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This article continues the series demonstrating to sellers, real estate professionals and auctioneers creative ways to use technology to market real estate effectively. For the most part this post is an excerpt originally included in my soon to be rereleased eBook, “Real” 21st Century Real Estate Marketing.

Why Auction My Home?

As you may have noticed, real estate auctions are becoming more common every day. This trend actually began well before the current mortgage crisis, which is responsible for so many foreclosure auctions. Actually, real estate auction marketing has been growing in popularity as a viable alternative for a decade.

As a former member of the National Auctioneers Association, and Certified Real Estate Auctioneer, I’m going to discuss the differences between auction marketing and traditional real estate marketing.

Once I started selling on eBay in 1999, my focus gradually shifted from traditional auction marketing to online auction sales. After all, eBay is an auctioneer, albeit a virtual one.

In this post, I’ll discuss 10 reasons why traditional auction marketing can benefit a property seller.

1. It’s a Quick Sale - Since time is money, an auction affords property sellers the opportunity to dispose of property NOW, at today’s prices, rather than speculating about tomorrow. A lot of unforeseen circumstances can impact the value of a property positively and negatively over time, such as tax legislation, mortgage rates, unemployment, etc.

2. The Seller is in control of the sale - The seller sets the date and time of the sale, along with the terms and conditions. When a seller discloses up front any requirements pertaining to earnest money, date of closing, etc., they provide legitimate buyers with the necessary information they need to consummate a sale. The effectively rids oneself of the headaches associated with insincere buyers, contingency laden offers and other buyer slanted issues.

3. High Carrying Costs Are Avoided- As home sellers currently on the brink of foreclosure know, property that remains on the market for a long time can become a serious drain on the owner, while rapidly affecting an owners equity in a property. Holding costs like insurance, taxes, mortgage payments, maintenance, etc. can amount to hundreds or thousands of dollars each month.

4. Fair Market Value Can be Demonstrated…..FAST! - Instead of relying on an appraiser to determine the value of a property, the auction process demonstrates the true value of a given property on a given day. When an auctioneer effectively markets a real estate auction, the potential exists to realize a greater sales price than would have otherwise been possible using the traditional listing method.

5. Marketing Efforts are Isolated and Property Specific- When a property is marketed individually - over a compressed time frame - to a targeted audience, it is realistic to expect immediate results. This differs significantly from the traditional listing method, wherein, a property is often marketed with several other properties to a broad audience. Often these properties, though marketed together, have nothing in common and have individual features that appeal to very different buyers. This results in less penetration and is a waste of time and money.

6. Auctions Effectively FREEZE the Marketplace - Think about it….if you were looking at House A (which is listed with a Realtor for $100,000) and one block over, comparable House B will be going on the auction block soon, wouldn’t you wait to see what House B did at auction before presenting an offer on House A? Most local buyers will wait for two reasons: To determine fair market value for House A, and to possibly get a good deal on House B if it presents itself at the auction.

7. Sunday! Sunday!!! SUNDAY!!!! - Think about the monster truck event commercials. They do a great job of creating a sense of urgency to come out for the show which happens ONE DAY ONLY! This kind of marketing applies to your real estate auction too! You’re only going to have the auction on one day. If somebody comes the next day, they will be too late. This kind of urgency creates excitement which often translates into more bidding activity and higher prices.

8. Buyers are Pre-Qualified and Come Prepared to Buy - Most real estate auctions stipulate that by bidding, a bidder acknowledges that they have performed all due diligence necessary to close on the real estate. Additionally, most auctioneers require bidders to present certified funds to bid or at least upon winning the auction. This process weeds out flaky bidders pretty well. Lenders generally have no problem lending on auction properties, as long as a buyer is pre-approved. This results in a higher quality buyer than is commonly seen in the traditional listing method of selling real estate.

9. Commissions Can Be Paid by the Buyer - The beauty of the auction method is the ability to utilize what is called a Buyer’s Premium for the purpose of paying commissions. This is very motivating when compared to paying the standard 6%-7% brokers regularly command around the country. It also allows a seller to be more open minded when the final bid comes in, knowing that no other fees need be paid.

10. If it’s good enough for Van Gogh, it’s Good Enough for Me! - (Never mind the fact that Van Gogh was on the neurotic side.) It seems like every week you hear accounts of some collectible car, painting, musical instrument, or historic document bringing millions of dollars at auction. This is no fluke. Only the auction method of marketing can bring all the fundamental ingredients together to ensure these record prices. These same elements exist in your real estate auction event to make it a success:

• Uniqueness - There’s only one of your property

• Urgency - Your property is selling one day and one day only. You snooze you lose!

• Excitement - In the heat of the moment, bidders sometimes go above their “top price”. What a nice problem to have as a seller!

If you’d like to try to auction your property, of give your clients an auction marketing alternative, you have several options.

1. Go to your state auctioneers association website to find a qualified real estate auctioneer. Or, better yet, go to the National Auctioneers Association website and look for auctioneers that have either the AARE (Accredited Auctioneer Real Estate) or CREA (Certified Real Estate Auctioneer) designation, which demonstrates that they specialize in real estate auctions.
2. Consider using an online auction service like 123sold.com, Bid4Homes.com or even eBay. If you do this, you really need to keep in mind how important it is to market your auction. In other words, remember that the auction method is just a method…..but you need bidders to make it work. It’s imperative that you get bidders to you auction to get some activity happening.
3. If you’re a broker or agent, talk to your franchisor to find out if they have any in-house auctioneers they can refer you to. United Country Real Estate, has recently launched it’s own auction division recognizing the growth in this market segment. Others are following suit, and yours may be one of them. Also, don’t try to do it yourself. You’re better off referring the listing to an auctioneer for the referral fee, than to sabotage your client’s sale.

Auctions require a lot of time and preparation to pull off effectively, but can be very rewarding for all parties involved. Stay tuned for Part 2, when I discuss the negatives of real estate auction marketing and get into the components that lead to a successful sale instead of a miserable failure.