Redland Real Estate Auction - Going, Going, Still Here!

By
Real Estate Agent with eXp Realty LLC BK 3126272

Redland real estate auctionAre you trying to sell your Redland home in this market? Have you looked at alternative methods of selling your home? Have you looked at real estate auctions?

Real estate auctions can be very successful. And they can be total flops too. Last week I attended the latter at a gorgeous home in the Redland.

The home had been appraised at $900,000 back in June. My trained eye tells me the market value is more like $750K today. Was it an inflated appraisal back in June? Maybe just a little. No matter. The appraisal wasn’t an issue. The bids were.

I had seen the signs proclaiming this coming auction a few weeks back. I had read the small print. I knew what was going to happen because of it. Here’s the small print in a nut shell:

  • -Bidders had to register and provide a $1,000 check at registration (no problem. If you didn’t win the bidding, you would get it back)
  • -Winning bid had to add 7% as a Buyer’s Premium and that would be the sales price. So if the winning bid is $100K the sales price would be $107K (OK, this sounds good for the seller, but only good for the buyer if he gets the home at an appropriate price. Bidder, set your limit and stick with it)
  • -House is sold As-is (no problem here either, you still have an inspection period and can back out if severe problems arise)
  • -Seller to provide clear title at closing (good, because anything but is unacceptable)
  • -Closing to take place with pre-chosen closing agent (this can be OK, but ordinarily the buyer chooses the closing company as the buyer is paying the title insurance. I’d need to ask more questions about this before I give the go ahead on this.)
  • -and the one that I knew would result in a flop of an auction: Seller can accept, reject or counter-offer the winning bid. ah hah!

That last one is the reason the auction failed to reach it’s mark. There were approximately 25 people in attendance. From their nametags, I would guess that 10 of them were from the listing agent’s office. Perhaps another 10 were observers such as myself. The owners of the home were apparently there. They provided some info to the auctioneer and I took them to be the owners anyway. There were 4 registered bidders but only 3 did any bidding.

The low # of bidders was not the reason for this auction turning out the way it did. It was the last item on the list. Why is that last item the one that can make or break an auction? Because it told everyone who may have had an interest in bidding that it was not an absolute auction.

An absolute auction means that the winning bidder wins. Period. His bid does not have to be approved by the seller. The seller has agreed beforehand that he will accept whatever the highest bid is.

Can this be risky to the seller? You bet your sweet potatoes it can! But can it result in a heck of a lot of excited bidders at an auction? Bet those same sweet potatoes on it. Heck yeah.

Anyone who knows that a desirable home can be had for any amount less than the market value is going to try to be there and win the bidding. And once bidding starts, chances are he will get caught up in the furor and the bidding will start going the way a seller wants…up..up..and up!

That’s not what happened in the Redland. It took the auctioneer about 6 minutes to start the bidding at $150,000 and take it to $350,000. At $350K it stalled. He had a very hard time getting anyone to offer more than that. After some cajoling and dropping down from $400K, $375K to $360K he was able to solicit a bid at $360K. After a little more effort he was able to get it to $365K. But the buck stopped there. Not one of the 3 bidders was willing to bid more than that for this $900,000 home (that I think is worth $750,000).

Was the winning bid accepted by the seller? My expert opinion is…heck no! Was it a total waste of time? No. I got an article out of it.

Posted by

Maggie Dokic - Broker/Owner - Special Miami Homes

What's My Home Worth? Instant Response!       Search All Miami Homes - Updated from MLS Daily!

For more information on our local real estate market, or to see or sell a home in Miami, Palmetto Bay, Pinecrest, Coral Gables or the Redland, visit our Miami Real Estate site or contact us at Team (at) SpecialMiamiHomes (dot) com.

The opinions expressed herein, are those of the author, and not necessarily of  Special Miami Homes.

None of this information is to be deemed legal or financial advice.  Please contact your attorney or accountant for same.

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Rainer
110,262
Linda Scanlan
A Fan of AR - Burleson, TX
Hi Maggie - I've never been to an home auction. I've heard they can be a nightmare, though.
Nov 17, 2007 09:55 PM #1
Rainer
340,963
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

I had a client ask me about auctions a while back.  I told him to get all the facts - all the fine print and read it thoroughly.  He called back and had one of the same "Ah ha!" moments you described.

Counter offer?  On an auction?   Why bother with an "auction" then? 

Nov 17, 2007 10:13 PM #2
Ambassador
2,752,418
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

And shame on the real estate brokerages that are using these so called "auction" to market a property.

They sell this marketing gimmic to the sellers who pay up front for the auctioneer and the advertising. 

The public is fooled into thinking that these are foreclosure auction and they are NOT.  Foreclosure auctions are absolute although if bids are not high enough, the bank will bid it in to protect their investment. 

This is one of the dirty secrets about real estate companies who have an auction department.

Good post Maggie.  A lot of folks are going to fall for this gimmick as homes sit, and sit, and sit.

I had a friend fall for one of these gimmicks because she wanted to be "proactive" about selling her home.  She lost about $2,500 on the auction/advertising and sold nothing.

"I shoulda listened to you Lenn".

Maybe I'll do a "WARNING, AUCTIONS CAN BE DANGEROUS TO YOUR FINANCIAL HEALTH" post.

No, why don't you do it Maggie??

Nov 17, 2007 10:22 PM #3
Ambassador
920,701
Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Savvy Realtor - Ann Arbor Real Estate
Maggie, I've started to see this more and more. Sellers need to be aware what they are signing up for. Good post and hopefully as in Lenn's suggestion more will be written on it.
Nov 18, 2007 12:22 AM #4
Rainmaker
206,324
Chris Tesch
RE/MAX Bryan-College Station - College Station, TX
College Station, Texas Real Estate
great information about auctions Maggie! I'll be looking forward to Lenn's and your collaborative post :)
Nov 18, 2007 02:42 AM #5
Rainer
270,606
Teresa Boardman
Boardman Realty - Saint Paul, MN
We have auctions here too and I have been to several.  Thye are most often reserve auctions, and sellers often reject the offers.  I track the prices they get when they auction a property, it seems to run right around 60 cents on the dollar.
Nov 18, 2007 04:05 AM #6
Rainmaker
337,585
Thesa Chambers
Fred Real Estate Group - Bend, OR
Principal Broker - Licensed in Oregon
Maggie - we had one similar here - and I was amazed by the bidders they actually thought they would get the home for less than half of the appraised or market value - for some reason they think auction means - give it away... glad you had the opportunity to see it... there are successful ones too I hear... just have not had the opportunity to see one yet.
Nov 18, 2007 07:22 AM #7
Rainmaker
121,550
Vickie Arcuri
ONE Sotheby's International Realty - Fort Lauderdale, FL
South Florida Luxury Real Estate
Very informative post, Maggie...definitely a waste of time and money for the Sellers.  You know, it seems like Bidders don't really want to bid anything more than "giveaway" prices (like Teresa mentioned, 60 cents on the Dollar) when most Sellers are not in a financial position to accept such prices.   There are other prospective Buyers who are the same way and I explain to them how to place a reasonable offer that's likely to be accepted, but some don't want to listen.  They somehow think that just because inventory is high that Sellers should be willing to give their houses away.
Nov 18, 2007 07:26 AM #8
Ambassador
606,096
Brian Schulman
Coldwell Banker Residential Brokerage, Lancaster PA - Lancaster, PA
Lancaster County PA RealEstate Expert 717-951-5552

I think you're right, Maggie - allowing the seller to counteroffer rather than accept or reject the highest offer, changes the concept of an auction. 

If there was a minimum acceptable price, the seller (and auctioneer) should have just set a reserve.

Nov 18, 2007 07:50 AM #9
Rainmaker
552,739
Lynda Eisenmann
Preferred Home Brokers - Brea, CA
Broker-Owner,CRS,CDPE,GRI,SRES, Brea,CA, Orange Co
Hi Maggie, Humn, it will be interesting to see how effective these are in the long-run.
Nov 18, 2007 02:22 PM #10
Rainmaker
223,300
Rick & Ines - Miami Beach Real Estate
Majestic Properties - Miami Beach, FL

Holy Cow!  that is absurd!!  There's a known auctioneer in my parts but you really don't see these very often.  The man did auction his own home when he left Miami Shores (wouldn't expect anything different).  But there was a 10% added to the top and inspections had to be done before the auction, not after. 

Auctions are definitely an option, my question is who is willing to pay upfront for costs like inspections and auction fees when they can't have control of their own purchase?  I guess that for the right type of property, it could be the right strategy. 

Nov 19, 2007 01:02 PM #11
Rainmaker
559,162
Maggie Dokic | Miami, FL | 888.883.8509 X101
eXp Realty LLC - Miami, FL
GREEN, CDPE, SFR, Pinecrest | Palmetto Bay |

Sorry it took me so long to return!

Linda - the ones at the courthouse steps for mortgages and taxes can be nightmares.  These pale in comparison.

Kris - my sentiments exactly.  It was merely a gimmick to drive more traffic to the property.  A waste of time for all and I'm sure the seller had upfront fees.

Lenn -  I love it!  I am up for the challenge.  I just attended another auction on Sunday and need to report on that one as well.  It was an eye opener.

Missy - I agree that more should be out there to educate the public about them.  I plan on at least 2 more articles myself =)

Chris - I wonder if Lenn would collaborate with me?  hmmmm....

Teresa - 60 cents on the dollar is not for the faint of heart.  Ouch.

Thesa -  I've only heard of the successful ones, have yet to see one. I plan on seeking them out and attending as many as I can just to keep an eye on what's happening in my market.

Vickie - have you been meeting with my buyers?  LOL  You described a few of them to a "T."  I try to explain the same.  Sometimes they get it.  Most often, they don't.

Brian - thanks.  I always read the fine print, and when I read that one I just knew.......

Lynda - so far not very.  The last one I went to was even worse.  Post coming soon =)

Ines - I agree with you on those fees.  Paying upfront is not the way to go, boys and girls. 

 

Nov 19, 2007 09:29 PM #12
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Rainmaker
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Maggie Dokic | Miami, FL | 888.883.8509 X101

GREEN, CDPE, SFR, Pinecrest | Palmetto Bay |
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