Back in mid 2006 I decided to look more closely at selling homes and land by auction. At that time, the market was heading for trouble. That was clear to just about everyone. But many sellers ignored the fact that home values were going to drop by 20-30% or more. Many factors were involved, but that's another story. Sellers were offering huge bonuses, offering to pay closing costs, offering free leases on their BMW's, offering 1 and 2 week vacations, making small meaningless price drops, one owner actually bought a new Mini Cooper that he would give to whoever bought his overpriced house. It took many, many months for many sellers and agents to get it through their head that " Price Matters", and overpriced listings don't sell.
Anyway, I signed up, took the course, and became a " Certified Auction Specialist". This is just a copy of my official certificate. It didn't mean that I could conduct auctions, it only meant I learned all the ins, outs, and gimmicks used in the auction world, but I had to use a licensed auctioneer to conduct the auctions. I did all the leg work, worked with sellers to explain the process, got auction agreements signed, etc, etc. I also coordinated with the auction company. It was a team effort. It normally takes 6 weeks minimum to get a property to auction because I had to hold 2 open houses, and get lots of marketing done in order to generate a crowd on auction day. Here's a stat many don't know. Appoximately 30% of properties sold pre-auction, 30% at auction, and 30% post auction. Auctions can waste a lot of time. Also, some auctions get canceled. Sellers were also required to pay upfront non-refundable marketing costs which ran from $1800.00 to $5000.00 depending on value of property.
So what happened? In 2 words " Short Sales". Yep, most sellers owed too much or had no or little cash on hand, so auction would not work for them. In some cases, auction was fine, but it was a small % of cases. It was time to begin focusing on the short sale process. Eventually, I drove to Richmond, got the CDPE ( Certified Default Property Expert) designation. I did learn a lot about the short sale process, but it wasn't enough. I then got another short sale designation ( CDRS) Certified Default Resolution Specialist. Again I learned more about short sales. Auctions were fading out of the picture. Short Sales were going to be the trend. Then there were meetings with several different lenders where I found out even more about short sales, lenders, investors, etc. Seems like every lender had their own way of doing short sales. Some lenders made the effort to train agents, others didn't care. They were just as happy foreclosing. Houses were being stripped, pending foreclosures were being rented out, sellers were just walking away, some filing bankruptcy, etc. The outlook looked bad for many sellers.
Anyway, back to Auctions. Both sellers and buyers don't always understand what can happen at an auction, and don't know how to figure out what type of auction might work for them if they were borderline qualifying for auction. Absolute is the least used auction for sellers, but attracts the most interest from buyers. Sellers have to be able to take a loss. Buyers that attend absolute auctions are looking for deals. They aren't there to pay fair market value. There are methods where builders could own 20 lots that they want to liquidate. The auctioneer will offer them separately, then in groups, then all at one time. You might be high bidder on a lot, but that doesn't always mean you bought it. Another bidder might offer more for a group of lots which contained the one you thought you bought. Then again, someone could make an even better offer on all of the lots. There are many methods the auctioneer can use to get the best deal for the seller.
Absolute is just one type of auction. Whether you're a buyer or seller, consult with an agent that understands auctions, read the auction terms, have a clear understanding of you current financial situation. Only then can you decide if getting involved in an auction is right for you.
Jeff Pearl | Lic in VA
Remax Distinctive | McLean VA | Lic in VA, MD, DC
Homes | Land | Farms | Historic