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Has your Realtor become an Auctioneer?

By
Services for Real Estate Pros with Sage Auctions LLC

Realtors use a static pricing system to present a property to the market.  Typically a list price is determined, based on comparable sales data, appropriate adjustments for time, and in this market an awful lot of guess work.  The property is advertised and placed on the local MLS and probably Realtor.com. Open houses are scheduled and a realtor usually sits in an empty house for the better part of a Sunday afternoon.  Then they wait, and wait and possibly wait some more for the phone to ring.  You start to see why I’ve call it a static pricing system. Without a mechanism to encourage competition or create urgency on the part of the buyer, the seller can feel as if they are being circle by sharks waiting for a sign of weakness.  Therefore, most Realtors will suggest to their sellers they reduce the list price by 5% or so every month or two until a buyer bites, pun intended.  In effect they have become auctioneers.  Wait a minute doesn’t an auction start with a low bid and work its way up?  In a traditional or western style auction they do, but there is an auction that works the other way around. It’s call a reverse auction or Dutch auction, where the price comes down so much over a given amount of time, until the first buyer to raise his hand becomes the winning bidder. That’s what realtors are asking their clients to do in the current buyers market.  It appears safe but its reactive and allows the buyer to drive the transaction, without I might add any form or competition between buyers, just first hand in the air (or signed offer) becomes the winning bid.  

I’d rather use a dynamic pricing system.  Grant it, I’ve been an auctioneer and real estate broker for over 25 years and I definitely look at a real estate transaction from a different perspective, but wouldn’t it be better if we could create some sense of urgency on the part of the buyer and then require them to bid against each other to determine the selling price and maybe in the process put the seller back in control of the transaction?  And wouldn’t you rather have the bidding going up rather than down?  If a Realtor suggests a series of price reductions over time to “capture the market”, ask them when the process will end, when your property will sell?  At which point you will likely get some flailing of arms and mumbling about extended time on the market and “you know we’re in a buyers market now” at which point she’ll give you her best guess.

A real auction conducted by a professional auctioneer/broker is intensely advertised, placed on the MLS and Realtor.com for 30 days. Then all interested buyers will gather (some via the internet) at the same time, on the same day, to bid against each other with the price starting low and moving up until the last man or women is standing. Then the high bid is delivered to the seller for their acceptance, rejection or counter. If accepted the transaction is closed in thirty days to a pre-qualified buyer without deal killing contingencies. If it is counter the transaction is negotiated with the high bidder 9 out of 10 times resulting in a sale.

Mark Hall
Realty One Group Cascadia - Vancouver, WA
Homes for Sale Vancouver Washington

Most of our economy is based on an auction system. Just about everything get sold to the highest bidder. Including real estate. The question is, what do you do when there are no bidders? There is only one option; Lower The Price.

Mar 26, 2009 09:33 AM
Anonymous
Marty

Mark,

Great comment. And I think you just answered your own question. I just spent two days in Olympia WA area talking to Reators regarding auctions. One quesiton asked was, "If I can't find any buyers for my listing, why can you?"  My answer, you can find buyers, they are out there, just not at your current prices. So then the question becomes, whats the best way to find the true current market price?  Traditionally, we've always used some form or competitive bidding process to find market value.  I'm sitting in a Sheraton Inn waiting on a flight out of Portland back to KC, give me a call if you want to visit more. And good luck with your business.  

Mar 26, 2009 09:53 AM
#2
Anonymous
Jason Rose

You guys have to come to Australia and see how we do it.

I have been a believer for a long time to promote the product before the price.

Yes, there will be some buyers out there that are price restrictive. IE the bank will only lend them so much. we call this bank imposed. It does not matter how much someone loves something, if the bank will only lend them a certain amount of money then that is all they can spend. Usually we will find this is only the first home buyers. The rest of the buyers are what we call self imposed. in other words the bank will lend them say 1 million dollars and they are only comfortable making the repayments at $750,000. These buyer usually react to features and benefits rather than price. These buyers are emotional buyers and when they are put into a competitive situation will pay a premium price.

Our auction process in Australia makes our contracts an unconditional purchase. In other words, the buyer has to make all their searches prior to auction and has to have the finance pre-arranged. I Do not know if this is the case in the USA.

All I say is auction is a great method to get a result in the shortest period of time.

Check out 2 of my websites www.auctiondynamics.com.au or www.becomeanauctioneer.com.au for some tips and advice.

Regards,

Jason

 

 

Mar 27, 2009 12:28 AM
#3