REAL ESTATE AUCTIONS, WHAT A JOKE

In most situations an auction is the way the get the highest price for some thing of value. Usually, auctions are held for rare or hard to find items. It brings those niche buyers together and they bid against each other to drive the price to the highest market value. The "frenzy" effect also helps in pushing prices higher. After all, how do you sell a rare coin for the highest price? You advertise heavily that coin will be sold. You advertise a starting price way below its value. You advertise where research says those buyers will be reached. You bring those buyers together and they push the price over or to the highest possible market price. It works great...for coins and collectibles, but NOT for houses.

Most homes sold at auction are foreclosed homes. Investors come. It is their full time job. They know they must buy that home at around 65% of what they can sell it for in order to make a profit. Most of those investors are not making a lot of money. But they enjoy their job, have no boss and go with their own schedule.

I recently wrote about an upcoming auction. I was not there, but the agent reported back what she experienced. I will leave all names out, but it was as I expected. Here is my interpretation of what she reported.

First of all, let me remind you. The seller is to pay $3,000 to be in the auction. The home is listed at a price about 60-70% of the ORIGINAL list price of the home. Most of the sellers have had their homes on the market for a long time and dropped the price dramatically. So, their old price looks good. The buyer pays the bid price plus a 10% fee to the auction house. The auction house splits that 10% with the Realtors. The seller does not have to accept the highest bid.

The Realtor and her seller were very disappointed. They received NO bids for their property. Not many buyers showed up, the turn out was low. There was no excitement created and the bids were low. To get the price up to market price you need a vigorous excited group of bidders, bidding against each other. The only value the Realtor saw was, with the lack of bids, at least it might motivate sellers lower their prices.

She was unaware of any sale going through at the auction. However, the auction reported 80 out of 150 homes supposedly sold......"mostly done on their website." Remember the auction is advertised for 90 days, and if you don't sell, there is no charge to be in the next auction. So, homes just keep rolling over. It appeared as though many of these homes were just getting sold by the Realtors over time as they were still registered with the auction the auction took credit. Who really knows, but if they aren't selling at the auction, I really don't believe their website was doing it.

Again, if the homes don't sell they just stay on MLS with their current realtor. This agent said, it was not something she would recommend to most sellers but builders with lots of inventory may get lucky.

In my opinion, when times are tough people take advantage of you offering this quick fix. There are no quick fixes. There are only 2 reasons a house does not sell: it is priced wrong or it is marketed wrong! PERIOD!