Alternative real estate option works well for some
By KERRI BARTLETT
Brentwood Home Page
Real estate auctions seem to get a bad rap. Many times when the word “auction” is mentioned, other words come to mind such as distressed property, foreclosure, or must sell Grandma’s estate quickly.
The assumption that only distressed properties enter the auction arena in order to get out of an unfavorable situation no longer rings true.
|“It’s a great way to generate competition for homes that are not getting attention from the regular listing process in order to find ready and able buyers.”|
Dwight O’Neal, owner and president of Realty Trust Auctioneers, LLC, has been in the business for 25 years and says that “auction” doesn’t have to be a derogatory term. It can actually be a great alternative to the traditional real estate buying and selling process.
Due to extensive marketing research and time sensitivity, auctioning can be a positive alternative for selling a home quickly. O’Neal said that the majority of clients who decide to give auctioning a try want to try a non-traditional approach.
“I get many clients who are running out of rope and put out by the conventional process and are looking for an alternative, which seems to be the common thread. They are looking for new ways to get their house seen so that someone can buy it.”
However, “auctions are not for everybody,” warns Will McLemore, president of McLemore Auction Co.
“Auctions are a good way to sell property that has a lot of equity, but there are owners who are not good candidates for an auction,” he said. Those include owners who do not have equity in their home and owners who are very price sensitive and cannot accept any price other than market price.
“No one is guaranteed a specific outcome from an auction,” said McLemore, who has been in the business for 13 years.
Many discover the auctioning process online through research or by word of mouth from friends and colleagues who have already tried it, O’Neal said.
However, in order for the home to be seen by willing and able buyers, there is much more to the auction process behind the scenes, which includes extensive marketing research and planning.
When someone approaches O’Neal to sell a property, his company conducts extensive market research called “accelerated marketing” in order to pinpoint the specific demographic that would most likely be interested in buying a property, referred to as the “target market.”
For example, Realty Trust Auctioneers usually works in the high-end real estate market whose clients consist of homeowners wishing to sell high-priced homes. If a client wants to sell a $1 million home, the firm charges about a 1% marketing fee to complete a comprehensive demographic analysis of target buyers.
McLemore’s auction company also performs extensive marketing analysis methods to ensure sellers that target buyers are identified and contacted about auctioning their home.
|This Windstone home sold at auction for $1,680,000 in January.|
Auction firms typically use demographic marketing companies to gather and analyze such data as net worth, household income, and a potential buyer’s preferences; these can include are they more likely to buy a lake home or a home on a golf course as well as how many potential buyers have recently searched “luxury homes” on the Internet.
Once the target buyer is identified by gathering and analyzing the demographic information, the company contacts the target buyers by mail, phone and/ or text about the home in order to alert them of its availability and auction.
“It’s a great way to generate competition for homes that are not getting attention from the regular listing process in order to find ready and able buyers,” O’Neal said of the auctioning process.
The auction professionals shared specifics on why auctions work:
Auctions create a sense of urgency
If an auction is set for a certain date, potential buyers will begin preparing to buy the home. Through the personalized marketing plan executed by most auctioning firms, potential buyers are contacted ensuring that the most appropriate buyers are notified and present, O’Neal said. People who are serious and have enough money to buy the home are identified and most likely present at the auction.
Auctions generate excitement
Buyers often are trying to get the best deal possible and believe that they can do so at an auction, which makes the auction process seem attractive to potential buyers. “It’s definitely true that auctions make buyers more serious about a property being sold than they ordinarily would be,” McLemore said.
Auctions generate competition
If a property is worth about $1 million and bidding starts at $700,000, the participants will begin bidding against each other creating competition to purchase the home. Therefore, with 10-12 people bidding, the property will most likely sell for the original $1 million or more. Many times, competition alone will drive the price up, even though homes up for auction reflect the market value. Prices are not altered in any way or driven down due to the auctioning process; homes are valued at what they are worth depending on the market.
Conditions of sale are set in advance
When a home goes up for auction, the playing field is leveled because certain terms and conditions are set forth, which cannot be altered. Plus, a date is set on which the property will be sold. It seems to remove a lot of the guesswork and moves the sale process along more quickly, O’Neal said.
McLemore shared that such conditions could include the property being sold “as is” with a deposit due at auction and closing date set within 30 days of auction for example.
A quicker process
On average, it takes a home being sold via auction about 60-70 days on average to go from the date of listing to the date of closing. This can be attractive for sellers.
Jaye Thomas, a partner of Timberline Land Development of Franklin, participated in the auctioning process in 2009 when the economy crashed and the real estate market was unstable. He had a few properties that weren’t selling through his business and decided to explore his options in the auctioning arena upon his business partner’s suggestion.
| “I used to think that an auction was something that people did when they were desperate and in trouble. However, now I realize that it is just another tool in your sales tool kit.”
“I used to think that an auction was something that people did when they were desperate and in trouble. However, now I realize that it is just another tool in your sales tool kit,” Thomas said.
Thomas said he was especially impressed with the timeframe of auctioning as compared to using more traditional methods to sell his properties and came away very satisfied with the auctioning process because it was all done in a day.“I found the process to be cost effective and time efficient as well as ‘user-friendly’ because with the personalized marketing campaign, I barely had to do a thing,” added Thomas, who worked with Realty Trust Auctioneers. Because his property moved quickly and at a fair and reasonable price with a profit, he would do it again, he said.