We have been asked on many occasions why we do a proposal for our clients. First, it is important for you to understand what we do as an auctioneer. No matter marketing, bid calling, payments, labor – it is all spelled out in the proposal. If you are getting multiple quotes, it is important that EVERYTHING be WRITTEN IN THE CONTRACT before you start. Second, there is nothing like having an auction, and then you find out you owe the auctioneer for a bunch of items that are blank or not even addressed in the contract. Here’s some additional things to know:
Most people that contact us about selling their property (real estate or personal property) have never had an auction. Some have never even been to an auction. But, they recognize that an auction may be an option for their situation.
During the first conversation, they are trying to find out more about the auction process, how it works, and if it will work for them. As the auctioneer, one of the main things that we are trying to determine is “What is your goal?”
Goals are important. In fact, having a definable goal is one of the most important ingredients to having a successful auction.
As the auctioneer, we start by asking questions – a lot of questions. These might include:
• Why do you want to sell this property?
• Has the property been for sale? For how long?
• Is there a time frame for the sale of this property?
• What do you want to accomplish after your property is sold?
These questions are designed to help you talk about the property, your situation, and your reasons for selling. They help us identify your goal – and whether an auction is the best way to reach it.
Each seller’s situation and goals are unique. The auctioneer should be adaptable to these situations and be able to create a plan that is specific to meeting each seller’s needs and goals.
So what should you look for when choosing an auctioneer?
You should look for one that:
• asks a lot of questions about both your situation and your property
• helps you determine what your goals really are
• takes time to figure out if an auction is right for you
• puts your goals before his own
Once a definable goal has been determined, the next step that we take is the Property Evaluation. There are several parts to this evaluation, which help us decide whether your property is suitable for auction.
This process includes evaluating these 3 key components:
1) the Property
2) the Seller
3) the Market
A good auction property is one that:
- has some equity. If you owe more than the property is valued, it will be difficult to sell no matter the method you choose.
- is vacant. Vacant homes deteriorate over time and are subject to vandalism and theft.
- has high carrying costs. These costs rapidly deplete any equity in the property.
- requires significant deferred maintenance. Usually the costs will take too long to recover if the repairs are made.
- is difficult to appraise. A properly promoted and conducted auction will realize the property’s true market value.
- is in high demand. Competition will drive the price.
A good auction situation is when the seller has a defined goal and:
- needs immediate cash.
- is relocating to another city or state.
- has vacant property (or properties) that has high carrying costs consuming equity.
- needs assistance settling an estate.
- understands that a property is only worth what someone will pay for it.
An auction can take advantage of any type of market.
- In a seller’s market when property is scarce and demand is high, competition for the property will be significant.
- In a buyer’s market when the market is flooded with property, an auction can help your property stand out from the crowd.
- In a changing market, an auction can help you take advantage of trends quickly, instead of reacting too late.
By evaluating these 3 components, we can determine whether your property is suitable for auction. If it is determined your property is suitable, then the next step is to determine a Target Market for the property and put together a Written Plan for success.
As part of the evaluation of your property, we determined whether the property is suitable for auction. We also determine its Target Market.
The Target Market is the group of potential bidders who are most likely to be interested in and bid on your property. This group is determined by several factors, including the property’s value, who can afford it, and what the possible uses are.
For example, a single-family home in a neighborhood with mostly owner-occupied homes is going to have a different target market than a home in a neighborhood with a lot of rental properties. Land, commercial properties, vacation properties, etc. all have unique sets of potential buyers. The location, its terrain, and its current use also have an effect on the Target Market. Even the current condition of the marketplace itself can determine who may be interested in purchasing your property.
Special Thanks to our friends at Terry Howe, Auctioneers.