BOSTON HERALD - Bidding for Success
By Karen Ukraine
As seen in The Boston Herald
Elliot Salloway's lovely, North Shore waterfront home languished on the market for four years. "It cost me thousands of dollars in upkeep," he lamented. But after reading a newspaper article about a woman who had sold her house quickly, and for a fair price, he started making phone calls to auction companies.
Salloway, who sold his house at auction on May 18, eight weeks after contacting an auction company, is one of a growing number of homeowners who, for various reasons, including divorce settlements, family downsizing and school or job relocation, have opted for private party auction in order to sell quickly.
Real estate auction professionals say that once the auction date is set, the house will usually be sold within four weeks. The closing is usually within the next 30-45 days. (Salloway said his closing will take place before July 4.)
"The key," asserted Jerry Manning, of Boston-based Jerome Manning Co. (the auction company that worked with Salloway) "is marketing."
"It is the auction company's job to let every possible buyer know that this particular property is available, even if it means searching outside of the country," said Manning. Most local brokers do not have the budget in their marketing plans to go that far, and the same amount of money is spread over a longer period of time say six months -- whereas the auction company uses that same amount of money in three to four weeks' time."
The auction company also endeavors to find out everything possible about the property beforehand. All auctioned properties are sold "as is" and it is the responsibility of the buyer to find any faults that would deter him or her from buying. Manning cautions sellers to be honest. "It's better to disclose everything." he said. "It's a lot better to have the bidders know beforehand any flaws rather than to have a statement come up on the auction floor."
A seller has the option of two types of bids: "absolute," which means the property simply goes to the highest bidder, or "reserve," which means the seller has specified an amount that the bid must not go below.
Absolute auctions attract the most buyers hoping to land a great deal; however, most auctions are reserve auctions.
There are advantages for the buyer in an auction as well. The buyer avoids negotiating hassles and broker's fees and also sets the price he wants to pay.
"In private treaty brokerage the seller sets the price, the buyer sets the conditions," said Manning. "Whereas in an auction it is completely opposite: the seller sets the conditions, usually 'as is' with only a title contingency, and the buyer sets the price by being the highest bidder."
Auction companies provide a "bidder's packet" on each property which may include floor plans, lot dimensions, a septic system inspection as well as a Home Inspection Report.
It will also include essential information such as the terms and conditions of the sale, the auctioneer's disclaimer, other costs -- such as a "buyer's premium" - and a sample Purchase and Sale agreement.
A bidder is expected to bring a "down payment" to the auction, which, for the highest bidder, will later be used toward the payment of the sale price.
"Auctions are the ultimate form of appraisal," said Manning, "it is the people who actually decide what a property's fair market value is."
Even though Salloway did not get exactly what his house had been appraised at, he is satisfied with the outcome of the auction. "I liked it because it was a participatory experience," he said.
Manning attributes the increase in the use of private party auctions to a better-educated public. "Historically, auctions had a 'distress' connotation to them," he said. "Now they are seen as a function of the marketplace."
* Visit the house more than once.
* Most houses are sold "as is" (with a title contingency); even if the seller has done an inspection, it may be worth it to have your own inspection done.
* Ask the auction company if there is a "premium" over and above the price of the house or any other costs.
* Hire a broker to help you (most auctioneers offer a broker incentive) and get help in learning how to assess a property's true value.