The other day a lady asked me, “Mr. Ackel how long will it take you to sell my house?” I told her about 30 to 60 seconds!
That being said, let me tell you about the auction advantage. Now you may ask, “What are the benefits of auction marketing?” Well, there are actually four advantages to marketing a property by auction. They are:
- Seller decides the sale date and terms
- Auction stops the seller’s holding costs
- Concentrated advertising program is used
- Market decides price
Let’s begin with Point 1: The seller decides the sale date and terms. Can any real estate agent tell someone exactly when a house is going to sell? No. But with an auction, the seller sets the date of sale, which is usually 30 to 60 days from listing.
Also, there’s no more “be-backers” club at the auction. We’ve all met the “be-backers.” They’re the people who endlessly say “I’ll be back with…my husband, my mother, my cat,” etc. But with an auction, when the auctioneer says “Sold”– it is sold! Procrastination ends on auction day! We sell the property “as is” with no contingencies. No financing or home inspections issues (inspection opportunities are typically held before the auction). The transaction is usually a cash sale which eliminates the need for financing. All negotiations are over at the fall of the auctioneer’s hammer!
Next, let’s explore how an auction stops the seller’s holding costs. Taxes, insurance, depreciation, maintenance fees, landscape costs, pool maintenance, HOA fees, lost opportunity cost, interest on mortgage, etc., are holding costs and they can be extremely burdensome for the seller during the long, drawn-out process of a traditional real estate sale. All these payments are ongoing but they stop once the house sells at auction. Not only do they stop, but they are also limited in length because of the accelerated pace of the whole auction marketing process. Limiting these holding costs is a major auction advantage.
Let’s assume you have a property. You’ve probably figured out exactly what it costs you to hold on to that property each month, right? Let me ask you this question: would you rather have $100,000 today or $110,000 one year from now – what’s the better deal? The answer depends on what the holding costs are. If the holding costs are $2,000 per month, you would have to get $124,000 a year from now to equal $100,000 that you can get today.
Thirdly, let me explain about the concentrated advertising program. Right now there are thousands of houses for sale. What makes yours stand out? A sign on the lawn and an entry in the Multiple Listing Service? Hardly.
At David Ackel Auctions, we make the auction of your home an event. We create web pages, we engage in email marketing, produce printed brochures, send out mailings, host open houses, list the auction when possible on other websites, post directional signage, run newspaper ads and more. If your property is part of a larger, multi-property auction event, we typically also advertise using billboards. The purpose is to market intensely in order to attract as much attention as possible to your property, bringing everyone who would possibly be interested in bidding on your property to one place at one time.
Our final point is that the market decides the price. Once we get all potential buyers together, the competitive bidding process kicks in and that is what sets the price. Once a buyer has made the decision to buy, he or she does not want to be outbid. I call it the “Gucci Theory.” If there is only one Gucci bag left in the store and two women both want the bag, neither is going to want to let the other take it. They will keep bidding until one person decides to stop bidding. It’s similar in an auction!
Desire is the buyer’s primary motivator. The competitive bidding process forces buyer decisions, which are usually in favor of the seller. The seller does not have to worry if he is pricing his house too high or too low. The market decides for you. Let’s say you put your house on the market and you priced it based on what your friend said it should sell for, or what your neighbor’s house sold for, then somebody looks at it just one time and buys it for full price. What is your reaction? Of course, it’s a forehead-slapping moment of “I priced it too low!”
Now on the other hand, if the price is too high what will happen? The property will just sit, unsold, and the holding costs will keep mounting up and up.
In conclusion, we’ve just taken a look at the auction advantage and the four key points of the auction method of marketing. I’m sure we can agree that it has strong benefits for sellers and that auctions really work!