PAX AUCTION NEWS!

How to Prequalify Assets for a Successful Real Estate Auction Outcome
2009-06-19

The information you are about to read is not commonly gifted and is comprised of many years of success and failure in the auction business. It is intended for real estate professionals who are new to real estate auctions and their emerging popularity. If this describes you well, the advice you will receive in this article will be critical to your success in this business. Not following it will only hurt this industry, giving auctioneers a bad name. The information shared here is perhaps the most overlooked and most critical aspect to the success of any auction sale. So I suggest you follow each point carefully.

A word of caution: Just because you read this in its’ entirety does not mean you will be successful in the auction world. Most people who are new to this business are excited about being in the profession, and often approach it the same way a real estate agent would book a new listing. The difference is that auctioneers are in the business of selling property, and not about obtaining new listings. Successful auctioneers will turn away more business than they will accept. We are not interested in catching as many listings as we can book, or conducting auctions that we know have little hope of selling. Thinking differently is the key to your success. After all, the biggest and most important aspect to any auction really comes down to the seller.

There is a down and dirty way to determine if in fact we, or in this case you, can be of any help to a particular seller. The following are "Red Flag” statements from a seller, potentially disqualifying them from even entering an auction sale;

1. I don’t have to sell!
   Then why are you talking to me? What they mean is I am not desperate to sell.
   
2. I need an out of town buyer.
   Almost all real estate is local. What he/she means is the locals know my property is not worth what I am asking and I need a bozo from out of town. Good luck with that one.
   
3. I’m looking for an investor.
   Same as number two above, just worded a little different.
   
4. I won’t sign a listing agreement.
   Yeah, and I don't like seeing the dentist but I still need to.
   
5. Don’t use the word auction.
   Then we obviously should not be talking. Some auctioneers try not to bring up the “A” word right away in the conversation. Not my suggested approach here - but hey, whatever works.
   
6. I won’t sell unless I get “MY” price.
   The market ALWAYS sets the price for your property. Now if "your" price is in line with the market then we might be able to help. But believe it or not, you don't set the price.
   
7. My property is worth more than market price.
   See number six above.
   
8. I would never consider breaking the property into smaller pieces.
   It might very well be that the only way to achieve the highest and best possible price is to sell the property in smaller parcels.
   
9. I don’t want the auction made public.
   If you have to ask why this is a problem, then you are in the wrong business.
   

Just because a seller may make any of these statements does not mean you should not continue to explore listing the asset for auction. Consider it a deal killer when you hear 3 “Red Flag” statements when talking to a seller.

Other deal killers include unrealistic reserve selling prices and sellers who are unwilling to pay auction expenses at the signing of the listing. Why have them pay for auction marketing expenses? It comes down to making sure your seller is motivated to sell. Asking for the seller to pay for the marketing expenses up front is a good way to tell that your seller is motivated. It may be appropriate to credit back half of the marketing fees at closing if the reserve is low enough and the property is highly likely to sell successfully. Auctions never close 100% of the time. Expect a 75% to 80% closing ratio if you do a great job prequalifying each asset and seller.

If you are preparing to enter this business, I suggest you find an auction company that is experienced to collaborate with before you decide to do this yourself. Your purpose is to sell property, not to just get the listing and have it sit for 6 months or more as the property drops in value. Focus on the Net and not the Gross - you'll do better and save your client the pain of market stagnation and carrying costs. You are not a full service broker if you don't offer the service, and I am willing to bet you are sitting on some listings that will likely expire, or already have. Co-listing property with an auctioneer might just be your ticket to selling those stubborn properties that are unique or tough to value. It's time to learn something new and evolve with the market. I hope this advice is helpful to you, and that you will be successful moving forward in this business.