May 2008 - Posts

What is a Ringmen?
29 May 08 02:58 PM | realestateauctions | with no comments
I recently went to a large auction out of curiosity. I didn’t bid but just watched. I saw men and women jumping around, moving among the crowd, yelling, “Yes” or “Yep” or something to that affect, flinging their hands up in the air. I asked someone what they were doing and I was told they were Ringmen? What is a Ringmen?

 Ringmen are the men or women who stand in the crowd and relay the bids to the auctioneer. Other terms such as bid spotter, bid assistant or ring person, do the same thing. All refer to the person taking bids during the auction for the Auctioneer.

Especially with large crowds, the duty of the Ringmen is to watch his/her section of the crowd that has been assigned to the Ringmen. The duty of the Auctioneer is to watch the Ringmen rather than the crowd. With large crowds, the Auctioneer could miss some bids if he tried to spot the bidders himself.

The Ringmen should try and establish a relationship with the bidders before the auction seeking to get as much information about the items the bidders are interested in, answer any questions and let them know when those items are up for bid.

The Ringmen is a very important asset to the Auctioneer. There is even a school to teach you to become a professional Ringmen.

 For more information on auctions, go to my website at www.canSellnow.com

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What If My House Doesn’t Sell at Auction?
25 May 08 08:01 PM | realestateauctions | with no comments
There are basically two type of real estate auction. An “absolute” auction is where the property is sold to the highest qualified bidder with no limiting conditions or amount. The seller may not bid personally or through an agent.  Also known as an auction without reserve, this type of auction means the property will be sold to the highest bidder regardless of price.

A “reserve” auction is when the seller or his agent reserves the right to accept or decline any and all bids. A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time.

Ron Taylor and Sons Auctioneers discourages sales with a high reserve price and asks sellers to disclose any minimum or reserve price prior to a sale. In the case of bankruptcy and certain court ordered auctions, many properties are sold subject to a reserve price or final ratification by the Court before the sale can be completed.

If the auctioneer does a good job with marketing, the home will sell at auction. The problem comes in when the expectations of the seller is not fully explored by the auctioneer prior to the auction.  Many sellers do not understand that if you have 25 or 30 potential buyers bidding on their property, market value is reached when the bidders stop bidding.

If the seller at a reserve auction rejects the high bid, there may be a “no sale fee” the seller will have to pay to the auctioneer.  The auctioneer should have a good feel as to what the home will bring. If the reserve is higher than this figure, the auctioneer should take a bye on the property.

For more information on real estate auctions, go to www.canSellnow.com.

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What If My House Doesn’t Sell at Auction?
22 May 08 09:48 PM | realestateauctions | with no comments

There are basically two type of real estate auction. An “absolute” auction is where the property is sold to the highest qualified bidder with no limiting conditions or amount. The seller may not bid personally or through an agent.  Also known as an auction without reserve, this type of auction means the property will be sold to the highest bidder regardless of price.

A “reserve” auction is when the seller or his agent reserves the right to accept or decline any and all bids. A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time.

Ron Taylor and Sons Auctioneers discourages sales with a high reserve price and asks sellers to disclose any minimum or reserve price prior to a sale. In the case of bankruptcy and certain court ordered auctions, many properties are sold subject to a reserve price or final ratification by the Court before the sale can be completed.

If the auctioneer does a good job with marketing, the home will sell at auction. The problem comes in when the expectations of the seller is not fully explored by the auctioneer prior to the auction.  Many sellers do not understand that if you have 25 or 30 potential buyers bidding on their property, market value is reached when the bidders stop bidding.

If the seller at a reserve auction rejects the high bid, there may be a “no sale fee” the seller will have to pay to the auctioneer.  The auctioneer should have a good feel as to what the home will bring. If the reserve is higher than this figure, the auctioneer should take a bye on the property.

For more information on real estate auctions, go to www.canSellnow.com.

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A Real Estate Auction Should Not Be A Last Resort Method
16 May 08 06:32 PM | realestateauctions | with no comments

Someone recently asked me if an auction should be the last resort to sell their home. She and her husband lived in a nice neighborhood where the homes and yards were kept in pristine condition. They thought their home would sell pretty fast.

They had listed their home with a realtor with a six month listing agreement. Since then, they have had very few showings. The agreement expires at the end of the month and they are not sure what to do.

It was her understanding that selling a home by auction was only for distressed properties, like foreclosures, or government seized property. I tried to explain to her that things are different today, that more and more homeowners are using the auction method.

The National Association of Realtors (NAR) verified this several months ago by stating that in a very few years, 25% or more homes will be sold through auctions. In February 2003, The Wall Street Journal ran a story with the heading, “Auctions Are No Longer Only for the Desperate.” The National Association of Auctioneers (NAA) reports that the sale of residential properties  by auction continues to be on the increase.

A seller does not need to be desperate to be motivated. Many sellers have reasonable price expectations and prefer the speed and excitement of the auction process.

It may still be true that foreclosed properties are still big business and carry the “last resort” image but don’t view all real estate as a last resort.  I told her a live auction should had been her first consideration. I encouraged her to attend an auction or two to get a feel how they are conducted and the prices that homes are being sold for.

And I also told her to visit my website at www.canSellnow.com to learn more about auctions. J

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Consignment Auctions
14 May 08 08:31 PM | realestateauctions | with no comments

Consignment Auctions

My mother recently passed away and left her home and furnishings to me. My husband and I want to move into the home but we do not need all the furnishings. I don’t want to do a “yard sale” as I feel some of her things are of value and may not get a good price.  A neighbor told me to find someone who would sell them for me on consignment.  Would an auctioneer be interested in something like this?

 

There are many auctioneers that have galleries that conduct consignment auctions. There is a caveat though. Most auctioneers do not like consignments with a reserve, meaning the seller has a minimum dollar figure the seller is willing to accept.

Ironically, some sellers want more money than what a group of buyers are will to pay because the sellers are not familiar with the market or the item to be auctioned. That is why the auctioneer likes the absolute auction, meaning the highest bid wins regardless of the price. If the auctioneer has done a good job in marketing the auction, you should get a good price for your items.

Many auctioneers will buy pieces or the total furnishings from an estate. The auctioneer needs to make a profit when he sells, so you need to take that into consideration. For information on North Carolina auctions, go to my website at www.canSellnow.com.

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Do I need an Auctioneer?
12 May 08 05:42 PM | realestateauctions | with no comments

Do I need an Auctioneer?

I own my home and have been thinking about selling it and moving to another state. I have talked with several realtors and just can’t get excited about listing my home with them, especially in today’s real estate market. I need to sell quickly.

I have been doing some reading about auctions. It seems home auctions are becoming more popular as a way to sell homes fairly quickly. My question to you Ron, is, why can’t I just auction the home myself?

As owner of your own home, you could but do you really want to. You could operate on yourself but I wouldn’t suggest it.  Most states require a license if you don’t own the property that is being auctioned.

Before becoming an auctioneer, as a real estate broker, some home owner’s would tell me they could sell their home and save on the commissions. Some did but most didn’t because they didn’t understanding marketing.

Their idea of marketing was to run a FSBO (For Sale By Owner) ad in the local  newspaper on the weekend, and to put a sign out front of the home.

Auctioneers are specialists in marketing. Auctioneers are not really auctioneers but marketers. They know how to expose your home to the greatest number of people in a cost effective way. Most FSBO sellers are targeting the local market only while auctioneers are national and in some cases , international, in their marketing efforts.

A professional auctioneer knows how to get people to the auction, how to create excitement and get the best price for your home. In addition, there is the paper work you will need to understand, viz., contracts and disclosures, handling escrow money, getting pre-approve, qualified buyers to the auction, and the follow up after the auction that leads to a quick and smooth closing.

My suggestion is to use a professional auctioneer.
 
For more information on auctions, go to my website at www.canSellnow.com.

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Using Credit Cards at an Auction
10 May 08 08:50 AM | realestateauctions | with no comments

Ron, I recently attended an auction in another state while on vacation. There were some nice pieces of furniture that were being auctioned. The auctioneer stated before the auction that they would accept credit cards for payment but they would charge a 3% processing fee along with the buyer’s premium.

The buyer’s premium was 10%. When you add the credit card fee of 3% plus state sales tax of 7%, it doesn’t seems to be that great of a deal.

 

There’s not a whole lot you can do about the sales tax but pay it, whether at an auction or at the local grocery store. At an auction, the best way to pay is cash, but I realized that is not always an option for everyone.

The credit card company charges the auctioneer or any merchant, a processing fee. This varies from vendor to vendor. If there was a 10% buyer’s premium, and if someone used a credit card with a 3% processing fee charge to the vendor, the gross to the auctioneer is 7% and then his expenses (labor, utilities, liability insurance, facility charge if he is renting, etc., has to come out of the 7%, thus reducing his margin of profit.

My suggestion is that if you are going to use a credit card at an auction for your purchase, bid accordingly, viz., "does the price I pay for the merchandize, plus the processing fee, make me feel I made a good decision with regards to price versus value?"

Keep, in mind, if you don’t pay that card off within the next billing cycle, you paid more for that item than what you bid, particularly if you have one of those 18 to 24% credit cards.

For more information on auctions, go to my website at www.canSellnow.com.

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AUCTION VALUE vs. MARKET VALUE
07 May 08 08:35 PM | realestateauctions | with no comments

How does auction value differ from market value?

The differences between auction value and market value stems from the auction process itself.  By this, I refer to several characteristics which are more dominant in the auction process than in the ”list and sale” technique.  They are:

1.    The necessity to make a decision as to buy or sell at that moment.  There is not time in which to deliberate and think about it. There is a sense of urgency.

2.    The auction process creates an atmosphere of competition among the bidders which could result in at least one or more bidders to offer more for the property than they would have under different circumstances.

3.    Buyers are not competing against sellers, but instead are competing against other buyers.  Therefore, the activities are not those of negotiation between a high and low price but instead it is a contest of how high one bidder is willing to go above another.

 Logically, it would appear that if all of the bidders present at an auction were all well informed as to the market price of a property, then the market price would tend to represent the ceiling of the selling price. 

However, an auction many times acts on the emotional side of a buyer’s personality.  And when a person starts to add emotion into value judgments, then those judgments may lose some objectivity and, in the buyer’s eyes, more value may be given to the property than is shown by market comparisons.

 On the other hand, there is a possibility that the auction price may fall short of the market value.  For example, the time allotted to expose the property to the public may be in reality not long enough to attract that buyer who is willing to pay the highest price for the property.  Then, the seller who is emotionally prepared to sell the property may accept a lower price rather than wait any longer.  Also, if all of the buyers are able to remain objective and the auctioneer has failed to inject emotionalism into the bidding process, then the auction price may also fall short of the market value.

For more information about real estate auctions, visit my website at www.canSellnow.com.

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What is an “owner confirmation” auction?
06 May 08 10:14 AM | realestateauctions | with no comments

I recently attended a real estate auction whereas the auctioneer stated that the winning bid would be “subject to the owner’s confirmation.” Was this really a “reserve” auction?

 

There is really no difference between selling real estate at an auction with a reserve or selling real estate at an auction “subject to owner’s confirmation.” In essence, both of these auctions are “reserve auctions.”

Unless a property is advertised as an “absolute”, meaning the property is sold to the highest bidder with no limiting conditions or amount, it is a reserve auction.

In the reserve or subject to owner confirmation auction, the seller may not personally bid or use an agent to bid for him or her.

For more information on real estate auctions, go to my website at www.canSellnow.com.

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What is a Buyer's Premium?
04 May 08 05:23 PM | realestateauctions | with no comments

The use of a buyer’s premium is a way of paying the Auctioneer for his or her services. The buyer’s premium shifts the payment of the Auctioneer’s commission from the seller to the buyer at auction.

The buyer’s premium is a fixed percentage of the sales price that is collected from a successful bidder in addition to the amount of the successful bid. For example, if the highest bid at a real estate auction is $200,000, and the buyer’s premium  is 10%, the sales contract will be written up for $220,000.

Auctioneers traditionally have been compensated through the payment of a commission paid by the seller, which is normally based on the total auction proceeds. An estate auction that includes both real and personal property is a good example.

As an alternative to this commission based fee structure, the Auctioneer and the seller will often agree to reduce or eliminate the commission paid by the seller and instead agree that the Auctioneer will be either partially or fully compensated through the retention of a fee levied against the successful buyer at auction by way of a “buyer’s premium.

The buyer’s premium is a matter of choice. The buyer’s premium is used only when the Auctioneer and seller agree to it in their contract. Auctioneers and sellers have to decide when to use it. The “buyer’s premium” disclosure is announced in the advertisement under “terms and conditions of the sale” in addition to the announcement at auction. Most auctioneers have potential buyers /bidders sign a statement before bidding that they understand that a buyer’s premium will be added to the final and highest bid.

For more information on real estate auctions, visit my website at www.canSellnow.com.

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When is an Auction not an Auction?
03 May 08 09:55 AM | realestateauctions | with no comments

Over the past six months or so, I have noticed an increase in the ads in the paper about auctioning homes. Here in the state of North Carolina, you must list your auctioneer license number in the advertisements and the property owner along with the terms of the sale. When I don’t see this in the ad, I get suspicious.

Upon further investigation of these ads, I have found two things happening. First of all, there is an investor or group of investors that claim they own the home by way of a deed BUT they do not own the debt (the mortgage), that is, they took over the property “subject to” the existing mortgage.

In most cases these are homes they are about to be foreclosed. The homeowner has throw up his or her hands and have basically given up trying to stay in the home. They deeded the property over to the investor(s) with the understanding that the investor will stop the foreclosure, buy their home or get the property sold and save their credit.

In the meantime, the investor(s) work out a “short sale” with the lender.  The investor(s) then try and find an end buyer to sell the home to, at a higher price than the “short sale” offer. Part of the marketing plan is to “auction” the home to the highest bidder by way of what I call a Dutch action or round robin bidding process.

Potential buyers come and look at the home and write an offer down on a list provided by the investor(s) along with their phone number. The bidding process stays open for several hours then closes. The investor(s) call everyone on the list after the bidding process closes and tells them what the highest bid was and wants to know if they want to increase their bid. A few will, most don’t.

If the highest bid does not meet what the investor(s) need or want out of the house, there is no sale, and it basically goes back to the bank through a foreclosure. The homeowner’s credit is ruined.

The second thing I see happening is that realtors are advertising a property as an auction using a form of the silent auction method. A potential buyer makes an offer through a sealed bid. The bidding process may stay open for several days. Again, as in the investor group above, if the bid does not meet expectation that is, a certain price level, there is no sale.

As a professional auctioneer, I question the legality of some of these selling methods that are being advertised as “auctions.”  What they are doing may be in the "gray" area of the law but they are not truly live auctions.

If you are approached about selling your home via an auction, ask that person if he or she is a licensed auctioneer,(not all states require a license)  a member of the National Association of Auctioneers [NAA] and/or a member of their state auctioneer organization and about their experience in the auction business. They should also be licensed to sell real estate.

For more information on real estate auctions, go to my website at www.canSellnow.com or call me with your questions at 252-257-4822.

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