I've been approached by a number of real estate brokers over the years wanting to get involved in real estate auctions. Most simply want to do a few auctions when things get slow or to be able to say to clients that they can conduct auctions so they don't lose a sale to the local auctioneer. A very, very small percentage ever make very good auctioneers. Not because they can't learn how to chant, it really has very little to do with their ability to learn how to bid call. It has to do with the nature of their business model as compared to that of an auctioneer. I've come to learn that it has nothing to do with their outlook on our business or whether they are good or bad people, it really doesn't have anything to do with that. It's just the differences in how brokers looks at a real estate transaction and how an auctioneer looks at a real estate transaction.
For example, for most real estate brokers to become successful they must learn the art of farming, it has nothing to do with planting or livestock, it has to do with obtaining listing. Listings are the Holy Grail of the real estate brokerage business, or at least it was before the current reset in values. Brokers get as many listing as possible so they have a steady stream of closings as other agents sell their listing. That type of business model can lead to obtaining listings by telling the seller what ever they want to hear so long as the brokers gets the listing. And when they've sat on the MLS for a few months, well reality should begin to set in with the seller and we can now get a price reduction, or two or three. But I still have the listing and ultimately the sale or half or one third of it.
Auctioneers do not have the luxury of large amounts of time. In thirty to forty five days we are going to have an auction where all interested parties are going to gather in one place to bid on the property. I can't really take an auction "listing" from a seller with unrealistic expectations. He'll be very unhappy and I'll have put forth a lot of work for nothing.
Another area that causes problems for real estate brokers when conducting a real estate auction is agency. Auctioneers usually are sellers agents only in an auction transaction and we never or hardly ever represent buyers in a transaction. We don't show other properties or look for properties for those wanting to buy a property. We concentrate completely on the auction we have coming up, it has to do with that whole time thing again. We simply don't have time to find properties for perspective buyers. Therefore, when we have viewings of our auction property we focus completely on that property, we need, must in fact, find as many qualified buyers as possible for that particular property to assure a successful auction.
A broker on the other hand represents a number of buyers and sellers. Therefore, they are always on the lookout for a property for a particular buyer, if the property's an in-house listing, all the better no other agents to split the commission with, I'm looking for as many buyers as possible for a particular property. Don't get me wrong I have absolutely no problem with this business model. However, when they move from traditional listings to an auction sale, well you can probably see the conflict. It's not a conflict for them or a buyer, but it can be for a seller. When a real estate broker is attending a viewing of an auction property, they are not focused solely on that property they have 100s of other properties that might work just as good for the buyer. And when money is involved (commissions) then a great auction buyer might easily be guided away from the auction property and toward a listing where the broker will be paid both the listing and buying side of the commission.
I really think most brokers do a great job of listing and selling real estate through a typical negotiated sales process. And I hope you might see why they don't always work the best in an auction setting. It's really no reflection on them or their ethics its simply not in their DNA to do auctions.
The buyers of the property are capable to make an immediate purchase. They can get the place at a cheap rate. The property auction is set for a definite days of the week.
Posted by: Andrew Wilson | March 17, 2010 at 12:07 AM