Are 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.