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Asked by C Case, East Point College Park Sat Feb 23, 2008

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4
Lee Taylor, Agent, Decatur, GA
Sat Feb 23, 2008
I think, as long as you are not emotionally attached to the result, that auction sales are a fantastic way to sell property. "Sell" being the operative word. Get it sold...as long as it closes.

One of my favorite memories of last year was attending an auction. The auctioneer made a lot of money, and as the auctioneer said many times, a lot of folks "bought themselves RICH" that day.

The auctioneer made 10% per transaction. They had a team of about 20 people to pay, including a 75 year old organ player. He played dramatic flourishes on the cheezy organ in pace with the auction drama. Tons of fun! They had a hotel bill to pay, plus lots of marketing costs. They deserve 10%.

Auctioneering is a great way to pull in gross commissions of well over $350,000 in just 3 hours, by selling about 50 or 60 properties. As long as all of those transactions close, the auctioneer makes money. As a Buyer's Agent present at the auction, if my registered Buyer buys, I receive a 5% commission - the auctioneer splits their gross commission because a competent Buyer's agent will get the Buyer to closing.

I read somewhere that over 30% of all auction deals fall apart after the word "SOLD" is yelled out (and the organ grinder plays "Happy Days Are Here Again.")

That means that 70% of the time the property will sell at auction. Not bad.

About 2 out of 3 listed houses are not selling in Atlanta. Your chances are better by selling at auction.

Selling is the operative word. I did not mention profiting.

You have a much better chance of making an additional 15-20% or more if you list your property for sale and disclose the truth about any material defects...you really do. However, if you are not emotionally attached, then lets start the bidding at $10,000.00.

It will sell in 30-60 days if it is priced correctly and marketed properly by a competent, hyper-local real estate agent. It will “cost” less to sell too.

If you need an auctioneer, just google for one, dude.

Get your real estate on!
0 votes
Don Tepper, Agent, Burke, VA
Sat Feb 23, 2008
The other advice below, about using a Realtor rather than an auction, is good...at least in about 95% of the cases. There are instances in which an auction may be the better choice, but not too often. (OK, I can hear the question: So, when is it better? It's better in a slow market...it's better if you can and are willing to accept something (maybe 10%) under what it would sell for listed with a Realtor...it's better if you're facing some time constraint and really have to sell in 30 days, versus 100-180 days or more...)

One other comment before we plunge into auctions: You shouldn't have to "get stuck" in a 6 month listing agreement. Demand less--say 3 months. And tell the agent: "If I think you're doing a good job, I'll be glad to extend my listing with you." And mean it.

So, auctions. There are several companies that I know of who do real estate auctions. It's a specialized field; a traditional auction company, as good as it may be, may not have the skills to handle a real estate auction. Here's a link to one I'm familiar with: http://www.auctionbrokers.net/

As with other auctions, there are two basic types: reserve and no reserve. Reserve means you set a base price. You retain the right to reject any offers below that price. In a no reserve auction, you agree to sell to the highest bidder, regardless of how low that bid might be. So, if your property might be worth (based on comps) $200,000, you might set the reserve price around $175,000. Could be higher or lower. So you could turn down a bid for $170,000. You'd have to accept a bid of $176,000. In a no reserve auction, if the highest bid was $140,000, you'd have to sell your house for $140,000. The advantage to a reserve auction is that it protects you better; the advantage to a no reserve auction is that it typically attracts more bidders and more excitement...and, hopefully, a higher price.

The seller is usually asked to provide some money up front for the auctioneer's marketing efforts--it can vary, but $3,000-$5,000 isn't unusual. The marketing is typically intense, with lots of signs, fliers, ads, even radio, for several weeks leading up to the auction. There are a number of different ways to conduct the auction, as well. If the marketing is effectively done, and expectations are reasonable, auctions are frequently, though not always, successful.

From what I've heard, usually the auction price of a property is a bit (5%-15%) under what it might have sold for using an agent.

As for who pays: Usually the purchaser pays a 10% buyer's premium. So let's take your $200,000 house. The winning bid is $170,000. The buyer would pay another $17,000 buyer's premium, bringing his total cost up to $187,000. Usually, the purchaser must have a deposit in certified funds at the time of the auction, and the remainder in 30 days.

Hope that helps.
0 votes
Keith Sorem, Agent, Glendale, CA
Sat Feb 23, 2008
Dear C Case
Thank you for your question. I am puzzled, so let me ask you: Is it your opinion that a real estate auction company does a better job attracting buyers that a real estate agency?

So I am gathering from your question you think that an auction company will do a better job finding you a buyer for your home because you find your home "on your own", is that right?

I just checked Realtor.com and it shows 1,135 listings in East Point, and 2,334 in College Park.
I am sure that there are homes also being sold by auction companies, I found one just by googling. $495 to auction your house.
You sound as though you want to sell your home for the highest net profit to you, right? So let me ask you, if the auction company is charging you $495 to sell your home (there may be more charges, the website did not say), how much marketing do you think the do? There website says that the phone is answered by real people. And they had TWO properties for auction on the website.

If you were a buyer, and you had a choice of looking at their TWO properties, or Realtor.com's over 3,000, where would you look?

The real issue for you should be "how can I maximize my net profit?" Approach this as a business decision. Check out the auction companies. Also, interview a couple of Realtors. Ask them some tough quesitons. Ask them for an Estimate of Seller's Net Proceeds, ask them for their marketing plan.

I work in California, so some of this may not apply to Georgia because I am sure that Georgians are much more intelligent that Californians, but here are some facts that might help you:
1. The buyer that sees the home they purchase sees it with a Realtor 90% of the time. So by listing your for auction you are excluding 90% of the buyers, at least.
2. Most buyers are under a written contract with their Realtor for representation. The buyer's Realtor is paid by the proceeds of the sale by the seller, so from the buyer's point of view, they have FREE representation. The Realtor learns of their preferences, then works to find them a home, and then negotiates for the best deal for their clients.

So who negotiates for the best deal when you sell your home at an auction? There is no representation. The number of people represented by a Realtor far exceeds the number of people that attend an auction because most people WANT professional representation when making the most significant purchase of their lives, and they do not have to PAY anything.

So do the legwork run the numbers, and let us know how it works out. I am sorry that you have perhaps had a bad experience with a real estate agency. Do not let your single bad experience cost you thousands of dollars by not at least talking with some Realtors. There is a reason that Realtors have been around so long. Speaking only for myself, in most transactions I can prove to my clients that I actually saved them more than they paid me in commission. It's not selling a home. Homes sell homes. It is in negotiating the details, and closing escrow that separates a professional Realtor from anyone else. Also, in most casis, if you are planning to move from one home to another, there are moving concerns, timing issues, etc. that a Realtor will address.

Good luck to you.
0 votes
Gary De Pury, , Pasco County, FL
Sat Feb 23, 2008
Well, you have a question and a reason for not using a REALTOR in one Statement. I worked for/with an ARMY General who once said to me...... "That is what I call; I'm going to TOLD you a question..."

It made me laugh at the time. OK, back to work...I can't truly answer your first question because I have not had a good experience with auctioneers. Most of my clients have just come back minus the $3- 5 thousand auction advertising front fee and still had a house to sell.

If you can find an auction house that will take it on a commission basis, then I would ask for multiple references and also check them out on the web. Auctioneers must be licensed and must belong to a professional society, so you should be able to verify their work.
(my uncle is the most famous auctioneer in the world http://www.phillipsdepury.com/ and yet I know so little about auctions.

As to the REALTOR....allow me three questions....

Have you ever had a bad meal in a restaurant?

Did you ever eat again?

How did you find your last Realtor?

If you decide to go that route....go through your area and other areas like yours (price range wise) and start looking for signs of Realtors who work in that PRICE RANGE. Make a list of ten names that you have seen more than once and interview the home sellers. Knock on the doors and ask them what they think of the REALTOR. Design a rating scale. Then interview the REALTORS themselves and find one that way. If you would like a list of interview questions...email me and I will send you one. The most important question, you would never think to ask and the REALTOR will not mention it, because it is NEVER ASKED....so he/she just won't think about it.

I hope this helps...

http://www.BayVistaRealty.com

Thanks
Gary De Pury
Broker-Owner
Bay Vista Realty & Investments, Inc.
Chairman, Communications Committee
Director, Florida Association of REALTORS®
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