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Current Problems Facing Owners Of Residential Real Estate

  • Properties that have been on the market for longer than several months give an appearance of being shop worn," with little motivation to arouse prospective purchasers.

  • Carrying costs associated with real estate typically run 20% to 35% of the property's market value per year to carry if they are vacant.
  • Security problems, absentee ownership and the resulting liability are a financial drain.
  • On-going property management responsibilities including insurance, taxes, mortgages, and utilities continue to accrue on a daily basis.
For the last couple of years, some property is depreciating instead of appreciating in value in New York State. In addition to all of the carrying costs associated with the property, owners face the situation where the property may be depreciating in value. Holding the property can only cost owners additional carrying cost expense, as well as receiving a lower price if, and when, the property is finally sold.
 
How The Auction Method Of Marketing Eliminates Problems For Sellers

Instead of carrying a piece of property for six months to a year or longer, an auction can effectively be scheduled within 30 of approval of an auction listing agreement.

The auction method of marketing accelerates the selling process for their property, forcing purchasers to deal with a deadline by establishing a specific date, time and place for the auction sale. This creates a sense of urgency and forces interested parties and possible buyers to finalize arrangements for attending open houses and/or private showings, pre-arranging for financing commitments, consultation between spouses and/or business partners, legal representation, etc. in advance so as to be fully prepared to make their highest and best bid on the day of the auction.

The Three Types of Real Estate Auctions

There are three types of auctions sales that can be considered when selling Real Estate. These are:

  • The Reserve Auction
  • The Unreserved Auction
  • The Absolute with a Minimum Bid Auction

The Reserve Auction allows the seller to reject the highest bid for any reason. Reserve auctions protect the seller, but tend to attract the fewest buyers.

The Unreserved Auction method of marketing exposes the property to the greatest number of buyers in the shortest period of time. The property sells to the highest bidder, regardless of the final bid. While the unreserved auction is obviously the riskiest, it also attracts the most buyers and often generates a higher than expected selling price.

The new Absolute with a Minimum Bid Auction allows the seller to set the lowest amount that is acceptable for selling the property. All promotional materials and advertising for the property will include this figure so that only potential buyers that can afford the property will register to bid at the auction. With this type of auction, the seller can rest easy, knowing that the property will not be sold for less than the mortgage balance, etc.

Not all properties are good candidates for this type of auction. If the minimum bid does not reflect a "bargain" - 20% to 25% below the current market in the area, for example - then there is no motivation for potential buyers to attend. A minimum that reflects a bargain price will attract buyers, and allow the auctioneer to "work his magic" to drive the bids up!

Specifics Regarding The Unreserved Auction Method Of Marketing

To ensure aggressive bidding and to maximize results of the auction, John L. Subik brokers, auctioneers County Line Auction and agents emphasize educating bidders on unique features and desirable characteristics of the property. A high confidence level by the bidders is commensurate with spirited bidding and successful real estate auctions.

The auction is open to all interested parties, and is widely advertised so as to avoid any criticism or lack of information, opportunity or cooperation by any third party to be able to buy any asset.

Definitions:

Unreserved:
In an unreserved auction, the auctioneer will accept the highest bid, regardless of the amount. The seller does not have the right to accept or reject that bid.

Absolute:
In an absolute auction, the property MUST sell. The seller may not bid on the property to buy it back.

Reserved:
The Seller, in advance, establishes a minimum (reserve) bid, which may or may not be know to the bidders.

Non-Contingent Purchase Contract:
A contract for the purchase and sale of the real property that contains no contingencies (ie: financing, radon testing, etc.).

Buyers Premium:
A buyer's premium is a commission, usually a percentage, that is added to the last bid and is paid by the buyer.

 

Getting The Word Out

County Line Auction mails auction flyers to buyers across the state and the nation featuring at least one photograph and details of the property including address, acreage, assessment, taxes, terms, dates and times of auction and open houses, plus other pertinent information.

Extensive advertising in local, regional and national newspapers, as well as business.

 

 

 

Auction Method vs Ordinary Sale

Auction Method Ordinary Sale
Focus is on your property alone. Property one of many being advertised and shown.
Auction conducted in 30-60 days or less. May remain on market for months or years.
Exclusively showcases throughout the market place. Minimal advertising; heavy reliance on Multiple Listing Service .
Buyers act on your schedule. Little motivation for buyers; you wait for them.
Auction creates a sense of urgency to promote buyer interest. Price reduction encouraged to create buyer interest and activity.
Realizes the property's fair market value. No limit on upside potential. Upside potential limited by asking price.
Eliminates guesswork in determining the asking price of the property. Seller risks overpricing, and thus seeing little interest, or under pricing and selling for less than the property is worth.
All conditions of sale set by seller in advance, thus eliminating negotiations. Seller must negotiate all aspects of sale.
Property sold without contingencies. Contingencies are common.

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