We auctioned a home and acreage the last weekend in June and it did not sell at the auction. It was really a bank ordered auction but a complicated sale due to the local bank loan being guaranteed by the FmHA (the Feds). Which means that decisions are not usually made fast enough, but in our case they did a pretty good job of working with us and our time line.
After the high bid at the auction was rejected $96,000 (we knew it would be) we put an ad in the local paper and advertised it at FmHA's reserve selling price of $110,000. So the list price was a take it or leave it price, but it was about 25K less than anything else even closely related to our property currently listed. The bank was motivated and it was a reasonable reserve selling price. We had a ton of calls on the ad, I showed it 14 times last week, and we received a full cash offer within the week, but of course we would accept nothing less. It's been a while since I've had to work as a Broker (I'm licensed in three states), which reminded me why I don't do listing and it refreshed my memory concerning a couple of things we should be doing at our opens.
1. Remind potential buyers that they can still buy at auction even though they need to sell their home. They can get a 30 or 60 day bridge loan to purchase a home at the auction and have 30 to 60 days to sell their home. IF they can't sell their home in 30 days we can discount our auction rates and auction their home if they desire. I had three people say they weren't an auction buyer because they had to sell their home before they could buy another. Not true.
2. In today's market we have buyers that are willing to buy, but not at the overpriced listing on most homes listed in a traditional manner. And with the market all over the place they don't know who to believe when it comes to price, appraisals are not even a very good indicator of value right now. Therefore, a low advertised starting bid is just what they are looking for. If we had advertised the 40 acre acreage and 1600 SF ranch style home with a minimum opening bid of $75,000 we would have had a much better turn out and I'm sure, better results. As it is we are still 100% sold for the year, if you count before, during and after the auction results.
What do you think, I’d love to hear from you?
There is no limit on the amount of real estate you can own. In fact, in today's garage sale real estate it may be benificial to purchas a second home if you can get the second to cash flow and treat it as an investment. I think today, more than in a long time keeping the second home may also be a choice if you have the means to do so and it does cash flow. Otherwise I agree that a bridge loan is the best way to deal with it, and actually fairly common in practice but something few people are aware of.
Posted by: Jason Smith | July 14, 2008 at 07:42 PM
Thanks Jason for your comments. I wish there was a great way to educate the buying public concerning RE auctions. We always publish our 800# yet few pickup the phone and call before an auction to ask about financing. And some show up at the auction without even viewing the property.
Posted by: Marty | July 15, 2008 at 03:32 PM