You probably think that this is click bait – I assure you – it is not. Let me Explain.
What if there was a way to sell your property with no open houses, last minute showings, no contingencies, buyer qualifications, no termite inspections, no lender requirements, no appraisals, no structural reports, no repair orders for the seller, no contingencies based on the buyer home inspection.
How about selling it for Cash, As-In Condition, and close within 21 days. Read on!
Selling your house can be a super stressful operation. There are real estate companies out there that in the industry who are capitalizing on that very stress with “No showings, no open houses…” mantra that makes it look simple – but it’s not – you wind up paying a premium for that sale – and you might not know about it.
At least from their testimonials, it’s all rainbows, unicorns and fairy dust, right?
Let’s face it, there are homes that sell for a premium because of location and great schools, and the one across the street is part of another school district so it is not as popular, so it might not sell for the premium. Then you have places that should be condemned selling for way more than most professionals will admit.
You may have an estate home that was left to you and other heirs, and none of you have the time nor money to keep the home or the land maintained. It could even be that your parents have downsized and the home is decorated from a period that is no longer popular.
In any case, everyone wants to pay no commission or as little as humanly possible. But there are tradeoffs. A 1% listing agent will not give you the best marketing bang for their dollar. Think about it. If you were to cut something from the fat – what would you cut while keeping your family fed? Your commission or your marketing? 100% you’re your marketing.
While most full-service brokers give you a video walk through, professional pictures, a detailed 3-D dollhouse view, and drone footage of your property, they will put it on an MLS, and that’s it. Commonly with only a picture of the front door. Buyers want to see the entire package, and not just a shadow.
Let’s talk about one online only company. They charge you 1% listing, a 3% to 3.5% buyers fee, so you are at 4.5% – and most real estate agents charge 5% for the inclusive package. So what are you saving? It is all in the marketing – even online companies will say it. Plus the cost of inspections, repairs, special assessments and the like – you could be on the hook for thousands. But you are hooked by that one percent.
But – that is not why you are here. You are here how you can have a zero-commission sale right? Well, the answer might not be what you expect. Are you ready?
Auctions have been used for everything from arranging marriages to auctioning antiquities and works of fine art. While early auctions were closed by driving a spear into the ground instead of the gavel typically use today, the general concept of the auction has remained the same. Over the last 2,000 years, many specialized variations on the standard “open ascending price auction” have been created to provide a more specialized auction experience that best fits the goods or services up for sale.
Some of the first American settlers, the Pilgrims, were known to use auctions as a common method of selling crops, livestock, tools, tobacco, and even entire farms – so auctions have been an integral part of our nation’s history.
So you are thinking – this guy is full of ______, right?
In a real estate market saturated with selling options, from traditional realtors to auctions to the private For Sale By Owner, it can be difficult to figure out which selling method is the best fit for you and your home or property. While once only associated with distressed properties, home auctions are growing rapidly in popularity. While selling through real estate auction is a great, fast, seller-controlled option, it may not be the right course of action for you. This guide to selling through auction will help you to understand how selling your property at auction compares to selling with a traditional realtor, and decide which selling strategy is best for you
Though timelines may vary, an auction is typically set up and promoted within 45 days. The post-auction settlement period is usually another 30 to 45 days, making the total timeline roughly 90 days, start to finish. This means that homes often sell faster through auction because there is a fixed date that the property is sold. All marketing happens before, and closing happens after, but this predictability is a key selling point for auctions.
With typical real estate brokerage this certainty can be unnerving for some sellers because they are not in control of negotiations, nor the closing dates, appraisals, inspections, nor how long the home sits on the market.
That said, when potential buyers arrive at an auction, they know that they want to buy and how much they are willing to pay. The deadline of an auction motivates buyers to do their homework, get financing approved, read through contracts, do all of the inspections and appraisals beforehand and register, so by the day of the auction, they are ready to buy. The sense of urgency created by this tight timeline also encourages buyer interest.
The buyer pays for the inspections, appraisals, termite inspections – all of which are needed to be done by the auction day. Then they come to the auction understanding there are no contingencies.
Depending on the market, selling with a traditional realtor can take substantially longer. This process involves any improvements and staging, listing the home, multiple showings, negotiations, and the time from when the sale contract is signed to the time of the contract settlement. This time period ranges significantly depending on market activity, price, location, and other outside factors.
With auctions, you cut holding costs (taxes, fees, payments, utilities, insurance) no open houses, no last-minute showings – you are in charge from start to gavel!
The costs associated with selling through auction versus selling with a realtor are competitive and depend on a number of factors. In an auction, there are auction fees and costs, and the seller pays for marketing out of pocket. However, quick property turnaround can reduce insurance, tax and maintenance costs associated with holding the property on the market. The auctioneer fee typically ranges from 1-3% of the sale price, with the focus on “impact marketing” that showcases the property to potential bidders through signage, direct mail print campaigns, online and social media advertising, and other media outlets to promote buzz and attention for the upcoming auction. When selling through auction, the seller pays the minimum amount of closing costs required by law, including the preparation of the deed, revenue stamps, and the seller’s portion of necessary taxes.
Selling through a realtor is more inclusive of various costs within the agent’s fee, including marketing and other promotional materials. Because of this, the sticker price is often higher but more predictable when selling with a realtor. The buyer also has some control of seller’s costs at closing, as they can negotiate repairs to be made or for the seller to pay all closing costs.
A house sold through auction is either offered “with reserve,” which means that the seller sets the lowest bid that they are willing to accept, or “absolute,” which means the seller accepts the highest bid without reserve. If the property is sold “with reserve,” the seller can decide not to sell the property if the highest bid does not reach their minimum bid price. In this situation, the seller still may still incur auction expenses. This reserve price is based on the property’s market value, ensuring that the seller gets the home for what it is worth. While no one – no auctioneer or real estate agent – can guarantee that a seller will get the price that they have in their head, the reserve system provides the seller with a “safety net.” An Absolute auction will attract 100% of the buyers, so consequently we typically see 15-20% higher values.
Market value is determined the same way when selling through auction or real estate agent. Is your home a fixer-upper or move in ready? Where is your home located? Are there other homes for sale nearby? However, because auctions are on a set timeline, the seller avoids the extra costs of keeping a property on the market, such as mortgage interest, maintenance and repairs. Additionally, because of the competitive nature of auctions, the price can be driven up by competing bidders. With a realtor, if a home is sitting on the market for a long time, buyers have the ability to negotiate a lower price for the property being sold.
Selling through auction gives the seller a significant level of control over the sale. Auction properties are sold “as is,” so the sale of your property is not tied to any appraisals, inspections, financing uncertainties, or other conditions that can be determined by the buyer when selling through a realtor. Because auctions:
- require bidders to pre-qualify for financing before registering,
- guarantee a sell date,
- eliminate the possibility of unscheduled or drawn-out showings,
- removes the seller from negotiations, and
- guarantees bidders who are ready to buy, much of the uncertainty of the selling process is removed.
When selling through a traditional realtor, the buyer is able to set purchase contingencies, which also allows them to back out of the deal if these contingencies are not met or if their loan is not approved. In this situation, the buyer also typically sets the closing date, whereas in an auction, the seller and the auction company determine the date and time for the sale of their property.
At the end of the day, there is a relatively specific set of circumstances in which selling through auction is the best strategy, but when these circumstances are met, selling through auction can be fast, profitable, and predictable. According to the National Association of Realtors, it is best to access the market, the property, and the situation when decided whether or not to sell your property through auction. If two out of the three circumstances suggest selling through auction, you’re in the clear to contact an auctioneer, like Higgenbotham Auctioneers.
Auctions are best in a market:
- That is changing quickly
- With some buyer interest and some inactivity
- In which your property is unique and in high demand
- Has either an inventory shortage or surplus
Auctions are best if your property:
- Has high equity
- Has high seller carrying costs
- Has features that are unique or difficult to value
- Is attractive to a specific type of buyer
Auctions are best if you, the seller, are:
- Limited on time
- Interested in quick cash
- Looking to liquidate a property, potentially including its contents
- Not interested in doing work on the property
- Not interested in direct involvement
- Ready to or have already purchased other property
- Not interested in paying traditional realtor commission
Have some additional questions or interested in selling your property?