Listings and AuctionsAuction: The Unlimited Marketplace
Auctions allow the public to experience the sametype of excitement that is found on the floor of the commodities exchange.After the fervor of the event, sellers know their merchandise sold at pricestruly representative of market value, and buyers walk away knowing they paid anamount only one bid higher than what someone else was willing to pay. Everyonewins at an auction.
The auction is not a new marketing method. Thefirst English reference is found in the 1595 Oxford English Dictionary.Evidence records auction activity as early as 500 B.C. and during the RomanEmpire.
Although auctions are fun, the reason they havebeen successful for thousands of years is that they work. It’s hard to imagineanything today that cannot be sold at auction. The ’traditional’ auctionmerchandise that immediately comes to mind is expanding to include new types ofcommodities. Real estate, automobiles, repossessions and other merchandisepreviously overlooked as suitable auction material are all a part of today’sauction industry.
The Sellers’ Marketplace
Converting property, possessions or inventory tocash quickly is a major benefit of the Auction Method of Marketing, but sellersalso want to be assured they will get a fair market value. That’s why anauction is the best tool to meet that goal.
No less important is the flexibility of the auctionmethod. The customer decides when and what to sell. Well-trained auctioneersuse established and successful procedures to ensure maximum benefits for theseller. Before the auction takes place, the auctioneer meets with the potentialseller to see what is to be auctioned and explain the services available.During this meeting, the auctioneer will ask questions to determine theseller’s expectations.
The auctioneer takes great care to make sure theauction conforms with the Uniform Commercial Code, with any city, county orstate license requirements, and to verify title to the property and to notifycreditors of the auction.
The Buyers’ Marketplace
Auctions are an excellent marketplace. Buyersactually determine the final price and market value of the items purchased.
For first-time buyers, an auction may appear to bea confusion of people and merchandise, but once they become familiar withprocedures, they realize it’s more like a well-rehearsed symphony.
Buyers are provided all the information needed tobecome informed bidders and realize the auction market sets a a fair andreasonable price for property. During the auction, auctioneers stand where theycan be easily seen and often use a public address system.
As increasing bids are received, the auctioneer’srhythmic chant becomes a series of prices. Filler words are used to maintain apleasant flow to the chant.
Information about auctions can be found innewspapers, sale bills, brochures, etc.
Guarantee A Successful Auction
Selecting an auctioneer is the most important partof assuring an auction will be successful. By choosing an auctioneer whodisplays the NAA Emblem, the seller can be sure of a professional who isdedicated to improving his or her ability -and the profession-througheducation, integrity and honesty. Keep these traits in mind when choosing anauctioneer:
Motivation and Initiation -to approach the job withenergy and enthusiasm. This will be transmitted to buyers, increasing theseller’s profit.
Empathy and involvement - to put themselves in theposition of the seller and to evaluate the problems that may arise.
Integrity and Honesty - to earn the trust of boththe seller and the buyer.
Adaptability - to respond to the varied needs ofsellers and situations.
Flexibility - to be open to new ideas andtechniques.
Knowledge - to properly market and sell the productbeing auctioned.
Selecting the right auctioneer will lead to thesuccess of the auction. To be sure of a quality minded auctioneer, look for theNAA Emblem - behind it you will find a leader in the auction profession.
National Auctioneers Association
This prestigious group was founded in 949 by agroup of auctioneers who believed in the potential of the Auction Method ofMarketing. Since its inception, NAA has grown steadily and now includes membersfrom all 50 states, Canada and other countries. NAA is an organization of menand women dedicated to the auction profession. They adhere to the finestprinciples of integrity and subscribe to a strict Code of Ethics. Headquarteredin Overland Park, Kansas, the NM network of auctioneers is ready to provideauction buyers and sellers with the most current advancements and experience inthe field of auction marketing.
National Auctioneers Association 8880 Ballentine OverlandPark, KS 66214 (913) 541-8084
· Come early to view the merchandise
· Have driver’s license ready
· Register with the clerk to receive a number (This is your biddingnumber)
· Look carefully for those hidden treasures
· Determine what you would like to pay for an item
· Raise your bidding number up high when you want to bid.
· If you are not sure where the bid is at, ASK!
· You may settle your bill any time during the auction.
· Pay for item before leaving the auction premises
Traditional sale bills and newspaper ads are themost popular ways to advertise. However, now in this technological age, theinternet has become an important part of advertising. At www.a-nacutions.com wewill contain all information about your auction including pictures. We alsoadvertise with specialized mailing lists, and informational signs. Regardlessof the size of your auction, the correct amount of advertising is essential tomake your auction a success.
Real Estate Auctions -
Imagine your ideal real estate sales technique. Itwould probably be one that sold the property quickly at a price that both theseller and the buyer considered fair, and that gave the real estate agent agood fee or commission, too. Well, you don’t have to tax your mind trying tofigure out what this technique might be, because it already exists.
It’s called a real estate auction.
Auctions are effective, easy and fun marketingtools that are rapidly growing in popularity as a means of selling real estate.No longer simply a way to dispose of property after a bankruptcy orforeclosure, auctions have become a legitimate way to sell real estate. Andthey work for all types of property, including residential, commercial,industrial, agricultural and vacant land. In fact, auction sales of real estatehave more than quadrupled since 1980 and are expected to account for 30% of allreal estate sales by the year 2000.
Why Auctions Work
Why are real estate auctions so successful Becausethey change the direction and focus of the sales effort in several importantways:
From waiting for an offer to stimulating the marketto get an offer,
From reducing the price (negotiation) to building aprice (bidding),
From valuing only price to valuing the timeinvolved in getting an offer, and
From competition among properties to competitionamong buyers.
Let’s look more closely at how auctions differ froma negotiated sale, One of the most difficult parts of the traditional listingprocess is setting the asking price. If the price set is too low, the propertymight not bring in all it could. If the price is too high, the real estatemight not sell for some time, resulting in holding costs that can eatconsiderably into the owner’s proceeds. Besides the sales date being uncertain,the offer is usually subject to negotiation and contingencies, such asinspections, which can adversely affect the price and make the closing lessdefinite.
The auction process flips this over. The sellerestablishes the date and terms of the sale, such as minimum bid, auction withoutreserve (absolute auction) or auction subject to confirmation. Bidding sets theprice. There is no negotiation, and the property is sold ’as is.’ This makesinspections part of the pre-sale due diligence process, not the post-offernegotiation process, and makes closing on the accepted bid almost a certainty.
Also, auctioneers typically allocate more formarketing than is the case for a traditional listing, in fact, well-plannedmarketing efforts are key to an auction’s success. Consequently, auctioneersuse strong media advertising, targeted direct mail and other aggressivemarketing techniques to get the word out about the auction and attract biddersto it. And because auctioneers often advertise in more than just thetraditional places for example, placing ads for vacation homes in the sportssection and their ads attract bidders who might not be actively seeking aparticular property, but from whom the top bid comes.
From the seller’s point of view, auctions provide apowerful tool for selling their property quickly and for a fair market price.That’s because auctions often generate more interest — and greater value — thanother sales techniques, for several reasons.
By establishing a definite sale date, an auctioncreates a sense of urgency that increases buyer interest. The pressure of adeadline can push bidding considerably beyond the price that would have beenset in a traditional listing. This is due not only to the excitement about thepossibility of obtaining a bargain, but also to the fact that bidders arecompeting with each other for a given property. An auction is a social event,not individual negotiation, that creates the apparent requirement that bidderscompete to be the successful buyer. So they do sometimes much to the seller’sadvantage.
Having a definite sale date gives auctions anotheradvantage: The seller usually gets the proceeds shortly afterwards. Because asubstantial down payment is required of the buyer, the sale almost alwayscloses. As a result, an auction sale often gives the seller cash more quicklythan a negotiated sale. Because of the time value of money, having the dollarsin hand to invest in other ways, rather than tied up in the property for monthsor years, can make a quick sale worth more in future gain than a sale prolongedby lack of market interest, contingencies or negotiation. Auction sales canalso eliminate the need for a costly bridge loan or for security and holdingcosts on a vacant property. Minimizing such expenses can make the proceeds ofthe sale even more valuable to the seller,
However, sellers are not the only ones who benefitfrom auction sales of real estate. Buyers like the fair competition thatauctions provide all bidders have a chance to buy the property and the factthat they determine the purchase price. Buyers also have an opportunity to doinspections and due diligence before they bid, so they have a better idea ofwhat they are purchasing and greater certainty that the top bidder will get theproperty. So buyers don’t waste their time negotiating on properties they mayend up not purchasing.
Real estate agents benefit, too. Auctions canincrease not only their sales and market share, but also their fees andcommissions. They can even get a commission by bringing the winning bidder toan auction. Because auctions can help customers achieve their goals (or sellinga property, real estate agents can strengthen their reputation and get customerreferrals for more business. Also, by cooperating with an auctioneer, a realtorcan generate leads from the bidders who attended the auction but did not end upwith the property.
Deciding Whether To Auction
While auctions are suitable for all types of realestate, they may not be appropriate for some sellers or specific properties. Indetermining whether an auction is appropriate, see how it fits the nature ofthe market, the needs of the seller, and the condition of the property. Hereare some things to consider when deciding whether or not to sell a particularpiece of real estate by auction.
Market - Auctions work especially well in:
Changing markets, in which there are no reliablebenchmarks for setting the price,
Dull markets, in which similar real estate is notselling (auctions bring in new people from other areas or markets),
High demand markets, where no comparables exist forthe type of property being sold, and
Emerging markets, such as subdivision openings orclosings (auctions generate interest).
Seller - The need of the seller for a quick sale orimmediate cash can make an auction the preferred sales technique in situationslike these:
Foreclosure or bankruptcy,
Partnership or marital dissolution,
Estate liquidation, and
Retirement to another location
Property - While all types of property are amenableto an auction sale, the following are particularly well suited:
Vacant properties (the quick sale of an auction canreduce holding costs),
Properties with substantial equity, and
Unusual, unique or high demand properties.
Many auctioneers will recommend that there be agood fit on at least two of these three factors. Others prefer a fit on allthree before they will accept a property for auction. But even when all threefit, an auction is not necessarily appropriate if other conditions are notright. For example, perhaps the worst time to set up an auction is when a realestate listing is about to expire (even then, however, an auction might providea solution, depending on the amount of time left before expiration.)
If there is a fit but the notion of an absoluteauction (where the property is sold to the highest bidder regardless of price)seems too scary, there are ways to reduce risk. For example, the seller mightprefer a minimum bid auction, in which the auctioneer will accept bids at orabove the minimum price. This guarantees that if the property sells, the sellerwill receive at least a certain amount. Another option is the reserve auction(also called an auction subject to confirmation), in which the high bid isreduced to an offer, which the seller has a right to refuse for a specifiedtime. If the seller does not like the price bid, there does not have to be asale.
Give Yourself the Auction Advantage
Of course, if you have any questions about themerits of an auction for selling a particular piece of real estate, or aboutthe best way to structure an auction to achieve your objectives, consult aprofessional auctioneer. As highly knowledgeable professionals, we can adviseyou about the best course of action. And if you decide to go with an auction,we will take care of all the details, from marketing through closing.
We would welcome the opportunity to discuss yoursituation and help you determine how an auction can help you sell real estatequickly and at a fair market price. Please call us for more information, andgive yourself the auction advantage.
Buyer’s Premium Information
A buyer’s premium is an amount added to the highprice of the property either a flat fee or a percentage of the high bid, thatthe buyer must pay in addition to the bid. The premium is advertised in advanceand becomes a part of the final purchase price. The buyers premium works wellon types of property: personal property, business liquidations and real estate.The buyer’s premium defrays the sellers cost of conducting the auction andthereby increases the bottom line for the seller.
TAG SALES VS. AUCTIONS - NO CONTEST -
There is no more efficient or fair means ofliquidating an estate or a family’s belongings than an auction.
Statistically over half of all appraisals is onlyone person’s estimate of the fair market value of an item. It doesn’t guaranteea buyer. If someone ’tags’ an item too low, the seller may never know, becausesomeone else quickly snatches it up. lion the other hand, the price is toohigh, it doesn’t sell. The owner is then stuck with it.
The only true way of arriving at fair market valueis to establish that value by two or more interested purchasers.
Auction is the basis of value for almost every typeof goods in the world today. Values of stocks, bonds, precious metals,commodities, livestock, antiques and even humble household goods are arrived atin a competitive bidding manner.
Traditionally, tag sales are advertised by a fewlines in the local newspaper. This might be fine if all that was for sale wassimple household goods.
A qualified auctioneer maintains specializedmailing lists that reach out to people who are interested in specific items.The auctioneer also utilizes publications that are targeted to specificmarkets.
There is no licensing or bonding required for ’tagsales.’ They are not governed by a strict code of ethics or set of by-laws suchas the National Auctioneers’ Association or their local or state association.They have no continuing education programs such as Certified AuctioneersInstitute held annually at the University of Indiana or the many excellentnational and state sponsored seminars. The qualified auctioneer is continuallystriving to upgrade his or her skills.
A tag sale can disrupt housekeeping for as much astwo weeks. With most auctions, the firm comes into the home the day of the saleand handles the set-up. The merchandise is cleaned if necessary andattractively displayed. The next afternoon the yard and home are clean, and theowners are presented with the money and the sales clerk sheets, which areaccurate accounts for every item sold.
All this is offered at a much smaller cost than a’tag sale.’ In most cases, the ’junk’ or ’jewelry wagon’ items will bring enoughto more than cover the expenses of the auction. These arc the very same itemsthat the ’tag sale’ would have left at the end of the sale for you to send tothe Salvation Army.
Everything sells! Nothing needs to be packed up andhauled off to charity or sold to a dealer for pennies on the dollar. Not onlyis auction fairer to the seller, it is fairer to the buyer. At a tag sale, onlythe first person in line ’ (or in some cases, the tag saler’s’ help) has anopportunity to buy every item. At an auction the items are offered for sale andevery person present has an equal opportunity to purchase. The buyer also neednot wonder if he paid too much. The buyer can determine ahead of time exactlythe amount he is willing to spend and stop bidding at that point.
In short, a professionally managed auction is thebest way to bring together a willing buyer and a willing seller, therebyfulfilling the true definition of ’fair market value.’
Here are some common auction terms and what theymean:
Bidder’s Choice: A method of sale that gives thehigh bidder the right to choose a parcel or parcels from a grouping of similarproperties. After selection, the parcel is deleted from the group, andsubsequent rounds of bidding take place. Parcels selected by each round’s highbidder are deleted from subsequent rounds.
Choice: The privilege extended to the successfulbidder to select for a price he or she bids one or more of the identical orsimilar items from the group of such items that has been presented at theauction.
Stillwater, OK 74074