Online Auctions For Traditional Equity Sales
When I say the words “real estate auction” what comes to mind? If you are like most others, you will think of a distressed sale where there may be a deal to be had. It also creates a sense of urgency. You may feel like you need to pick up the phone and get the details because it may just be the deal your clients have been looking for. In other words, it generates a great deal of interest.
Smart companies like Private Auction Properties, who recently launched in San Diego are enabling home sellers and their agents to capitalize on all of the interest that naturally comes from auctions to get the best price in the fastest amount of time for their homes.
Now, online auction companies have been around for a while but it is not until now that a select few are starting to focus on homes with healthy financials. It has mostly been used for bank owned homes and other distressed properties. It is for that reason that it works so well. The public smells blood in the water and you end up getting a flood of phone calls.
I know it works well because I have used auctions to sell my luxury home listings three times now, including one that I am currently selling in Fairbanks Ranch.
How It Works:
- You post the property on the MLS as you always do but you set the price at what is clearly below market. The fine print in the confidential remarks let’s agents know that this is a suggested opening bid and the final sales price is subject to the secret reserve or seller approval.
- The property is posted to the online auction site where the auction date is set and the bids are collected. Additional information, including all disclosures can be found up front on the auction site as well. The idea is to have very few possible objections once you enter into contract.
- The auction company advertises your property through their vast network, giving both the agent and the home tons of exposure.
- The phone starts ringing as people sense what they think may be a killer deal.
- The agent funnels all appointments into two slots during the week and holds the home open during those set hours. The open house signs say “Auction” on them, which This is to cause a sense of competition and urgency as home buyers are met with many others who are also interested in the home.
- You will surely be met with many undesirable buyers who are only attracted to the low price and don’t want to step up to what it is really worth. However, the beauty is that you will in inevitably also attract one or two real buyers that love the home and are prepared to purchase it at its real value. You put up with the rest of the crowd and actually use them to your advantage to get the best possible price from the one or two real buyers.
- The seller reserves the right to negotiate and accept an offer prior to the end of the auction. This happens more often than not, as it did when I sold my client’s home in the luxury community of Meadows Del Mar. The property was marketed at $2,200,000 and the first person that came through the home purchased it for $2,500,000. They knew that the asking price was far lower than market value and they did not want to allow it to reach the end of the auction process and have to compete with everyone else. Instead, they negotiated this deal and the auction was cancelled.
Online auctions can be a great way to differentiate yourself and secure a great listing. It turns the sales process upside down. Instead of having an asking price that you negotiate down from, you have a suggested opening bid that you negotiate up from. Instead of every day on the market causing the property to become stale, every day on the market causes the anxiety to rise because you are coming closer to auction time. It’s an awesome process and also a pretty darn good lead generator.
Feel free to get in touch with me if want to know more.
Sam DeBord, SeattleHome.com
Posted at 09:41h, 09 DecemberDaniel, thank you for the detailed explanation of how this company’s auctions work. I’ll grant you that auctions certainly make the phone ring, and many times gather much more attention than traditional listings. There are auctions with no reserve, and a true, viable advertised opening bid. That is a perfectly reasonable sales technique.
I believe that the kind of auction you’re describing, however, contributes to a negative public perception of our industry. I’ve watched it in person a number of times, and the majority of people leaving the auction are angy or disenchanted–not just because they didn’t get the home, but because they know they’ve been lied to. In short, it’s underhanded marketing and likens our profession to used car sales.
“you set the price at what is clearly below market. The fine print in the confidential remarks let’s agents know that this is a suggested opening bid and the final sales price is subject to the secret reserve or seller approval.”
There is no amount of disclosure, caveat, and legalese that you can add to a bogus advertised price that will remove the smell. The additional phone calls and buyer contacts being received are all due to phony marketing. You may attract a larger crowd to the auction. You may in the end bring in a buyer. In the meantime, you’ve wasted a lot of other peoples’ time and misled them about the opportunity.
Our job is certainly to market a home to as many people as possible and get the best possible buyer for our clients. When our marketing efforts are clearly created to mislead the majority of potential buyers, however, it’s a net negative for reputation in the long-term.
Candsmedina
Posted at 20:34h, 17 DecemberTraditional equity sales is what consumers go out for in the market. What other types of sales are there which we can go out for and how to benefit for these auctions.
Phony marketing won’t work these days.
Dan
Posted at 22:52h, 02 JanuaryI’m sorry you feel that way and I respect your views but maybe you misunderstood. Nothing about the list price is meant to mislead anyone. It is a suggested opening bid with a secret seller’s reserve. That is no different than how tons of good and services trade hands via auction on sites like Ebay. The agent should make this clear. Otherwise, I would agree with you. However, if done clearly and up front this is completely legit and it has been done for years by some of the country’s top and most respected agents.
Sam DeBord, SeattleHome.com
Posted at 23:53h, 02 JanuaryYou’ve stated in your post that this information is only in the “confidential” remarks. That means it’s being hidden from the consumer. Other agents know, but the average consumer viewing a real estate listing site does not. They are being misled. I understand that other services are sold this way on ebay. I don’t want to use ebay as a professional standard for our industry.
Seattle Condos
Posted at 17:39h, 09 DecemberDaniel, thanks for the insight. I can see how the auction approach is effective. In many cases, I have seen emotionally-charged buyers overbidding. On one hand, as Sam mentions, the auction may be effective marketing, it is deceptive. On the other hand, this approach is no different than some of the auctions on eBay. Perhaps, instead of disclosing the details in the agent remarks, the minimum reserve and seller’s right to negotiate ought to be disclosed to the consumer.
christy
Posted at 05:27h, 10 DecemberNice information.Thanks.
Christyjackson
Posted at 05:35h, 10 Decembervery useful post. i got many information form it .thanks for share it.
Rick hearns
Posted at 23:24h, 11 DecemberGreat post! If you’re looking for an alternative to live auction marketing, Equity Cooperative Livestock Sales Association can provide you with it. Computerized auction marketing links buyers throughout the country by computer. These buyers log on to their computer system on designated days and times to place bids on livestock. This auction system provides sellers with a competitively derived price from a worldwide buying group. Presently, Equity Cooperative Livestock Sales Association offers more service.
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Posted at 01:41h, 15 DecemberIn real estate there has a good deal with people.And online auction companies start with home facility.
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Posted at 17:56h, 26 Decemberactually in this instance the best bidder wins the auction. And also some bidders have great offers but if I were to ask I would settle to the offer were in both parties can benefit from each other.
Anonymous
Posted at 21:52h, 28 DecemberI agree with you Daniel and I can see how the auction approach is effective and how its work.I think this approach is no different than some of the auctions on eBay.
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Posted at 11:07h, 01 JanuaryWow. Nice realty site you have here.Nice tip on online auctions. The buyer/bidder included was quite a wise man too.
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Posted at 09:41h, 05 JanuaryDoing an online auction gives the best of everything. No time constraints. Bids can be done at any time at place.
Sellers and bidders can participate from anywhere that has internet access. There is intensity of social interactions for bidders and sellers. This is one great Deal!
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Posted at 22:51h, 09 JanuaryI agree with your post.I believe that the kind of auction you’re describing, however, contributes to a negative public perception of our industry.
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Posted at 21:42h, 11 JanuaryI agree with your blog.I respect your views but maybe you misunderstood. Nothing about the list price is meant to mislead anyone.
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Posted at 12:19h, 25 JanuaryDaniel, I hope that the real estate bidding services are also available in the Philippines. If there is no affiliate of Private Auction Properties in my country, I think I should start it myself. Thanks for the business idea.
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Posted at 12:21h, 25 JanuaryDaniel, I hope that the real estate bidding services are also available in the Philippines. If there is no affiliate of Private Auction Properties in my country, I think I should start it myself. Thanks for the business idea.
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Posted at 00:34h, 18 MarchIn this case, one must really know how auctions go. This post has thoroughly explained Real Estate Auctions. What I like about this is that possible buyers of your properties wouldn’t negotiate for a lower price, but higher.