The challenge of unrealistic expectations?
I recently visited with a man who had 100 acres of rural land that he wanted to sell using the auction method of sales. As always, we set up a “get to know the client” meeting over coffee. It was then that I found out about his situation.
In some cases, real estate is chosen to take to auction because of a distressed situation. This was one of those cases. The gentleman was behind on the payments of his first mortgage and also had a second mortgage which he had not made a payment on for years. The “friend” who originally loaned him the money added a second mortgage lien on the land and was in the process of demanding their money back through foreclosure. He had also recently lost his job and been denied for a loan at the local bank to get caught up on his payments.
In our meeting, he described his property to me and indicated that in the last 25 years he had spent over $700,000 on the property and improvements to his real estate. He built several ponds and installed a gravel airplane runway complete with lighting. He was hoping to recoup all $700,000, but was willing to take $450,000 as his “bottom dollar”.
As I began my research, I learned that land in the area was currently selling for $2,000 – $3,000 an acre. This is where it got a bit tricky, $300,000 versus $450,000! How do you tell a client or prospect that his property most likely will not sell for even his bottom dollar number? Do you convince someone who will soon lose their property at a foreclosure sale to take what they can get at public auction and move on without tarnishing their credit scores? Is something better than nothing, knowing he only owes $220,000?
As a professional, I enlisted the help of a real estate agent with 14 years of experience in the same area as the property. We ran a formal Comparative Market Analysis in the MLS to determine the expected amount the property should be marketed for. I also utilized my past 15 years of experience as a Financial Planner to determine the best course of action given the prospect’s current financial situation.
Our next meeting was at the property. It was there that I was able to assess the property to determine if the upgrades to the land were enough to increase the value up to his bottom dollar. As I suspected, the improvements were not enough to raise the value to where he wanted it to be. I took time together with the prospect to explain what the other properties in the area similar to his were selling for and what price I believed we could get for his property at auction.
During this time, I also educated him on the various options he had of listing his property in the traditional sense using my Real Estate license versus selling the property with us at auction. We discussed holding costs, accelerated bidding, and how he would receive proceeds from the auction. I also educated him on the fact that the one thing to remember in the auction business, “Whatever someone is willing to pay on auction day, is exactly what a property is worth!” Anything can happen, but ultimately the public decides what something is worth at auction.
The bottom line is this… Every situation is different. At David Ackel Auctions, we take it upon ourselves to discuss every option available that is in our client’s best interest. What sets us apart from other companies is that we take a great deal of time on the front end educating our clients so that they can make a wise decision that fits “their” situation. No matter what course of action is decided upon, whether it be auction or a traditional real estate listing, we will help you with all of your real estate needs.