In todays gloom and doom real estate market I've got some great news you can take back to your clients to give them some hope.  Real Estate Auctions are helping separate more and more people from their listing when they thought there was no hope. 

Real Estate auctions bring excitement and attention to your listings and partnering with an auctioneer makes sense.  If you have clients that really want to sell that home you'll be their hero for finding a solution to their trouble and you'll still get paid and they still get market value.  As a Realtor you have many tools, many relationships with key people to assist your clients but do you have an auctioneer? 

If you don't have an auctioneer in your brokerage does that mean you can not use or offer auction services?  Absolutely not, you still have the option of using an auctioneer.  If you can't find one call me, I travel!

Why partner with an Auctioneer?

Each home has a market value and using the auction method of marketing is the best way to determine the market value and the best way to GET market value.  When all the marketing has been done properly you will attract all buyers that are interested in the property and they will compete against each other to buy the property.  The final price will be the market value, the amount of money someone was willing to pay for it.  Now as a Realtor you'll have a ready made list of people that want to buy homes!  You'll get the registered bidder list when the auction is through!  Thats the easiest prospecting you'll ever do.  You'll also still get paid your commission on the sale and you'll be the hero of the clients that hired you in the first place.

Do auctions really make sense?

You know that at any given time there are a certain number of people interested in purchasing a home.  You also understand there is a market value for each home.  Why not put that home in front of all of them and offer it, let them bid their highest bid and see who comes out the winner?  You will offer a greater predictability for your clients.  Your selling clients will be able to choose the amount of the earnest deposit (usually 10%), they will be able to set the sale date, they will be able to set the closing date and all other terms.  The best thing about an auction for a seller is that they get to set the terms and the buyer must abide by them.  Here is one of the things I love about auctions NO CONTINGENCIES.  Would your life be easier if you did not have to worry about getting that cracked shingle fixed, or the carpet replaced.  Would you sellers life be easier if they did not have to wait 30 days to see if the buyers financing was going to go through?

Can somebody steal the property?

Absolutely not and this is the biggest misconception about auctions, but also lends to their popularity.  Sellers worry that someone could just come buy the home for a few thousand dollars and buyers think they may be able to get a good deal.  It might make sense this way.  I am both an agent and an auctioneer so I sell homes both ways.  As an agent we are usually starting above market value and moving down.  As an auctioneer we are starting low and moving up.  Which price is going to be more attractive to the buyer?  Most likely the lower price.  When a buyer sees a home with an opening bid of $90,000 but feels the home is worth $150,000 they are going to be attracted.  If a buyer sees a home priced at $170,000 and they feel its worth $150,000 they may never give it a second look.  Now that $90,000 will move up and when the bidding ends will be around $150,000 or over.  If the auctioneer has done his/her job marketing the property and brought the right buyers and the home is worth $150,000 thats the area it will sell.  You do want to bring attention to your listings am I correct?

There are two types of auctions.  Reserved auctions where the seller sets a price the bidding must get to before they will sell and Absolute where the seller agrees they will sell to the highest bidder regardless.  Back to my original question whether the home can be stole at auction... no.  People are going to protect their investment with a reserve.  Reserves will protect the sellers interest but DOES NOT put a cap on the price. 

Take a look back at the example I gave earlier of the $150,000 home.  If originally you thought this home was worth $150,000 but your seller priced it at $160,000 then you have essentially put a cap on it.  You are not likely to get more than $160,000 on the home.  With an auction there is no cap.  What if someone was willing to pay $180,000 for the home?  With an auction you are going to take advantage of this benefit and not leave money on the table, you are going to feel certain in the end that you have gotten what the home was worth. 

What kind of homes are sold at auction?

Every type of home can be sold at auction.  An auction has nothing to do with the type of home.  Distressed homes, executive homes, new construction homes, builder held homes, incomplete construction, model homes, mobile homes, vacation homes are all candidates for auction.  An auction is about marketing, its not about the type of property.  An auction brings attention and interest to a property.  You and I both know how hard it can be to get attention to our listings right?  An auction makes your listing the "Rock Star" of the all the homes available.   

I've said in the past that not all homes are candidates for auctions when I should have said "Not all sellers are candidates for auction"  Any home is a candidate for auction and again, it will sell for market value.  Sellers however might have circumstances where the home can not be sold for todays market value.  If their mortgage is larger than the market value. 

So does this mean auctions only work in a buyers market?

Oh absolutely not, you can sell real estate at auction in any market condition but I think you as a Realtor are more likely to be searching for options in todays buyers market but lets talk about it as if it were the other way around right now.  If we were in a sellers market right now and we had more buyers than sellers you'd expect to see multiple offers right?  Thats what an auction is, a multiple offer situation.  The difference between the two is that at an auction everybody can see everybody's bids.  Its open and transparent.  Now I bet you have been there and tried to explain to a client that the home they offered on has two other offers and they give you that look of "ya right" or they ask "how much did the other people offer" and you can't answer them.  You have to tell them to give their highest and best offer right?  Well if you were hold an auction at the property there is no question who is bidding what, there is no worry that the other offers are "made up to get more"  Its happening right now, right here, right in front of our eyes, its real and if you don't bid now one more time those other people are going to get it so think quick and get that card in the air. 

What is an auction?

When someone says auction you are thinking of the auctioneer with the microphone in his hand chanting. An auction is so much more than that.  An auction is about MARKETING.  You've heard me say "the auction method of marketing" or "auction marketing"  The auctioneer chanting the bids is an important part of the auction.  A good auctioneer is a good bid getter and its more difficult than it looks but the real meat lies in the marketing ahead of the auction.  Without marketing you can not even get the buyers to the auction to bid.  Auction marketing is intense, its accelerated, its condensed into a short time period.  Its the only way to assure you got every dollar the home was worth and not a penny less.  The marketing does many of the same things you would do to market a private treaty sale, but it also does much more.  Auction marketing brings interest and excitement to a single property and spotlights it for all to see. 

Interested in the auction method?  Our Iowa Auctioneering service may be able to help you sell your real estate at auction.  Want to know how you can partner with an auctioneer and do the very best for your clients?