Utilizing the auction method of marketing is now an alternative way to market and sell your properties in California. As real estate auctions become more popular there will be more companies that claim they are legitimate real estate auction firms. Here are a few questions that can be asked to determine whether or not the auction company is reputable...
Does your company exclusively sell real estate at auction or do you also use the list and sell method? Companies that claim to sell real estate at auction but are also list and sell agencies have a conflict of interest. The list and sell method is the exact opposite of the auction method and means that agencies that practice both do not have complete confidence that the auction method of marketing is the right choice for your real estate transaction. Your best choice would be a company that only specializes in the auction method of marketing real estate because they fully understand how auctions will benefit you and have complete confidence in their ability to sell your property at fair market value.
Does your company exclusively sell real estate at auction or do you also conduct auctions selling other types of product? There are many auctioneers that claim that they sell real estate at auction, when in actuality they also sell other products at auction and do real estate on the side. Your best choice would be to choose a company that exclusively sells real estate at auction because their focus is real property, not personal property.
Is your company bonded as auctioneers in the State of California? Auction companies that conduct business in the State of California are required by law to be bonded by the state. If the company you are interviewing is not bonded by the State of California do not trust your real estate to be sold legally by that company.
Is your company licensed by the Department of Real Estate (DRE) in California? Any auction company selling real estate in California must have a DRE licensed Broker overseeing every auction. If the company you are interviewing is not licensed by the California Department of Real Estate do not allow them to sell your property.
Is your company a member of the National Auctioneers Association (NAA) and the California State Auctioneers Association (CSAA)? It is not mandatory that real estate auctioneers be members of the NAA or CSAA, but all auctioneers that are members of both associations are required to follow a code of ethics while practicing as a legitimate auction company. Do not do business with auctioneers that aren't members of both associations because they may not be looking out for your best interests.
How many successful auctions has your company completed and how many years has your company been in the California real estate auction business? Choosing a real estate auction company that has not conducted more than 100 successful auctions and been in the real estate auction business for at least 5 years in California may not be in your best interests. In order for real estate auctions to have a positive outcome, they must be handled by auctioneers that have the proper knowledge and experience, which can only be gained by conducting a multitude of successful real estate auctions in California over a legitimate time period.
What type of marketing does your company utilize? If the auction company does not have a clearly defined marketing plan (i.e. signage, print advertising, internet, Realtor advertising, direct mail, etc.) for your property, then the best choice is to move on to an auction company that can give you a clear description of how they will market your property.
Does your company conduct real estate auctions exclusively in California? Real estate auction companies that conduct auctions in many different states will often times not understand the Calfornia market and can't give you a "hands on" approach, which may not lead to the successful sale of your property. The best choice is to utilize a local California real estate auction company to handle all facets of your sale.
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For quick results sell your real estate at auction! |
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1. An auction usually out performs any other marketing methods for whatever is being sold. The excitement level is high throughout the gathered crowd, because only one person will be the buyer that day. Several people are confident they will be the buyer, but they are in competition with each other. At its essence, the auction process is about competition. The auction event places bidders in a head-to-head contest for the privilege of buying your property. This competitive bidding process takes the guesswork out of pricing the property, so that you as a seller do not risk setting the price too low or overpricing the property and having it on the market for extended periods.
2. Sellers appreciate our innovative marketing program, which combines newspaper advertising, direct mail, telemarketing, the Internet, and other media that reach potential buyers and turn them into bidders on auction day. Our efforts bring very interested and qualified buyers to bid competitively for your property.
3. In addition, real estate professionals (brokers and agents) are invited to participate and assist or represent their clients at the auction. They are paid from the buyer's premium and not out of the sellers proceeds.
4. When the auction is over, you get a signed purchase contract and escrow is opened with a large non-refundable deposit from the buyer. You will receive your check from the title company within 30-45 days after the auction but many times even sooner. Our average closing takes under 30 days!
The principle of the time value of money supports that a dollar received today is worth more than the same dollar received at a later date. The traditional method of listing and selling through a negotiation process has minimal ability to capitalize on this principle. While real estate may never be as liquid as stocks or bonds, the auction method increases your liquidity significantly.
Auctions will work for you if...
Auctions not only work for traditional sellers who want to liquidate their properties quickly and efficiently for the HIGHEST price the market will bear, but also for the following groups...
Real Estate Investor Property
Investors need to sell their properties quickly for fair market prices so they can move on to the next deal in order to maximize their profits. We've designed a unique property selling system that caters to investors, rehabbers and wholesalers. Let us sell your properties so you can spend your time negotiating, making offers and closing on killer deals! We offer 12 profit-making benefits so you can do more deals and make more money with less hassale...
Lender Owned Property (REO's)
Property that is not sold at the foreclosure auction reverts to the lender. The main reason properties are not sold at the foreclosure auction is that investors dominate this arena and these properties are not marketed to the general public. Investors are usually only willing to pay 60-80% of true market value. In California, all cash is required if you're the highest bidder, which makes it difficult for most people to buy. Also, these properties usually cannot be inspected.
Using a well advertised public auction by our company, on the other hand, that invites the whole market to see the REO property, creates buyer competition and urgency. It allows owner occupant home buyers the chance to purchase REO single family houses that have been taken back via foreclosure. Because we also encourage Realtor's to bring their qualified clients to the auction, the REO property is on everybody's mind.
Typically, many banks and loan companies try to work out forbearance agreements with their delinquent borrowers. Many times this only delays the inevitable foreclosure event. Once the property reverts to the lender, a Realtor many times is given an exclusive listing, which can reduce the price the lender will receive, as well as the time it takes to close versus using our auction method.
Selling property quickly and efficiently by intensive marketing of our auctions will bring highly qualified buyers to the fore front, who will close and provide the highest price in the shortest amount of time. The auction method of marketing converts illiquid real estate to cash with a sale at the date and time you decide. This also reduces concerns with vandalism, insurance cancellation, and liability.
Builder / Developer Property
Builders always seem to have excess inventory after developing a new area. Often times builders have difficulties launching a new project to the public and selling the last remaining properties of a new development.
Auctions will create the necessary interest to not only get the project off the ground but to also sell the remaining "stale" inventory. The main objective that builders need to accomplish is to quickly sell their inventory and move on to the next project. Using a well advertised public auction enables builders to sell a large portion of their inventory in one day!
In a slower market auctions can help builders stand out from the rest of the "pack" by showing the public that they're extremely motivated to sell. Why offer to pay for closing costs, give out gifts or kickbacks when all you need to do is utilize the auction method of marketing? Builders can choose the date they want to sell their inventory eliminating extended holding periods and reducing vandalism and insurance concerns. Auctions bring ultra-qualified buyers that will close quickly with no contingencies to the forefront.
Inherited Property / Property Donated to Charity
Property that is inherited or donated to charity in many cases has more value if it's converted to cash. These properties can have deferred maintenance or require extensive costly repairs. The heirs or charity many times doesn't want the hassle or have the time and money it takes to do the necessary fix up.
The auction method works great with these types of properties because an asset with value is quickly liquidated and turned into cash, without needing to fix it up. We extensively market to investors as well as folks who want to live in the home as their personal residence, but don't mind the process of fixing up the property.
The process from start to closing takes 60 days or less. With this method you are virtually guaranteed a sale. There are no contingencies and all properties are sold "as is" which makes it more feasible many times than an extended listing.
Our Auction Method Might be the Best Method of Selling your Home in a Buyer's Market...
Thanks for your interest in our accelerated method for selling your home.
The biggest hurdles you might need to overcome if you want to sell quickly through our company is understanding that we will bring you at least the same but usually more in your pocket from the sale of your home but do it in a much shorter time frame than a traditional listing (60 days vs 6 months to 2 years).
A recent sale we completed in Pomona, CA generated over 30% of the appraised price... simply because we don't put a cap on the price like a traditional listing and we were able to draw several potential very qualified buyers to competitively bid.
The example below is very important to understand in order for you to feel comfortable using our company to sell your property. This example is very typical with many areas in California, but most sellers don't either believe it could happen with their property or just don't want to believe it. Other areas not experiencing quite so drastic price deterioration will still be affected but possibly not to the same degree. The key message is the truth of what happens in a buyer's market.
Example
Property address: 24110 Carmen Lane (Moreno Valley)
Listed with a realtor on 10/11/07 for $259,900 (what comparable sales said it was worth)
On 12/6/07 the price was reduced to $249,000
On 01/8/08 the price was again reduced to $236,500
On 2/21/08 the price was again reduced to $220,000
On 3/18/08 the price was again reduced to $209,000
On 4/30/08 the price was again reduced to $169,000
It finally sold in July 2008 for $107,625! When you subtract sales costs (commission), closing costs and holding costs, the net to the seller was about $88,000. So it went from $259,900 to $88,000, a $171,900 (66%) loss in "value".
*Many properties throughout California have similar results using a traditional listing.
If the property were sold through our real estate auction company, we would have generated over $110,000 more to the seller, based on our track record and the fact we sell in 30 days (which dramatically reduces holding costs and price erosion costs).
Let's assume the property was worth $259,900 when it was listed according to the comparable sales and we told you we could likely get $208,000 as a minimum net to you. Quite honestly you would probably not sign up with us... thinking you could get more selling through a realtor... or selling yourself.
A common scenario is we receive a call later when sellers realize the old fashioned listing method isn't getting the job done. By the time we end up with the property, the seller is usually upset because their property has not sold and they now need to sell because holding costs (and price erosion costs) have taken a big chunk out of their equity.
Here's how it works... the potential seller has a pre-conceived idea of the value of their property. Several realtors are consulted and they base their opinion of value on recent sales that have taken place (comps). The realtor that quotes the listing price closest to the potential seller's perceived value usually gets the listing.
Once this decision has been made the property is listed, both the seller and the realtor have expectations that the property should be sold within 30 days. When it doesn't sell, the price is reduced to try and chase the declining market. In the mean time, holding costs continue to accrue. When a potential buyer is finally found, concessions in the form of buyer incentives (ie paying for closing costs, cosmetic upgrades etc.) and miscellaneous expenses incurred by the home & termite inspectors are required to be paid in order to try and secure the finicky buyer. By the way, the only incentive we offer to the buyers is the chance to get a deal.
Once the property finally goes to closing using the traditional method, contingencies are required to be met and the buyers have 21 days to decide whether they want to go through with the sale. This reduces the closing rate down to just over 50% (according to realtor.org). Imagine taking 9 months to find a buyer and have the sale fall out of escrow! Because our auction method has no contingencies, and requires a large non-refundable deposit from the buyer we are proud to say our closing rate is over 95%.
In contrast our auction method relies on the lure of the deal and a massive marketing campaign to create the exposure necessary, so each property can be sold in just 30 days at the highest net price possible. We are so confident we will generate the highest net price that we can even guarantee it.
Hope this has given you a clear perspective on both methods of selling real estate. You now know there is another way.
If you want to move to the next step please read "Are you an Auction Candidate".
Selling your property by auction through our company can have several advantages. However before you decide to use our accelerated selling service it is very important that you truly understand how the traditional method of listing with a realtor differs from the service we offer. Below are the main differences:
• A realtor listing typically relies on the MLS and a yard sign to try and get the job done. In contrast, we utilize a massive marketing campaign that emphasizes the chance for the buyers to get a deal. This creates urgency, excitement and more importantly brings people to view your property. The MLS and sign are just two of the many marketing strategies our company uses.
• The traditional method using a realtor relies on drawing buyers by a pre-determined listing price, usually based on current comparable sales. When buyers don't bite, the price is lowered until the property either sells, becomes stale or the listing expires. Our auction approach is more pro-active and is designed to sell any property in just 30 days through a live auction format that produces a price inspired by competitive bidding.
• The two biggest expenses in a buyer's market with a vacant property are holding costs and price deterioration costs. The longer it takes to sell, the more these expenses eat into the bottom line. For example if it takes 9 months to sell and close using the traditional method and holding costs are 0.75%/mo and prices are deteriorating at 1.5%/mo, the total of these two critical expenses would be 18.75%. In contrast using our auction method, holding and price deterioration costs would be just 3% with property we sell.
• Other traditional listing costs include incentives to lure a buyer as well as miscellaneous expenses for work the home inspector and termite company recommends. In a buyer's market these expenses can easily be 6% using the traditional method. Our auction method, on the other hand, is designed to be a non-contingent sale and our clients do not pay for any of these other costs. Our incentive to the buyer is the chance to get a deal.
• Commission to the seller charged by realtors is usually 6%, whereas we charge the buyers in the form of a 10% buyer's premium that is added to the final bid.
• Title insurance is paid by the sellers in a traditional escrow but with our auction process it is paid by the buyers. Our company also pays for a home warranty policy, normally a seller's expense.
Below is a table that summarizes the costs of both methods in a buyer's market:
Possible Selling Costs
Based on a vacant property in a buyer's market
| Traditional Method | Our Auction Method | |
| (9 mos. to sell & close) | (2 mos. to sell & close) | |
| Holding costs | 6.75% | 1.5% |
| Price erosion costs | 12% | 1.5% |
| Incentives | 4.5% | 0 |
| Miscellaneous | 1.5% | 0 |
| Commission | 6% | 8% * |
| Marketing | 0 | 2% |
| Total (approx.) | 30.75% | 13% |
*The buyer is actually responsible for paying the commission in the form of a buyer's premium, however it can be a deduction from the seller's net, so it's included as an auction method selling cost.
• Closing rates should also be scrutinized before a decision is made whether or not to use the auction method. Our cumulative closing rate over 3 years is 98% versus 52% using the traditional method (according to Realtor.org). Because our sales are non-contingent and we hold a large non-refundable deposit from the buyer in our trust account, the closing rate is extremely high. The traditional method involves contingencies and a small deposit held in escrow that is refundable if the buyers decide to back out; therefore the overall average closing rate is about half of our auction closing rate.
If you're an investor who buys and sells property, selling and closing quickly allows you to move on to the next deal faster and ultimately should generate higher annual net profits. When it could take 9 months or more to sell using the traditional method through a realtor and only about half of the escrows close, there can be a reluctance to buy and sell property during a buyer's market. By selling in one month and closing in one month, the negative effects of holding costs and price deterioration costs can be mitigated by selling with our auction selling process however.
Our auction method of selling real estate is designed to bring the same net price (or more) than the traditional listing method...in just 60 days. It is based on the concept that a $1.00 in 2 months is worth more that a $1.00 in 9 months...especially in a declining market. In order to be considered as a candidate to sell using the auction method, an understanding of the time value of money is necessary and also an understanding of what the true costs can be by selling using the traditional method. Hopefully you will make your own calculations of these critical costs and other factors before selecting the method in which to sell your property.
Included is a form we use that will assist you in determining approximate potential selling costs, so a net figure can be calculated using the traditional method. We can furnish you inventory numbers (listings) vs closed sales to help compute how long it may take to sell through a realtor. Also we can provide you what the percentage of price deterioration is currently so you can make a better prediction of what it might be moving forward. To summarize, please review chart below:
Comparison Chart for both Selling Methods
| Traditional Method | Our Auction Method | |
| Price guarantee | None | Yes* |
| Avg. total selling costs | 25-35% | 12-15% |
| Selling time | Unknown | 30-45 days |
| Contingencies | Many | None |
| Title ins. paid by seller | Yes | No |
| Closing rate | 52% | 98% |
* If the highest bid is rejected we will pay you 1% of the total price generated at the auction if you are able to sell for a higher net cash price in 70 days after the auction.
Because we are very confident our auction process will out-perform the traditional method of an extended listing through a realtor overall, we offer two types of reserve auctions.
Unpublished Reserve - With this program we agree on a net price based on the true selling costs using the traditional method. If we don't reach this net price there would be no production fee charged. Half of the upfront marketing costs would be paid by us.
Seller Confirmation - We agree on a ballpark price as with the reserve auction venue above, but you would have full control over whether you accept or reject the highest bid. You would be responsible for paying all the upfront marketing costs. If the bid was accepted and escrow closed, you would be reimbursed half of these costs. If you reject the bid, a production fee of 1% of the final price would be paid to us if you weren't able to sell for a higher net cash price 70 days after the auction. This is our price guarantee to you!
* Note- in some cases an absolute auction (no reserve) might be suggested as the best auction venue.
If you think our auction method might benefit you, please let us know. We look forward to assisting potential sellers who understand the time value of money, can acknowledge true selling costs of the traditional listing method and have realistic expectations.
Elite Auctions
Disclosure: This is provided for informational purposes only. Elite Auctions will not be held liable for misrepresentation of the data presented. There are no assurances or guarantees made from any of the examples given. Each real estate transaction is unique and will have different results.
Elite Auctions is "California's Auctioneer of Real Property". Real estate auctions are the most effective way to buy & sell property in a buyer's market.
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
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