Frequently Asked Questions
1. WHY SHOULD OWNERS CONSIDER AUCTIONING THEIR PROPERTY?
More and more owners are realizing that there are many good reasons why they should consider auctioning their property when they are ready to sell. Have auctioneers changed the way they do business to encourage such a change? ...No. What has changed is the perceived image of the auction method. People are learning that the auction method is an alternative way of selling their property that potentially maximizes their cash recovery. Moreover, the transaction is completed within the seller's time frame.
In the years past, most owners asssociated auction sales in general with estate sales and art sales. When people died, their assets would be auctioned off to settle their estates. Auctions of houses, on the other hand, would be linked with distress situations such as foreclosure and bankruptcies where the law often dictates the method of sale. Thus, when approached about voluntarily auctioning their property, owners would respond negatively because they did not want people to think they were bankrupt or being forced to sell. Today, this is not the case.
Today, the entire picture has changed. Auctions are now seen as an attractive alternative to selling most anything. As a result, more and more properties are being sold by auctioneers. Owners see the auction method for what it really is - a highly successful and potentially more profitable way of selling houses and real estate in general.
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2. HOW CAN AN AUCTION NET MORE FOR THE SELLER?
The auction method nets the seller more for several reasons: limited time frame, lower settlement expenses, competitive selling environment, no ceiling prices, and much more. No one reason makes auction sales preferable to privately negotiated sales, but when put together they can make the difference between a fair sale price and an excellent sale price. While appraisals are based on values of the past, the auction determines what a property is worth that day and into the future. At auction, the owner has the right to reject any and all bids. The successful bid must meet all of the owner's requirements.
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3. WHAT IS THE TIME FRAME FOR AN AUCTION?
Auction sales are held at a specific time, date, and place - typically four to six weeks after the contract with the auctioneer has been signed. Even for properties that require special marketing, time frames usually do not exceed eight to twelve weeks.
This specific time frame is effective in two ways. First, it reduces the owner's waiting period for a buyer because bids can only be made at the sale. Second, the time frame puts a deadline on buyer interest. Potential buyers know that they will have only one opportunity to bid on the property and if they do not they could lose the chance to purchase the property. This limited marketing period, therefore, stimulates a buying frenzy which contributes to a competitive auction.
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4. HOW IS THE AUCTION ORGANIZED?
These potential buyers need to be informed of the auction. When an owner signs an agreement with a professional auctioneer, he or she is hiring an auction team who will design and implement a specialized marketing/advertising program to meet the owner's specific requirements and which will draw serious buyers to the auction.
This marketing program is specifically designed around the particular property or collection of goods and geared toward all potential buyers. Ads are designed and placed in newspapers and journals where they will be most effective. Mailing lists, brochures and email are part of a marketing program to attract a large pool of prospective buyers who would not be aware of the sale otherwise.
On the day of the sale, the auctioneer and his team use their selling skills in front of a crowd of prospective and qualified buyers. These selling skills include pitting buyer against buyer. While face to face competition rarely occurs in the private sale process, a professional auctioneer will exploit it and use it to raise the price for the property being sold. Each time a bidder raises his bid at an auction, it reconfirms and raises the other bidder's idea of the value of the property which is reflected in their willingness to continue raising their bids.
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5. WHY AUCTION BEFORE BROKERAGE?
The private sales process focuses on the buyer verses the seller. Through an agent, a competitive relationship is established between the potential buyer and the seller. Moreover, the relationship takes place in a vacuum. Rarely will an interested buyer find out what other people are offering until too late. If a seller makes a counteroffer, the buyer will have no evidence of other interest to warrant his paying a higher price until it is too late.
The auction process, on the other hand, transfers this competitive relationship to the buyers only. The buyers compete with other buyers - not the seller. The buyers deal openly and directly with the auctioneer. They see then and there what other people are willing to spend. At many auctions, the auctioneer will ask the bidders to look to their left and right. "These people are your competitors," he will say. While everyone in the crowd usually laughs at that statement, it relays a basic truth about the auction method. All potential buyers of the same property are openly competing during the auction sale. No one likes to lose, and the professional auctioneer uses this competition to push the price higher and higher.
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6. WHAT ARE SOME AUCTION ADVANTAGES?
An auction sale creates a psychological force that plays on people's dislike of losing something they want. They get caught up in the moment and usually spend more money than they had initially intended. The initial bid price is often the price they would have offered privately. A professional auctioneer convinces them that the property is not worth losing. As a result, this psychological aspect of an auction sale works well with the bidding process to push the price higher.
With the private sales process, typically, the ceiling price is set and the price is negotiated down. The seller is asked to compromise. However, with the auction method, the bidding starts at an initial price and goes up through the bidding process. No ceiling price is established (or stated) and it is the bidders who must compromise - not the sellers. The auction process opens up the pricing process and meets the definition of "Fair Market Value" when the seller agrees to sell.
Another advantage of the auction method occurs during the settlement process. In a private sale, the seller typically pays half the transfer taxes and some other expenses. With HOBBIE AUCTIONS, the buyer pays all the transfer taxes and most all other settlement expenses.
Moreover, in private sales, the agreement is often contingent on financing, rezoning, or inspections favorable to the buyer. In the auction agreement, there are no contingencies. Good title to the property, however, is always conveyed.
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7. WHAT ARE COSTS OF SELLING REAL ESTATE AT AUCTION?
Commissions charged by professional auctioneers are usually negotiated, but are generally very competitive with real estate brokers and agents.
Deciding to sell property is rarely easy. By using Hobbie Auctions, owners can minimize a myriad of details and voluminous paperwork and can maximize their potential returns with a simpler, clearer and easier to understand process used by banks and attorneys - the auction!
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8. WHY USE HOBBIE AUCTIONS?
An auction facilitates the entire sale of property, regardless of the owner's motives. Throughout the years, Hobbie Auctions has worked with all kinds of clients. As people become more aware of the advantages of the auction method of sale, they are increasingly making the auction their method of choice. When owners decide to sell property, they should consider the auction method as the best alternative as it deals directly with the ready, willing and able buyers.
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