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WHAT IS AN AUCTION SITUATION?

Auctions are the fastest, most cost effective manner by which to bring real estate and personal property to the market place. The auction marketing method facilitates the private treaty sale process by adding significant marketing techniques and a time element that entices all genuinely and remotely interested bidders to bid competitively on auction day, therefore creating the fair market value for highest and best use. Listed below are some typical auction situations:
 

    1. An Emerging Market

    Your property is so hot that it sizzles. Your phone is ringing off the hook from callers interest. Should you limit your potential return by applying a "price tag". Why does any seller ever attempt to tell the market "how high is high? That is the job for the market! Ever wondered why the selling price is called "Market price"? "Highest and best use" is always the opinion of the buying side of the table. Will you leave money on the table by using conventional marketing an unconventional "emerging market"? How does an appraiser factor in external changes near your holdings? They can't. Appraisals deal only in past transactions on different real estate. How does an appraiser factor in scarcity?

    2. Appraisal Value Difficult To Determine

    For example, scarcity cannot be factored into an appraisal. Appraisals are based on past sales when the supply and demand may have been different. Market conditions change, up and down.

    3. Rapidly Changing Market

    If demand is high for a particular type of property the competitive environment of an auction creates new market values. If the supply is too great or the market is deflating, an auction allows the seller to "freeze" the market at an auction day price reducing further price erosion. SAVVY BUILDERS understand this factor perhaps better than anyone.

    4. Unique Property

    The more unique or specialized a property is, the more an auction can help obtain a unique price. Appraisals are difficult to determine with unique properties.

    5. Demand Exceeds Supply/Supply Exceeds Demand

    a. Aggressive bidders help ensure sellers' properties will not be sold for less than current market value.
    b. Auctions bring together the supply of limited buyers for the available properties.

    6. Property Location

    Property may be difficult to find; has become "invisible to the market." The auction method provides a concentrated marketing program which draws attention.

    7. Financial Situations

    a. Seller needs quick cash.
    b. Seller wants to buy another piece of property but must liquidate present property to finance new purchase.
    c. Seller wants the money and financial peace of mind.

    8. Estate Liquidations or Partition

    a. Heirs or partners want to dispose of property promptly.
    b. Heirs or partners cannot agree on fair price.
    c. Heirs or partners want an arm's length manner to buy out each other while inviting the general public to come and compete

    9. Partnership Split-up, Retirement and Divorce

    a. Division of holdings.
    b. Parties cannot agree on a fair price.
    c. Parties want to cash out quickly.
    d. Parties offer their property to the entire market.

    10. High Carrying Cost

    a. Mortgage Interest, Taxes and Insurance
    b. Other Liabilities
    c. Opportunity Costs…i.e.. recovering a line of credit or funding retirement

    11. OREO Properties

    Other Real Estate Owned (OREO) and personal properties. Allows a quick sale for the financial institution that now holds the property.

    12. Auction Minded

    Seller is auction minded and feels an auction will bring him a fair price in a minimum amount of time.

    13. Raw Land/Crop Pasture/Timber Land

    "The sum of the parts is often greater than the whole." For example, large tracts of land with road frontage presents an opportunity for parceling into smaller tracts. This can lead to a lot more total dollars at the auction.

    If your situation is similar to one of those above, an auction offers a ready alternative. If you have checked up to three, an auction could be the preferred method of marketing. If you checked more than three, you should be planning an auction. Let the traditional real estate agents bring buyers to the auction by acting as a buyer's agent. They will be compensated for their efforts should their client be a purchaser.

Granger, Thagard & Associates, Inc.
1806 Oxmoor Rd, Birmingham, AL 35209
205-326-0833 / 800-996-2877
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Real Estate Auction Company, Residential and Commercial Real Estate, Multi-Parcel Land Auctions