Tuesday, October 15, 2019

Frequently Asked Questions and Answers


Q: Why should I sell my property using the Auction Method?

A: Sell your house fast based on the true market value of your house AND without paying ANY commissions!

Auctions accelerate the sale of your property by generating additional consumer interest and activity. Auction fever begins. Everybody wants a steal!

Advertising a property for auction creates a sense of urgency, bringing all interested parties together in a specified timeframe.

An auction provides multiple bidders competing to buy, generally bringing a higher price than negotiating with a single buyer. Your property is sold in “as is” condition, with a non-contingent contract, non-refundable deposit and 30-day settlement is required of the buyer. This means a quick and easy transaction for you without the hassle of negotiations, and the uncertainty of an unknown sale date.

Please visit our article about what makes auctions a superior choice.

Q:  What types of Auctions are there?

A:  As a general rule, auction firms choose from three types of auctions when recommending a specific type: (1) absolute auction, (2) minimum bid auction, and (3) reserve auction.

Absolute Auction: In an absolute auction, also called an auction without reserve, there is no minimum bid. The property is sold to the highest bidder, regardless of price. The biggest advantage of absolute auction is that it attracts more lookers and buyers. Since a sale is guaranteed, regardless of price, an audience's level of participation and excitement is heightened. The disadvantage is that it provides no safety net for the seller, which makes it difficult for auction professionals to recommend this type of auction to seller clients.

Minimum-Bid Auction: Short version - Often used interchangeably with “reserve” and referring to the minimum bid which will be acceptable to the seller. Not usually disclosed. Bidding may begin below the minimum bid and the seller may accept a high bid that falls below his or her established minimum.

Long version - A minimum-bid auction, also called a minimum published bid, is an auction for which the lowest acceptable price is pre-determined by the seller and the auction firm. The minimum price is stated in the auction brochure and in advertisements. It is also announced during the auction. When the bidding reaches the minimum amount, the property will be sold “absolute.” Unlike an absolute auction, however, the minimum bid auction creates a safety net for the seller. Disadvantages of minimum-bid auctions are that they may limit interest to buyers only willing to pay minimum bid price and that it is usually more difficult to generate excitement for minimum bid auctions on auction day.

Reserve, Seller’s Reserve, or Reserve Auction – Short version -The reserve is the minimum bid a seller has stated that he or she will accept at the auction. Usually not disclosed. If the high bid falls above the reserve, the auctioneer has the authority to declare the property sold. If the high bid falls below the reserve, the seller reserves the right to accept or reject it.

Long version - In a reserve auction, the seller reserves the right to accept or reject the highest bid within a specified time period. A suggested opening bid may or may not be posted. The time period may be anywhere from immediately following the auction to 72 hours after it ends. The owner predetermines the price at which the property will sell. In a reserve auction, sellers are not obligated to accept a price other than one that is entirely acceptable to them. The main drawback to reserve auction is that many prospective buyers do not want to invest the time and expense of investigating a property when there is no guarantee they will receive that property, even if their bid is the highest.

A buyback fee is sometimes used to reassure the auction firm that they are dealing with a motivated seller, in which case the auction firm charges a fee to the seller if the property does not sell.

Other Types of Auctions

Other types of auctions include:

  • Sealed-bid auctions in which confidential bids are submitted and opened at a predetermined place and time.
  • Dutch/high-low/”mine” auctions where (1) the auctioneer begins bidding at an extremely high price and progressively lowers it and (2) the first bidder to accept the price wins
  • Multi-par auctions, which allows bidding on one parcel or combination of parcels

Online Auctions and Online Bidding

Online auctions of real estate continue to grow and will become more prominent across world markets. As the emerging purchasers of real property are more and more computer literate and experienced with electronic bidding systems such as e-Bay and others, online bidding of real estate will continue to grow.

It is probable that online bidding will become more prominent in the auction/exchange of real estate, as it has in all the major stock/futures exchanges across the world, from New York to London to Japan and elsewhere.

Online bidding generally falls into two categories:

1. Static bidding—Bidders place bids on a one dimension platform. All the activity of the sale happens at one point (place) with one reporting medium, the screen of the bidding platform.

2. Dynamic bidding—Bidders place bids on a multi-dimensional real-time platform. Bids may be placed online, from the actual site/live cry, or from another venue, such as a ballroom event, or multiple locations. The bidding is simultaneously reported to all bidding locations whether on line, on site or at a remote location. Recent available technology enables voice, data, and real time-video on some systems simultaneously.

The online real estate bidding industry is growing at a rapid rate, with many sites available for use by real estate professionals. Some of the sites are operated on strictly a fee basis, others on commission, and sometimes as a combination of the two.

Q:  What is the cost of selling at auction compared to a FSBO (For Sale by Owner) sale?

A: There are a few factors to consider when comparing the costs between an auction and FSBO sale:

Cost of Advertising

Having a well-planned and aggressive marketing campaign is the key to getting bids during an auction. An auction company can create customized marketing tactics to ensure you get the highest bid for your property. This cost is fixed before the sale date.

An owner selling through FSBO might be savvy enough to invest in their own marketing tactics, have the time to do so and be available at all hours.

Obviously they can also choose not to spend a dime on advertising at all if they’d like to take the risk. Their FSBO sign is their primary marketing technique and tactic.

Commissions

Using the auction method, the buyer pays the real estate commissions, and the seller receives credit for the full bid with no deductions. In a FSBO, the seller pays commission to the buyer’s agent if applicable.

Carrying Costs

An auction date fixes the date and time that a property will be held.

A FSBO sale can drag on longer than an auction and can have high carrying costs if the property does not sell. Think mortgage, taxes etc.

Q: Auctioning your property. How does it work?

A:
On the date of the auction, you can collect bids either online, in person, or both.

If bidders submit bids online, they’ll typically register online before the auction date. Some online auctions can last several weeks so those interested can submit their bids. Onsite auctions can also take place in person and a winning bid can be determined on the same day.

Once a winning bid is chosen, the winner will be required to submit a non-refundable deposit and sign contracts immediately to close the sale.

Auction buyers come qualified and prepared to buy, and ready to put down a sizable non-refundable deposit.

With an ordinary contract, buyers are allowed multiple “outs” with little or no recourse. Auction buyers come ready to put down a sizable non-refundable deposit.  They are also willing to buy the property without the contingencies that so often lead to failed closings and extended listings.

Q: Is it possible to convert my listing from a FSBO (For Sale by Owner) sale to an auction if someone wants to buy my home ahead of the auction?

A: You can convert your listing to an auction during any point of the process. If a buyer makes an offer before the auction date, they can also submit an offer on the auction contract. It’ll be up to you if you want to accept the offer and cancel the auction. You can also decline the offer and invite the buyer to the auction instead.

Q: Will my home sell for less in an auction compared to selling it myself or through an agent?

A: Not necessarily. House auctions can attract a large pool of prospective buyers. This can make the bidding process more competitive and help you fetch the highest price. You also receive the full amount of the price (with no commissions deducted) compared to an agent-assisted or FSBO sale.

Q: What types of property do you sell?

A: We can auction all types of real estate. Residential, commercial and vacant land are the primary categories. From investment properties such as duplexes and triplexes to luxury estates, from $50,000 to millions of dollars, from fixer uppers to new construction, from a single acre to thousands of acres, all can be successfully sold at auction.

Q: How will my property be marketed?

A: A key advantage of auctioning real estate is the benefit of a customized advertising and marketing program.

In the real estate auction industry, executing a marketing strategy within a narrow time frame requires speed, precision and skill. An auction firm’s marketing strategy also requires a high degree of scheduling and coordination. Specific marketing tasks may include:

  • Public relations
  • Media planning
  • Preparing and executing internet strategies
  • Developing and producing television, radio, newspaper advertisements
  • Preparing brochures (for an example of a print brochure used to market condominiums in the
      Palm Springs area.
  • Coordinating direct mailings/e-mail campaigns
  • Preparing signs. For many auction firms, the internet has transformed the ways in which they
      market properties to potential leads.

While every campaign is unique to the property, auction marketing typically consists of professional brochures, online advertising, and print ads in key publications, targeted direct mail, e-mail marketing, realtor promotions, preview events, property signs, telemarketing, and a full-featured webpage with photo galleries and downloadable documents.

Of course your property will also be featured on Multiple Listing Service (MLS), realtor.com, and a variety of specially chosen listing sites.

Our marketing professionals produce all sorts of advertisements and marketing material, always with an eye toward highlighting and presenting your property’s strongest features.

Your property is always exposed to the widest possible buyer audience, thereby increasing your possibilities of a successful sale at the highest possible price.

When multiple properties have for sale signs posted, the property with the PalmSpringsHomeAuctions.com sign will always garner most of the attention. People love auctions!

You can rest assured that our custom marketing ensures that your property stands out when buyers and Realtors are evaluating residential properties, land or commercial properties for sale in the Coachella Valley and surrounding areas.

Q: Even though I am not in financial trouble, there is that perception, so I am a little concerned about what people may think if I should auction my property. Can you give me any insight on this?

A: You are not alone in your concerns. Many people initially think of the old, limited perception of auctions as what happens on the court house steps. There are great differences in the marketing and the public image of a voluntary, ‘by choice’ auction, such as ours, versus a distress auction.

Many of our sellers have desirable properties and have chosen auction as a means to expedite and control the terms of the sale. They absolutely love the ZERO commission concept. Our auctions are positive, enthusiastic events designed to generate competitive bidding to secure the highest possible market price. For more information on the changing view of Real Estate at Auction, see “Media on Auctions”.

Reality: Neighbors “talk” lasts no more than a week AND, it is none of their business.

Q: I am concerned about the net amount I will realize from the auction and my ability to cover my existing mortgage. What advice do you have to offer on this?

A: We understand your concerns and many of our sellers need to cover an existing mortgage or lien on their properties. The broad exposure of an auction, coupled with the competitive bidding requirement, generates the most accurate valuation of the property. Said simply, it is only worth what the person who wants it the most is willing to pay. That amount is determined on auction day.

The fact that you are selling at auction does not change the market value of your property. If the market value is at a level below your existing mortgage, then that is the price that you have to work with regardless of what selling method you choose.

Q: Who pays the Auctioneer’s commission- Buyers’ Premium or Buyer’s Fee?

A: The Auctioneer is paid via the buyer’s premium, which is added to the buyer’s final bid. There is no auction commission charged to the seller. Sellers are only required to invest in the advertising and expenses of their auction event if they agree to this beforehand and it is stated in the Listing Agreement. This way you can be sure you receive the maximum advertising exposure possible for your property at the lowest possible cost.

Example: A percentage of the high bid, is added to that bid to determine the final contract (purchase) price. For example a high bid of $100,000 with a 10% Buyer’s Premium would result in a contract price of $110,000.

Q: Will we still have to consider contingent contracts?

A: Everything that we sell at auction is sold “as is” and “non-contingent,” with a 30-day projected settlement date. According to the auction terms, a prospective buyer cannot make his or her bid contingent on any outside factors such as financing or inspections.

Q: What does “As is” mean exactly in auctions?


A:
It means selling a property in its current condition without any warranties or representations as to its condition or fitness for a certain use. Buyers are responsible for any examinations they feel necessary for their protection, but understand that the seller is not going to make any changes to the property.

Q: Does “as is” mean that I do not need to disclose any known defects?

A:
Though we are selling “as is,” we must abide by applicable state and federal laws. The Broker-Auctioneer will offer full disclosure to all interested parties in accordance with the law. “As is” simply means that you are not offering to make any additional improvements to the property and the buyer is bidding on and buying it in the condition it is in at the time of the auction.

Q: Where will the auction of my property be held?

A:
While we hold most auctions online, there are several other options available including a combination of an offsite “gallery style” event, a sealed bid format, and an online-only auction. We will recommend the strategy we believe will be most beneficial for you.

Q: How often is PalmSpringsHomeAuctions.com (PSHA) successful in selling property at auction?

A:
Rarely does a PSHA auction purchase contract fail to proceed to closing. Buyers who are unlikely to close are dissuaded from bidding because of the stringent terms of auction. With no contingencies and a sizable non-refundable deposit on the line, auction buyers are qualified and highly incentivized to complete the transaction. This contrasts with traditional real estate listing contracts, in which buyers typically maintain many options for easily exiting the purchase contract.

Q: Can I attend an auction before agreeing to sell my home through the Auction Method?

A:
Certainly. In fact, we encourage your attendance so you can experience a live example of the auction process firsthand provided that that is the method chosen for that particular auction. You can also visit our office to see an online auction in process. Check our Upcoming Auctions schedule or give us a call at 760.574.7676.  If you come to one of our auctions, be sure to introduce yourself!

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