This past week I needed to attend an update course for continuing education, and decided to take the elective that was being offered. Not knowing anything about the auction process, I thought this auction course might be something of interest, after all it was only 4 hours, was in Wilmington, NC, only about a mile from my office and again I was clueless regarding auctions. Of course I had been to charity auctions, antique, and art auctions, but never to a real live house auction.
The class was very interesting, informative, and really did open my mind to the idea of auctioning property. All the while I was silently thinking to myself, that auctions are for foreclosures, distressed property, and for heirs to unload quickly, in other words the stigma of cheap. After learning some auction terms, each member of the class was given some criteria on how to bid and the motivation behind your bidding we had a mock auction.
One of the instructors was a licensed auctioneer, and moved the bidding from a starting bid of $75,000 to a final bid of $176,000. Of course this was with play money and could not possibly be the way it would play out in a real life situation. Here is where it gets interesting....the 10% buyers premium is added to the final bid for a selling price of $193,600 ($176,000 + $17,600) that the BUYER pays. Jeff Weinberg, the auctioneer, was delighted......we learned what an auction was all about, and he would be very happy to sell the house for $176,000 and make a commission of $17,600.
The real auction on our mock house was Saturday the 24th and class members were encouraged to attend, which was another benefit to the class. This is how the house was promoted in the MLS......
" AUCTION PROPERTY! List price ($75,000) is opening bid! No addl reserve! Sold on Sat. 2-24 at Noon. Central loc. Lg. lot w/200 y.o. oaks! Hdwd flrs, updated elec, wired shop/ garage, floored attic. Solid but needs renovation. Pre bids accepted but no sale until auction date. Terms: As-Is. Close in 30 days, no contingencies. 10% Buyers Premium added to high bid to arrive at contract price. $3,000 refundable to register + bank letter of credit/funds. 10% of contract price due in 1 biz day. On combo lockbox. Vacant. Call to show! No comn to broker purchasing for self."
Here is shortened story.....SOLD for $174,000 plus 10% buyers premium. WOW, WOW, this could not be possible, how could this be true? No way that it would appraise...wait, it does not have to, No way will it pass an inspection.....nope, thats not needed either. The terms of the sale pretty much assures the sale will go through.
Here is what my pre-auction research turned up....city appraised value was $151,125, needed at least $35,000 to $50,000 worth of work to bring it up to livable standards, was a 1950 style cottage with 1 bath and 3 bedrooms, in not the greatest of neighborhoods, in fact the the reserve bid was $75,000 which according to most people in attendance was its true worth and the seller probably would have sold it for that price.
Here is the email I received from the auctioneer after the sale:
I know you're probably a bit curious to know how the Auction Orange event turned out this past Saturday. Does anyone remember what the high bid in the mock auction during class was? I remember it being somewhere in the mid 170's with a total sale price in the low 190's. Jeff said he'd be thrilled if he got those same results at Saturday's auction. Well - looks like Jeff Weinberg and his auction company hit a homer out of the ballpark. The high bid at auction was $174,000 with a 10% buyer's premium bringing the total sale price to $191,400 (a recent appraisal came in at $155,000). What's not to love about a cash sale of $191,400 that closes in 30 days and has no contingencies for financing or repairs? Below is Jeff's detailed report. Where were all the Buyer Agents? Looks like the Wilmington market is ready for auctions. Are you ready to take one of your listings to auction? Deadlines for mid-April auctions are closing in - it's time to start the conversations with your sellers if you feel they could benefit from the Auction Option.
Sarah, Score a big win for the auction method. Today's sale had 38 REGISTERED bidders for the real estate alone plus the hundred or so that came for personal property.....unbelievable! Seller was worried that since the house was in questionable condition, it wouldn't bring his 75,000 reserve. We guessed 105-115K easily. Appraisal came in at 155K which we all thought was too high since the appraiser didn't take into account the 35-50K worth of work the house needs. I dropped the hammer at a stratospheric 174K plus 10% premium with no agent on the buy side. Only four of the 38 bidders had agents despite the fact that I probably fielded 150 calls from agents and countless showings. Have a great weekend...I'm taking my family out to celebrate. Jeff
In the past I know I lost some buyer and seller prospects because of my inexperience regarding the AUCTION EFFECT, now I will welcome the chance. Where in this real estate world can you work with a client and have no contingencies, have the excitement of an auction, no home inspection worries and get paid in 30 days?
According to latest NAR statistics, in 5 years 1 out of 3 houses will be sold by the auction method, don't think it won't happen.......does EBAY come to mind? Take the course, go to an auction, have fun!!
Dick Beals
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