The CA Real Estate Market

THE CALIFORNIA REAL ESTATE MARKET

Auctions, The New Wave of Real Estate?

By: Mike Grigg, AARE

We have all been told different things about what is happening to the real estate market in California, but the truth is that the market is rapidly declining, about 1-2% a month in areas. Many realtors and their associations want us to believe that we are just in a slowdown and the market will come back in winter or sooner, but this is just wishful thinking. The Norris Group, a real estate investment, hard money loan, and real estate market analysis company based out of Riverside, CA is predicting that the market will continue to fall through 2010 and take one - two years to begin climbing back. Folks, that is 2012 (5 years) before prices will begin to recover! That means that foreclosures and trustee sales will be at an all time high! How do you think banks and individuals are going to liquidate this massive quantity of real estate holdings? You guessed it, AUCTIONS.

According to The Norris Group, in recent history the highest amount of trustees deeds recorded in Southern California was 70,513 in 1997. We are just at the beginning of the downward trend in 2007 and there have already been about 50,000 and rising! People are beginning to leave California to other areas, which is causing a decrease in demand and tons of inventory that needs to be sold. So what does this all mean to the auction industry?

This means that auctioneers are going to be in high demand to liquidate this excess of real estate holdings quickly and efficiently. I'm sure that most of you have driven down a residential street lately and noticed a large amount of "For Sale" signs with the "Price Reduced" signs hanging below. This is not an effective marketing campaign because the signs are staying up and never seem to have a "Sold" sign hanging below. As auctions become more and more popular there are going to be more people claiming that they are real estate auction specialists, when indeed they are not.

Auctioneers must take the necessary precautions to make sure that we are taking on auctions that we can get sold. Because of all the mixed messages that home sellers are receiving about the condition of the market, their price expectations have still not come down much. Before signing an auction make sure that your client is truly motivated to sell their property for whatever the market will bear. If they are not in that type of mindset then pass on the deal and go to the next. Believe me, there will be plenty to choose from, and it is not worth your reputation and the auction industry's reputation to take on an auction that is not going to sell. Remember, you are only as good as your last auction, so make sure you get the property SOLD!

The next 5 years is going to be a buyers' market and auctions are the best way to make the buyers feel like they are in control. Auctions also show true motivation from the sellers, which, in turn, will produce action from the buyers. Just because the market is slowing does not mean that buyers are not going to buy, it simply means buyers want a better deal and they need to be shown where to go when they are ready to buy.

When taking on an auction the sellers need to value time more than money. As auctioneers we need to show sellers that time is money, and the longer they take to sell their property, the more money is being lost with holding costs, commissions and other expenses. My best piece of advice is not to over-sell your program, let the sellers come to you when they are serious about liquidating their real estate. Show them the benefits of an auction and don't make any promises as to what the property will bring; remember this market is in a downward trend and properties are worth less on auction day than they are when you sign the auction. Make sure they understand that an effective marketing campaign will produce TRUE market value on the day of their auction.

Please visit the CSAA website at www.caauctioneers.org for more information about our association, and industry updates. If you are not a member of the CSAA you should be, especially as real estate auctions become more popular and the public is going to want to see that you are part of an organization that promotes and values the auction industry while holding you to a code of ethics. Good luck with your auction business, and remember that you need to be licensed with the California Department of Real Estate and hold a surety bond to legally conduct business as a real estate auctioneer in California.