Real Estate Auctions Gain Popularity

Real Estate Auctions Gain Popularity
As many homes remain on the market for extended periods of time, many sellers are turning to the auction format to sell their properties. There are several reasons for this, especially in today’s market conditions.
Australia, New Zealand, the UK and other countries have used auctions to sell valuable assets such as real estate for many years and in the US auctions have long been used since the War of Independence and the Civil War. It was originally used after a battle to sell the spoils of war, thus the term Colonel. Years ago, some auctioneers referred to themselves as Colonels for this reason.
During the depression, the auction method was used to sell properties in foreclosure and still is today. When a property sells on the courthouse steps from the foreclosure process, the lender usually ends up buying the property back to eliminate any junior liens and the property becomes what is referred to as an REO (Real Estate Owned). Most lenders do not like this term however and may refer to the property as a Special Asset.
Buying a property at a true foreclosure sale can be complicated, risky and one is usually competing against the lender and possibly other professional investors. It is not recommended for the novice for several reasons.
It is understandable that auctions have been associated with distress and a means of last resort. For years, they have carried a negative connotation with them.
This is not the case any longer. When you consider that the high-end auction houses such as Sotheby’s, Christies and other auction companies that sell assets from fine art to collector cars for hundreds of thousands of dollars into the millions, it’s not a wonder that real estate was going to enter the fold of assets for sale using the auction method. It is no longer a last resort and since the 1990s to 2007, real estate at auction has tripled and is a multi-billion dollar industry.
Some reasons many sellers are using or considering the auction method for selling their properties are Time, Holding Costs, Stress, Relocation, Job Change and Better Exposure to the Market.
Savvy asset managers and business people have long known the Time Value of Money. They consider the use of the money (Equity) now may be better than the risk of waiting for a longer period of time.
Holding cost are associated with on-going mortgage payments, taxes, insurance, utilities, maintenance and repairs, and changing market conditions such as the mortgage money supply and/or declining values.
With more and more buyers looking to the Internet for their home searches and information, auctions make sense for buyers and sellers alike. Many real estate auctions are done on line or use a combination of live, on line and phone-in bids to approved, registered bidders.
Buyers can assume that the seller is realistic in their expectations while sellers have a better venue for exposing their property and closing in a more timely fashion. This allows the parties to avoid the sea of over-priced properties. Over-Priced properties are one of the reasons there is a 10.5-11 month supply of homes for sale in Charlotte County alone. A normal supply would be approximately a 3 month supply. This same factor holds true in Sarasota and Lee Counties as well, according to many analysts.
“When you consider the very definition of Current Market Value, auctions are a scientific approach to selling”, said Bill Hoyle of The According To Hoyle Group-Shells Realty with offices in Punta Gorda, Burnt Store, North Port and Sarasota.
Bill said “If a property is worth what a ready, willing and able buyer will pay, with the proper exposure to the market in a given time period; then an auction compliments and supports this very definition of Current Market Value”.
The According To Hoyle Group has been involved in selling real estate since 1986 and has sold over 2,500 properties. They originated from the OH/MI area when they arrived in Florida selling Special Assets at Absolute Auction one week out of every month. They have been involved in teaching, selling and consulting in several states and sold properties all over the state of Florida. They would fly from one sale to the next in a small Mooney Plane in the same day.
“We’ve sold every type of property from single family homes, multifamily residences, golf courses, marinas, businesses, land and lots, bars, restaurants, an island and even schools for municipalities” according to Terrie Hoyle. Terrie is a Licensed Broker-Associate, a Mortgage Broker and has been involved with high-end marketing and negotiations. She is Vice President of According To Hoyle, Inc.
According To Bill Hoyle, there are 3 commonly used types of auctions when selling real estate. They are Absolute, Public or Reserve Auctions and a third type, Minimum Bid where a reserve is publicized as a minimum and discloses the lowest dollar at which the seller will guarantee a sale or where the bidding becomes absolute. A Public or Reserve Auction does not disclose the reserve or minimum, while an Absolute Auction sells to the highest bidder, wherever the bidding stops.
Any seller wishing to explore the auction option should consult a professional and experienced auction group when considering a sale. There are several specifics determined in advance such as the deposit from the buyer, who pays for what closing costs, the best dates, the type of auction sale, the marketing budget-exposure campaign and if the sale should be held live on site and or on line along with other options.
“We’ve been involved in real estate and auctions as a group, including some family members like my daughter for years” Bill Hoyle stated. Heather Hoyle-Jones is a Mortgage Consultant and a Licensed Realtor.
Bill Hoyle possesses the AARE (Accredited Auctioneer Real Estate) and the CAI (Certified Auctioneers Institute) designations.
The designations are taught primarily at Indiana University and are considered the Doctorate Degree in Real Estate Auctions among the auction community.
“Auctions are somewhat different than conventional sales” according to Mr. Hoyle. “With an auction, the sellers control the days, dates and times for the sales” Hoyle went on to say. “Usually, the only thing that’s determined on sale day or in the case of an on-line sale, the ending date merely sets the price offered. The buyers need to pre-arrange their financing in advance since the sale is usually not subject to or contingent on financing and the ability for a buyer to get a loan. That’s one reason we offer financing options up front for the convenience of the buyer”, Bill Hoyle stated. “Most savvy buyers go through the pre-approval or pre-qualification process already.”
When asked How Much Does it Cost or what fees are involved? Terrie Hoyle said “The seller participates in the exposure and advertising budget and the buyer will most often be required to pay the selling fee in the form of a buyer’s premium.”
The buyer’s premium is usually a percentage that is added on to the final, high bid in order to determine the contract or sales agreement price. The fee, as it was explained pays for the auctioneers, staff and cooperating brokers. Brokers can register their buyers for the sales in most cases and may be compensated if they procure the buyer that closes on the property. Brokers can refer their sellers to an auction firm as well.
When asked how the property is advertised or exposed, Terrie Hoyle sad “The sales can be advertised based on what we call Buyer Profiling. It’s based on where the buyers are most likely to come from, where they live, what income bracket they’re in, recent migration patterns, age demographics and many variables for the best exposure.” Professional auction firms have access to in-house database lists, other list sources, newspapers and print media sources, websites and web- portals, MLS, IDX, Realtor.Com and also do direct mailings. The signs usually have the date, time and e-mail address for more information along with the phone numbers and Website Address.
Auctions gain attention in a market where the choices have been diluted and in some cases made buying complex and even overwhelming to some buyers.
Buyers are looking for good buys and have many choices currently. Auctions freeze the market around competing properties and give the buyers an answer much sooner than a long search and negotiation process.
“The buyers can have the property inspected and usually have a seller’s disclosure statement prior to the sale” Bill Hoyle affirmed. “Our sales offer clear, marketable title and customary closing procedures as with a conventional sale too Sellers are obligated to disclose any known defects to the buyers as well. So the myth that you may get burned is simply not true, at least at our sales.”
We learned that most sales begin with a consultation with the auctioneer, a marketing period of 6 to 8 weeks and then a contract which usually allows for a 30 day period to close. We also found out that the usual marketing fees or budgets vary from one auctioneer to another but run from 2% to 4% of the expected value of the property. Hoyle mentioned that one should be leery of a very low advertising budget since advertising and exposure are critically important in selling a property and can influence the results drastically.
Newspaper advertising can be expensive depending on which papers you use and how often it is run. For example, running one small ad in the New York Times is approximately $700 per run. Then consider Chicago Papers and of course Canadian Papers. When coupled with local print media exposure, the newspaper exposure can be costly. This does not take into account Websites, E-Mail Campaigns, Signs, Direct Mail, Portals and in some cases, TV and/or Radio. “Each sale is done on a case-by case basis” Terrie Hoyle said. “This is discussed in detail with each seller based on the project and is our forte. Keep in mind that there are no miracle cures for selling. When our market was very strong such as in 2004-2005, almost every sale resembled an auction. There were multiple offers on many properties and the bidding process was going on then. That was a good time to do an auction however now that the market has adjusted and slowed, the results will reflect that. I always look at the definition of Current Market Value. If you live and breathe the business daily like we do, you’ll see the appraisers have really pulled in the reins and tightened up. Some conventional sales are not appraising and the negotiation process resumes if the deal is to stay together. There is no such thing as a better time to do an auction but certainly now’s a good time. We had our own brokerage and were doing mostly auction sales until the market boom of 04-05. Then we associated with Robert Milligan, a bright ambitious broker out of Sarasota with Shells Realty. At the time there were only about 5 or 6 of us, all top producers and our only office was in Port Charlotte with the Corporate Office in Sarasota. Now Shells Realty has approximately 150 agents, multiple offices and our office is in Punta Gorda at 207 Cross St.”
So you decide; as Auctions Gain in Popularity, which option is for you. It appears to be a growing trend and not one likely to go away anytime soon.

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