Ø Advertising normally begins 3 to 4 weeks prior to auction
Ø Telemarketing begins 1 to 2 weeks before sale
Ø Open house/property previews begin 1 to 2 weeks before sale date
When are Proceeds from the Sale Available to the Seller?
Ø Typically 2 to 4 weeks after sale
Ø The terms of sale will determine when proceeds are available
Ø Auctions often get the proceeds to sellers quicker than a negotiated deal.
Where is Information about Auctions Available in Local Areas?
Ø www.auctioneers.org for a list of upcoming events
Ø Local newspapers
Ø The Auctioneer’s Mailing List
(Thanks to Dale Fulk Rodgers Realty & Auction Company Mount Airy, North Carolina
For much of the above information, and for the way he conducts his business)