Nearly Half of Homes in Collin County Sell at Auction

The Texas Residential Real Estate Market is Hot

For most families, their home is the single largest and most appreciable investment they will make. The idea is simple, buy a home, pay your mortgage, make improvements, build equity. In several Texas markets the professional real estate industry is struggling to accurately price homes. Every seller and every real estate agent earnestly desires to sell homes for the maximum amount the market will bear. Real Estate agents walk a fine line between underpricing and overpricing. On one hand, underpricing the real estate agent risks losing thousands of dollars of their client’s money and commissions. On the other hand, if the agent overprices a property it goes stale and does not sell in an appropriate time.

Hot real estate markets are a blessing and a curse. Our staff recently compiled and studied data from several of the hottest residential real estate markets in the DFW metroplex. What we found was astonishing and should be worrisome for 65% of homeowners in Frisco who are in the process of selling their homes. Depending on the community, 37-65% of the homes sold were priced lower than they actually sold for.  Our data, provided by North Texas Real Estate Information Systems, showed pricing discrepancies from just a few hundred dollars to as much as $49,000 for single family homes.

Realtors Struggle with Pricing

You may ask “Are Real Estate Agents really this inept?” Absolutely not. The problem in this case is not the real estate professional. It is the speed of the market. Seller’s need to understand that real estate professionals use “Sold” comparables to decipher market data and ultimately recommend a listing price, which is the best way to accurately establish a marketable value. The problem is the sold price is not reported until the transaction closes. If a home closes today it is highly likely that the price was negotiated 30, 45 or even 60 days prior to today. Each transaction has many moving pieces such as inspections, appraisals and financing, not to mention the speed at which a seller is willing to surrender possession. When the real estate professional meets with a prospective seller tomorrow and uses the sale that closed today the market data may provide an illusion of freshness but in real world terms it is 30-60 days old. These markets are simply moving upward so rapidly that the sales data cannot accurately portray market value.

Timing is Everything

Our staff also concluded that the average length of time a home is on the market is just over 8 days. Many properties experience only 1-3 days on the market, few see the 20th day on the market. Our staff actually threw out any property that was on the market for over 35 days, as it was a sign of extreme overpricing or total undesirability in the marketplace for some reason. Out of 110 reviewed properties, we threw out only four because of the 35 day cut-off. When property is selling in less than 72 hours sellers are only receiving offers from a limited number of the actual interested parties in the market. In layman’s terms, the property is not given an opportunity to ferment and get full exposure in the marketplace. Seller’s in these markets are like college kids getting drunk on Boone’s Farms Strawberry wine instead of slowing down, investing a short amount of time and enjoying the full bouquet of a 2005 Château Pétrus. While both get the job done, you’ll feel better in the morning knowing you slowed down and experienced the latter.

What Can Sellers Do?

If professional real estate agents are behind the curve, what is a seller to do? Simple, take control of the process. Let the market work for you and allow the buyers an opportunity to financially compete to own your property. Market your home by auction. Yes, by auction. Our data shows that 40% of homes in Collin County, Texas alone are being sold by auction. Just not in the traditional sense. When real estate professionals list a home and sell it for more than the asking price, with multiple offers they are selling by auction. The problem for sellers is you have listing specialists conducting auctions, much like going to your Proctoligist when you need to go to the Dentist for a toothache. Both service providers are specialists, both have medical licenses, both have your good health in their best interest but they should not be interchangeable. When you think about it, do you really your Proctologist and Dentist to be the same person? Of course not. You should not want your listing agent to be your auctioneer either.

Auctioneers have the unique experience and education to handle the problems found in hot sellers markets. They know how to manage what is often a high stress and chaotic process to achieve the maximum value for your property. An Auctioneer’s everyday job is to assemble multiple buyers and encourage them to compete against each other financially to own a particular offering. A Professional Auctioneer will establish a date and time your property will sell, whether it is an online or live auction. That date will give the auctioneer time to inform all interested buyers through their proven marketing plan about the offering, conduct open houses, showings and assemble them in one place at the time of the auction. A 21 day marketing period will certainly attract more competition on a predetermined date than a one day listing. Thus, maximum competition results in maximum price.

Sellers Benefit From Auction Marketing

Experienced real estate auction firms know how to structure an auction to achieve the top price. Many buyers and real estate agents alike think that cash must be presented for the total sales price immediately following the auction. That is true in foreclosure sales, but not in the open market. Auctioneers have learned in recent years to move with the market and allow financing and appraisal contingencies to buyers to maximize the return for sellers. Inspections, Title Opinions and surveys are often done prior to auction day so there are no unsavory surprises between the auction day and closing.

Sellers have different needs that can be solved with the services of an professional auctioneer. Say a seller wants a two week temporary lease after closing to move out, not a problem. The auctioneer simply makes the Temporary Lease a condition to the auction and the successful buyer is contractually obligated to honor the lease. With an auction the seller gets to set the rules, the date and the terms of the sale. They also remove themselves from the gut wrenching negotiation process as the terms of sale are the same for all buyers and they are competing against each other instead of the seller.

In short the auction process managed by a professional auctioneer with proper real estate licensing and experience will likely prove much more enjoyable for sellers in these hot markets. Additionally, auctioneers welcome the opportunity to work alongside real estate professionals who each have a common goal – to sell your home for the top market price. If you have a real estate professional that you are comfortable with but you want to consider selling by auction the two professionals can work together seamlessly with no additional cost to you, the seller. Experienced auctioneers will also offer traditional co-brokerage to any agent that brings a successful buyer to the auction which increases the pool of potential buyers and drive price even further.

President Trump’s Childhood Home Sells at Auction

Flipper makes 53% return in 30 days using the auction method of marketing real estate.

President Donald TrumpA New York real estate investor purchased the childhood home of President Donald Trump this past December for $1.39 million. Throw in the auction method of marketing and a 30 day auction marketing plan sales price of $2.14 million is achieved. A 53% return on investment. And they say auctions are the method of last resort, fire sales and giving your property away.

 

CBS News reports that president’s father, Fred Trump, built the home in the Queens neighborhood around 1940, and the Trump family lived there for 10 years before moving around the corner.

The Trump homestead offered five-bedrooms, 4.5-bathrooms, an eat-in-kitchen, formal dining room, fireplace, screened patio, den, finished basement, and hardwood floors along with a two-car garage.

Michael Davis purchased the home in December from Isaac & Claudia Kestenberg, who purchased it in 2008 for $782,500 and later sold it as part of divorce proceedings. The Kestenbergs  wanted to auction the house in October, after the third debate between the Donald Trump & Hillary Clinton. However, they chose to postpone the auction after “significant media attention.”

The home’s address is 85-15 Wareham Place in Jamaica Estates, in New York City’s Queens neighborhood. This is the address listed as the home address on the president’s birth certificate. Median home sales in the neighborhood is $850,000 according to Trulia.

Mr. Davies sold the home at auction grossing 2.5 times the median home value in the neighborhood, that is a deal that Donald Trump himself would be proud of. How do you place a value on the childhood home of a President of the United States? Simple you tell the market what day it’s going to sell and allow them to financially compete to own it.

The losers in this deal are the Kestenbergs. When “significant media attention” happens in the auction industry we call that “free advertising”!

Read the CBS News Article Here

Auctions Eliminate Holding Costs and Overpricing

overpricing costs youThe market always has the right answer; you just need to know how to ask the right question. Auction?

This past April a friend contacted me about selling his 100-acre horse ranch. He and his wife were going through a divorce and the court was appointing a receiver to sell the property. The auction method was a perfect solution – achieving market value and reducing holding costs and time. Time was important because each party was responsible for this property as well as their own, separate household. Reducing the marketing time would increase their net from the property and complete the divorce proceedings.

As we do with all real estate auction properties we conducted a thorough price expectation evaluation. After completing our evaluation, we set an auction expectation of $700,000 to $800,000. The estimated expectation did not set well with either party as they wanted over $1,000,000. The couple’s expectation of price was one of the few areas of agreement. Enter the traditional broker with a suggested list price of well over $1,000,000. Husband and wife, eager for the highest return agree that the broker should list the property and thus the broker was appointed the receiver and ordered to sell the property.

Several price decreases and 10 months later the property closed! Sales price? A whopping 54% of the original list price! Originally listed for $1.2 million the property closed for $650,000, much to the disappointment of both husband and wife. I wonder how the parties would have taken it last May if the broker said “I’m going to list it for $1.2 Million but I’m going to actually sell it for $650,000.” I reckon the auction method would have been a much more acceptable option.

Overpricing is bad for the real estate professional.

The practice of overpricing by this broker to get the listing cost this couple an easy $100,000 in additional and unnecessary holding costs and sale expenses. Auctions are truth serums. As experienced real estate auctioneers, we know that our papers will be graded by the market within 60 days of discussing price expectations with the sellers. Our rigorous method of evaluating price is time tested and proven. However, it is not always welcomed news for sellers to hear.

The professional real estate industry will continue to suffer until we, as an industry, deter the practice of overpricing. What if sellers told listing agents “If my property sells for 85% or less of your suggested price I don’t pay you any commission”? I suspect we would stop pulling list prices out of the clouds and get a bit closer to market value.

We at Alliance Auctioneers will give you an honest assessment of your property – every time. We will get up every day and keep working to change the perception of the oldest, most proven marketing method on earth. Auctions work!

Welcome

Alliance Auctioneers teamWelcome to the new and improved Alliance Auctioneers website.

Our team has known for some time that we needed to revamp our site. As with anything in business, it just takes time and money. When we decided to move forward wanted to do three things: 1) provide you with information about upcoming auctions, 2) educate you about the auction process and, 3) show you who we are as auctioneers.

This new site is a success! It provides you a portal to bid on items and learn more about our industry as well us who we are as professional auctioneers. Today’s public is not as versed in auction knowledge as previous generations. Much of that gap comes from more people growing up in urban areas versus farm or rural areas. Farm and rural areas have historically had more auction activity where young people were exposed to live auctions. To help you become comfortable with the auction process we want this page to be an educational resource into the exciting world of buying and selling by auction utilizing professional auctioneers.

Alliance never wants the fear of the unknown to prevent someone from attending any live auction event. Therefore, we are dedicating a large portion of this website to educating the you. As time goes on you will see short educational videos, pictures and blog stories of auction successes and failures from around the auction globe as well as other auction and auctioneer educational content.

No Experience needed…

If you are new to auctions we invite you to learn from our website and visit us at upcoming auctions. Upon arriving at any of our auctions simply inform any uniformed team member that this is your first auction. You will be introduced and paired with one of our bid assistants that will walk you through the process. Our bid assistants will hold your hand during your first few bids until you are ready to fly solo.

We hope you enjoy our new website and we look forward to seeing you at an upcoming auction very soon.

Biddingly yours,
The Alliance Auction Team