Auctioning properties has become a popular technique for selling properties for a variety of reasons. Some of those reasons include the opportunity to pick the date you want to sell, the opportunity to have someone else do all the work for you and the opportunity to hopefully get top dollar for your property.
Another advantage to using auctions to sell houses is that since it is still a fairly unusual way to sell houses, it has a tendency to bring out a lot of qualified buyers who are curious about the process. If you are using an aggressive auctioneer to sell your property, you can create a buying frenzy that can result in a big pay check for you.
In order to successfully auction a property for a big pay day, you must have purchased the property correctly in the first place. It should also be in an area where people really want to live as opposed to need to live. Therefore, luxury homes fall into the category of the type of home you might want to auction. You might also want to think about higher end homes that are in desirable subdivisions.
There are a couple of ways to purchase properties with very little risk. One is to option the property for a specific period of time. If the home doesn’t sell, the most you would be out would be the option amount you gave the seller, which is usually around $100.00. I have also had situations where we auctioned a home that had simply been deeded to us and we had the seller make the payments on the property for two to three months so we also had little risk involved in the process. In the case of the properties that were deeded to us, we also had a back up plan just in case the home didn’t sell using the auction process.
First, let’s define what constitutes a successful auction. A successful auction should bring the kind of buyers who want to purchase a particular type of property. The more potential buyers you are able to bring to the auction, the better price you will be able to get for the property since more buyers mean more bids. Secondly, you need to have enough equity in the property so that even if the home doesn’t sell for full retail, you can still make a significant profit on it. If you don’t purchase or option a home with a significant amount of equity, then the auction process is probably not going to work for you.
The third and main ingredient that will make or break your auction is the marketing that you do to draw potential buyers. You must work with an auction house that has a track record of selling houses. Don’t use an auction company that has never marketed and sold a house. The auctioneers who do this on a regular basis have a specific marketing plan that they follow in order to bring you the highest number of potential bidders and ultimately the buyer.
They will advertise the auction in a variety of ways which may include newspaper advertising, possibly radio spots, signage, and notification to all the local Realtors in the area where the home is located so that they can bring potential buyers who may be interested in the property. The auction company will also send letters to everyone in the area surrounding the property notifying them that the auction is going to take place so they can tell family and friends. If the property is truly a luxury property, they will also advertise outside your immediate area to draw even more potential buyers. They will also do this by creating a website with a virtual tour of the property.
You must also have good photos of the property both inside and out for marketing purposes and the home should be in very good move-in condition. It should also be staged with lighting, possibly furniture, flowers, and décor. The exterior should be inviting and well manicured so the home has good curb appeal. On the interior of the home, usually in the kitchen on a counter, we will have blueprints, a survey and a home inspection for prospective buyers to review.
There should be a box out front filled with flyers with the information on the home and all of the information regarding the auction, including the date, time and the rules for the auction. Generally, the auction company you hire to do the auction for you will handle all of these marketing details.
The auction company usually requires an amount of money upfront to cover marketing costs and they will also receive a “buyer’s premium” on top of the amount the home sells for. This amount is usually ten percent of the sale price. For example, if the home sells for $200,000, the buyer’s premium would be an additional $20,000 making the price of the property $220,000. The potential buyers who are interested in bidding on the date of the sale are required to bring a certified check for a specific amount of deposit and should also be pre-approved for a mortgage if one is needed .The amount of the deposit is applied to the sales price if they are the winning bidder.
You can do an auction with a “reserve amount”. A reserve amount is a specific minimum price the property must sell for. Usually auctions are much more successful if there is no reserve. This is why it is so important for you to have a lot of equity in these properties to work with and to make sure the marketing of the property and of the sale is top notch. Anything less will cost you money! If the auction fails and the home doesn’t sell, you still have to pay the auction company the marketing fee. For a luxury home, the marketing fees can be several thousand dollars.
I have personally worked with auction companies and have auctioned properties. Some auctions worked well and some didn’t. However, even the properties that didn’t sell for whatever reason at the auction sold later, and still made us a handsome profit. One of the interesting things about having an auction to sell a property is that it creates a lot of attention in your community and therefore creates a lot of traffic with regard to interest in your property.
If you have a luxury home to auction, the auction company will sometimes bring other things to auction off as well, such as furniture, cars, boats, jewelry, etc. This also creates a “frenzy” at the property location and can bring more buyers. You can also negotiate with the auction company to get a percentage of the profit from this part of the sale. This can help to defray marketing costs to get the property sold.
So, you see, there are many ways to use an auction company to sell your properties for you. Having a good auction company as part of your dream team can really make a difference in the number of deals you will be able to handle. For more information on marketing to find motivated sellers, buyers and auctions, visit our website at marketingmagiclady.com.