Real Estate Auctions

I bought a property in Park City, Utah at auction a little over two years ago. It was a developer closeout auction on a condotel property. The initial fees were only about $100 I think to register and participate in the phone auction part for all out of state participants (others were live at the auction site).

Premium was 10% of the bid, which you just need to factor into your bid to determine if that is a price you are willing to pay. I thought I got a great deal and appreciation since then has proven all prices at that particular auction to be a steal (so far).

I was speaking with a friend of mine earlier today. They inquired about selling their SoWal property through Roebuck Auctions. They owe about $700,000.00 on it, and have lowered the asking price to about $775,000.00, down from their original asking price of around $850,000.00.

Roebuck told them they require a non-refundable $7,500.00 listing fee to sell at auction, and that they could expect to get a bid of around $500,000.00 at the sale.

I assume this means the auctioneers get money up front, and an additional % if the property sells. In this market it seems like a great deal for the auctioneers and the buyers. If you're a seller, be prepared to get bottom dollar if you decide to sell this way.

The upfront fee is for advertising. If they have 6 properties in a single auction, they may have a $60K budget. My understanding is they take that 60K and split it up among the sellers depending on value of the property. The 10% is a buyers premium. If they bid $500K, they will write the contract for $550K. The seller doesn't pay it. It's not always a bad deal for the sellers. Of course, the deciding factor on that is going to be when they bought and how much they paid. If your friend had paid $300K for the property, and it brought $500K at auction, it wouldn't be such a bad deal.

I'm just curious to hear everyone's opinons on real estate auctions. Do you believe in them? What do you think about the initial fees and buyers premium?

The problem with auctions is that many people think an auction will change market fundamentals...which it usually won't. The best way to sell a property is to price it so that it's attractive to a buyer. In today's South Walton market, that means turning the price clock back by about 3 years and get the widest exposure possible, and that's usually by listing with a Realtor. Say what you want about Realtors, but they're the ones with the buyers. Unless you just want to unload a property at any price --- and it's done every day by estates and other circumstances --- I think an auction would be a terrible way to sell property in South Walton under current conditions. Just my opinion.

I understand the % on the back end is paid by buyer. I guess what I should have said is this is a good deal for auctioneers, buyers and advertisers.

The problem with auctions is that many people think an auction will change market fundamentals...which it usually won't. The best way to sell a property is to price it so that it's attractive to a buyer. In today's South Walton market, that means turning the price clock back by about 3 years and get the widest exposure possible, and that's usually by listing with a Realtor. Say what you want about Realtors, but they're the ones with the buyers. Unless you just want to unload a property at any price --- and it's done every day by estates and other circumstances --- I think an auction would be a terrible way to sell property in South Walton under current conditions. Just my opinion.

I totally agree with this philosophy...200%, and there are still many sellers that would have this level of appreciation with this formula. :clap_1:

I've been doing some research on this and have seen a lot of different views. One of the main points the auctioneers are making is that there is no better way to set a price on a property than having 10-15 people competitively bidding against eachother. A property is worth only what someone is willing to pay for it. What's your view on that?

I'm just curious to hear everyone's opinons on real estate auctions. Do you believe in them? What do you think about the initial fees and buyers premium?

I've dated a VERY successful Auctioneer,( another story... won't bore ya) that works all over. He's known for his audience participations and that's the biggest advantage, in my opinion! He can pull money, out of a rabbitt's ****!:clap_1: :clap_1: :clap_1: Anyone interested, PM me.

I've been doing some research on this and have seen a lot of different views. One of the main points the auctioneers are making is that there is no better way to set a price on a property than having 10-15 people competitively bidding against eachother. A property is worth only what someone is willing to pay for it. What's your view on that?

From what I am seeing and hearing at auctions, there are not 10-15 people bidding. Most of the time, there may be 2-3 bidders, and I know of plenty with one or zero bidders. Are you suggesting that your auctions are different?

I've dated a VERY successful Auctioneer,( another story... won't bore ya) that works all over. He's known for his audience participations and that's the biggest advantage, in my opinion! He can pull money, out of a rabbitt's ****!:clap_1: :clap_1: :clap_1: Anyone interested, PM me.

Now that is an auction which I would like to see.

I've never held an auction, just going by what others have said. I too would be suprised if auctions averaged that many bidders.

I have a friend who recently scored a new 2/2 townhome on 30A for under $200K at auction. It seemed the bank wanted some money from the developer, so, he auctioned off a few units. I found out in hindsight, otherwise that bidder would have been wearing my nametag. A great score for the buyer. ;-)

Definately a good buy!

Auctions are fantastic for a buyer in a down market, and excellent for sellers in a hot market. The absolute best time to buy is when its a buyers market, which is right now - and dont buy anything when its a sellers market. The interesting thing about this market is buyers are so skeptical and sellers are so nervous its pushing the prices down below what the equilibrium price should be. In other words - NOW IS THE TIME TO BUY! Its working for me, I bought 2 properties this year at auction and have done very well on both of them. I am not a realitor nor did I use a realitor when I turned around and sold them both.

Mark pale, not all auctions are great for buyers right now. Many sellers are not selling absolute, and have a substantial minimum. From what I see in auctions today, the majority of properties held at auction, are not selling at auction. I will be curious to see how much one particular property, being sold absolute auction this week, brings. We had it under contract last year for $5M+. Had the seller placed a little more realistic price on the mobile home to begin with, perhaps we would have went to close.

I've never held an auction, just going by what others have said. I too would be suprised if auctions averaged that many bidders.

I've been to numerous auctions of Jack Granger's, with Granger Thagard Auctioneers Birmingham, AL. You wouldn't believe, the turnouts! I'm certain that it's due to the advertising (lots) and their impecible reputation! And yes, he's the one that I dated!;-) In his business, he knows what he's doin', draws the crowd in & gets them to participate and is VERY successfull at it! Commercial, Residential, Farms/Equipment, Liquidations, Charities, he does it all and everywhere!

http://www.gtauction.com






President

Smiling Joe, I assume that you're talking about the acreage in Freeport. I'll be there as well.

Originally posted by Mark pale

I am not a realitor nor did I use a realitor when I turned around and sold them both.

That would be REALTOR, not the unknown profession you mention

I understand the % on the back end is paid by buyer. I guess what I should have said is this is a good deal for auctioneers, buyers and advertisers.

So one could say that it is an "Auctioneers, Buyers and Advertisers Market."

If the seller has a resonable sense of value of the property, then it's not usually a bad deal for the seller either.

If the seller has a resonable sense of value of the property, then it's not usually a bad deal for the seller either.

If the seller had a "reasonable sense of value" and applied that knowledge based on present market conditions (excessive inventory--very few buyers) when pricing their home for sale, they wouldn't need an auctioneer to sell their home.

I believe folks who go to these auctions fall into 3 categories (1) People who are actually looking to buy a place at the cheapest price possible; (2) Late-night Infomerical Devotees who think they're on their way to making a killing in the real estate market, and (3) Owners of other properties and realtors from the surrounding area who are curious to see what's happening in town (and probably farming for potential buyers).

Aside from the obvious need for an auction for the average joe selling a home (meaning they want to unload it quickly with no hassles), a lot of these folks selling their homes at auction today take the view that they are selling "fine and rare pieces of art" that are highly prized by many folks eager to out-bid each other at ever increasing prices...nothing could be further from the truth. People going to these auctions are looking for bargain-bin prices...meaning BELOW what properties sold for in the last couple of years.

There may be an odd property that fetches a fairly decent price, but that will clearly be the exception and not the rule (and probably the example the auctioneer uses when he's pushing his services to potential clients).

Too many sellers have not reached a sufficient level of financial pain to price their homes to market...and buyers (especially if they are investors) are not willing to catch a falling knife. With ever-increasing inventory hitting the market day-by-day and prices starting to show a tiny bit of softening, buyers are content to park their money in a CD and wait for the prices to come down to them.

From what I am seeing and hearing at auctions, there are not 10-15 people bidding. Most of the time, there may be 2-3 bidders, and I know of plenty with one or zero bidders. Are you suggesting that your auctions are different?

The auction that I participated in by phone was heavily advertised. There were probably 100 or more bidders in the hotel where it was held and another 50+ on the phones (who were assigned a bidding rep on site).

That market was in the dumps at the time and people definitely got steals, but it still may have been a good deal for the developer to finish up at the project and get his sales staff out of there, etc.

I just remember at the end there were a few units left and there was a rock bottom price set but the auctioneer was basically saying 'Anyone who wants one of these just come up to the front and sign for the minimum'. I wish I would have bought a few more units but just couldn't pull it off at the time.

I went to an auction as the house mortgage broker in N.Y. about 10 years ago. The people who came in for the auction were not suits, they had cash, and at that time, some properties were a steal. I had an auctioneer stay at my place early spring from TN, and he said auctions were how properties were sold in some Sotuhern States even before they were listed with realtors. Is this true?
he said he went to an auction in Destin, and was going to be coming back to look for property soon, and I imagine there may be a few deals here and there.

I was told by John Roebuck that auctions work best in a sellers market. In a buyers market, especially like in South Walton sales at auctions are down. In a sellers market buyers really get in a bidding war. Right now the buyers just walk if they do not get the property at what they think is a steal. It could have gotten real crazy if we would have sold some of our listings last year at auctions!!! If the auction is not "absolute" I would not waste my time going.

I was told by John Roebuck that auctions work best in a sellers market. In a buyers market, especially like in South Walton sales at auctions are down.

...don't you actually have to have "buyers" to call it a "buyer's market?"

Someone told me yesterday, "Look, I've got the money in the bank...it doesn't matter what the Realtors are saying--it's not a "buyer's" market until those of us with the cash say it is....and we're still not there yet."

I can dig it.