Major Advantages of Real Estate Auctions over Conventional Listing

Auctions have many advantages for the seller over conventional listing methods.

for saleReal estate auctions offer many advantages in today’s market. Sellers typically prefer not to wait months or even years to receive an acceptable offer on their property. As a seller, you ideally want an offer as quickly as possible to turn a page in life and to move on. The auction method of sale is the only suitable choice for that situation. Selling real estate by auction is perfect for sellers who need to sell quickly but receive market value. The auction method of marketing is extremely important to establish market price on unique or large properties with a very small pool of potential buyers. To put it simply, a real estate auction establishes true market value of a specific property in a specific marketplace on a specific day.

The benefits of real estate auction greatly outweigh the mainstream listing method in many cases.

Put the Markets Focus on YOUR Property – An auction showcases your property to the marketplace, providing maximum visibility to the target market. Potential buyers must decide on your property first as it is date certain and will not be on the market past the auction date. In a conventional sale environment, your property will just be one of many (currently over 20,000 on our local system) that are minimally advertised in the Multiple Listing Service (MLS). At Alliance we belong to four of the major MLS systems in Texas. We place your auction on each system to notify all real estate professionals that your property will be sold at auction and invite them to register their buyers.

Lightening Fast Market Price –  Real estate auctions offer a marketing timeline for a residential property of 30 days, a large ranch takes 60 to 90 days. Mainstream listing methods typically take months for single family homes and years for large ranches. Real estate auctions compress the marketing timeline and notify all potential buyers that auction day is the day to buy.

“Real Estate Auctions take the control away from the buyer and gives it back to the seller”

The Sky is The Limit –  An auction does not have a ceiling when it comes to price. I doubt any auctioneer in World History has ever said “I’m stopping the bidding, it’s too high.” Auctions allow the market to speak for itself, that’s why world record prices are established at auction not by seller pricing. Conventional listing methods allow the highest possible price to be capped by the seller´s asking price.

Contingencies? We Don’t Need No Stinkin’ Contingencies – Properties offered at auction are sold “as-is”. This means the high bidder cannot back-out of the auction purchase contract without risking their escrow money because of inspections or lack of financing. Experts have estimated conventional sales have a fallout rate as high as 50% because of contingencies. This wears on the seller’s emotions and lengthens the time it will take to sell their property even more.

No Negotiation Zone – The auction method of marketing real estate pits buyer against buyer. This allows the seller to sit back and enjoy the escalation of price since the terms and conditions of the sale were established by the seller prior to the auction. Conventional sales processes pit the buyer and seller against each other causing an anxiety-ridden back and forth, sometimes for days or weeks. Many times, this results in strained relations between the buyer and seller even after negotiations have been settled.

True Market Value, NOW –  Markets ebb and flow faster and more often than ever before in World History. Real estate values can drop dramatically over the span of a 6 or 12 month listing agreement. When you are ready to sell, real estate auctions provide the catalyst to determine the true market value of your property within 60-90 days. All too often the conventional listing process starts out with overpricing a property immediately killing the interest of potential and serious buyers. At an auction, the fair market value of a property is established and goes up from there.

Timing, It’s Everything –  Real estate auctions allow the seller to control the marketing process on their chosen timeline. Conventional sales methods guarantee that sellers will play the waiting game. Sellers will wait on buyers to show interest, wait on them to come see your property, wait on them to make an offer, wait on them to accept your counter offer and wait on the option period to expire. But with an auction you have more control. Auctions are the fastest way to seriously move real estate because much of the waiting is simply eliminated.

Offers, Let’s Get a Bushel Basket of ‘em – In a conventional listing you rarely get multiple offers. If you do it is likely a good sign that you are under-priced. Typically, you can expect a painstaking process of waiting for an acceptable offer from a qualified buyer. Industry experts predict the average listing gets nearly three offers before an acceptable offer is made, but those offers are not at the same time. With an auction, you will get many offers presented on auction day until the highest and best offer is determined by the auctioneer. That’s the only one you wanted when you decided to sell.

Don´t waste time on often ineffective conventional listing process. Selling real estate by auction is the new way to get it done.

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!