Kathy Kennebrook discusses Using Auctions to sell Properties Quickly
By Kathy KennebrookWhen motivated sellers begin contacting you regularly and you suddenly begin doing a lot of deals in your real estate business, it is important to make sure you have exit strategies in place to sell your properties quickly for a profit. After all, isn’t that what the real estate business is all about?
In a market as uncertain as today’s market has become, it is important to know that you can sell your houses quickly. The more holding costs you incur, the more profit you lose. It’s that simple. So what sort of exit strategies are we going to use to dispose of properties and still make a good profit on our deals?
One of my favorite exit strategies is the round robin auction. Using this particular strategy, you get to show your property to large numbers of interested buyers at one time, and you get to choose the date you sell your property. How much easier can it get? Even when a round robin auction doesn’t work the way it should, it still produces good results by “shaking out” a lot of activity on a property you would not have otherwise had.
So what is a round robin auction and how do we execute this amazing strategy? The very short version of a round robin auction is this. You begin the process by running some ads in your local newspaper and shopper guide, and by placing signage out all around the area where the property is located advertising that the home is to be sold via an auction to the highest bidder. I also do a mailing to everyone who lives in the subdivision or the area surrounding the property I am trying to sell. The sale can have a reserve price if you so choose. You then advertise an open house with a very limited timeframe, say from 1-5 pm on a Sunday. Having a very short window for your open house causes people to show up in large numbers, creating a “buying frenzy”.
When your potential buyers arrive at your round robin auction, they receive a packet of information outlining the rules of the auction as well as detailed information about your property. This should include comparables, square footage, number of bedrooms and baths and other amenities. It may also include a copy of a survey and a home inspection if you have had one done.
As your potential buyers look at the property and express an interest in purchasing it, they leave a “bid” with you before leaving your open house. This is absolutely necessary if they want to be included in the bidding process later. This is an open bidding process, so there is a sheet of paper where they write their information and their bid, and they can see what everyone else has bid as well.
At the end of the open house, you pick a specific time that you will begin to call each of the people who left bids (your bidders have already been told to be available at this time to be called) and ask them to raise their bids. You call them one by one in an orderly fashion (thus the term round robin auction). Potential buyers will continue to increase their bids each time you call them until someone finally makes a final bid. If the final bid is a sufficient amount of money, the property is sold. At the time the buyer and back up buyer are chosen, they each submit a contract and a deposit which is held by your title agent or closing attorney. If the first bidder is unable to close for whatever reason, the property then goes to the back up bidder.
This technique is not only an excellent way for you to sell your property, it is also an excellent way for you to build a buyers list for future properties you may purchase. While there is a great deal more to the process, this explanation will give you a good overview of how a round robin auction works.
We have personally done several of these auctions, and while some worked well, some didn’t work out quite the way we planned. The ones that didn’t work out as planned resulted in us finding a lease/option or owner finance buyer for the property instead. So the process still worked, it just had a slightly different result than we initially anticipated.
As our real estate market continues to change, we as investors must continue to come up with creative ways to market our properties and make them stand out from all the rest. The round robin auction is just another way for you to do that. For more information on marketing to locate buyers and sellers, visit us at marketingmagiclady.com
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