BAY STATE REALTOR - Looking For Alternative Selling Options: Add a Gavel to your Toolbox
By Camilla McLaughlin - writer for Inman News and Unique Homes magazine.
Email her at email@example.com
As seen in the Bay State Realtor (May/June 2003) page 14
News reports of eBay sales of an island, a California town and a former missile site have taken real estate auctions off of the sidelines and into the headlines. Once reserved for distressed and foreclosed properties, auctions are becoming part of mainstream real estate as agents add a gavel, actual and virtual, to their toolbox.
Currently, only a small percentage of all transactions, real estate sales by action, are growing. "It is estimated, according to a study by the National Association of Realtors (NAR), that one in every three properties sold will utilize the auction method of marketing within the next seven years," says Steve Martin, president of the Gwent Group, a Bloomington, Indiana auction consulting firm. NAR has added an auction section to the real estate specialty area of the web site, realtor.com.
In 2002, these sales exceeded $58.5 billion, according to Gwent's research, with about 1,000 firms specializing in real estate auctions. A number of online companies offer virtual auctions, and emerging business models promise a mix of both virtual and real auctions.
What is an ideal auction scenario? The property could be unusual in design, difficult to appraise, vacant or the sellers might require a quick sale because of relocation, financial issues, high carrying costs or divorce. Both a competitive seller's market and a softening market is well suited to auction sales.
There are two types of auctions: absolute auctions and reserve. With absolute the property is sold to the highest, qualified bidder. In a reserve auction the seller sets a minimum price, which may or may not be disclosed, and reserves the right to accept or decline all bids within a specific time.
Realtors are very much part of the equation acting as a referring agent or as a cooperative agent or listing broker. Auctioneers must hold a real estate license to handle the contracts. Some traditional brokers like Donna Brooks of Boss Realty and Brooks Auctions in Leominster have added an auctioneering license to their credentials.
Recent auctions for Brooks include two estate properties, a commercial property and the home of someone going into the military. She anticipates a growing use of auctions for estates, since both the contents and the property can be sold on the same day easing the burden, both financially and emotionally, for the family.
Auctioneer Jerome Manning of Jerome J. Manning & Company, Inc., deals primarily with upper end real estate. Manning attributes a surge of auctions, particularly with the luxury properties, to the apprehensiveness of entrepreneurs to commit investments to the unstable stock market. At an absolute auction with competitive bidding, the buyer realizes that they are getting a sold investment at the best possible price. Consistently, luxury homes sell at prices above appraised value, according to Manning. That fact, coupled with the speed for which the process is conducted (4-6 weeks), is drawing the attention of sellers considering an auction sale.
For more information on auctions, visit NAR's auction information center at www.realtor.org/auctions.nsf.
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