As the real estate landscape evolves, more and more home buyers and sellers are using auctions as an alternative to traditional home buying.
Real estate auctions continue to be one of the fastest growing sectors of the auction market. According to the National Auctioneers Association, residential auctions generated $17 billion last year alone.
For sellers, auctions can translate into immediate cash and no long-term carrying costs. Buyers can save time and money. A listing can typically sell within 9-12 minutes.
Locally, it seems that while there are auction companies out there, the trend seems to be on the downward slope. Costs involved with auctions, unlike a listing, revolve around advertising. The seller in addition to listing the property for a traditional commission must also pay upfront advertising costs that the auctioneer needs to advertise the auction. These costs can run as little as $5,000 and as much as $15,000 or more. Auctioneers I have spoken to recently have told me that they would not take my money right now as in their opinion the auction market is a slippery slope at best. The last auctioneer conveyed that in his last held auction there were no buyers who showed up. That’s right. After the seller spent almost $10,000 on advertising through the auctioneer’s firm, the only people who showed up were other nosy neighbors and Realtors.
On a side note, one reason turnout was probably bad was because the weather did not cooperate the day of the auction. Therein is the other issue. If you as a seller spend $10,000 advertising an auction for a certain Saturday, you have that auction on that Saturday whether or not you have sun, rain, or snow. With 10 months or more of inventory in many areas including our own, in the midst of a buyers market, on a day where the weather does not cooperate you don’t have many buyers interested enough to brave the elements for “one more auction” or perceived distressed sale as there are so many to pick from in this market.
Wow. I think more research on this is in order. A trend or a fad? A trend, certainly. 2009 showed up ticks in number of real estate auctions, and number of sales by auction.
Sellers are NOT always required to pay anything up-front. Many auctioneers charge NO marketing fee up-front, or very small amounts, and in many cases, those fees are credited at closing.
A $5,000 to $15,000 advertising budget would necessitate a $1,000,000 to $3,000,000 property, or this would nearly constitute unethical practice. Nobody would rightly spend $10,000 in advertising to sell a $200,000 home.
The weather? Not a factor — at all. The reason the home you mentioned didn’t sell after all that marketing was likely it had an unrealistic reserve or subject to confirmation format, which buyers detest. If it was marketed “absolute” and sold “absolute” there would have been people there in 10′ of snow.
Yes, the real estate market remains supply heavy, which means price adjustments are necessary. However, auctions continue to be the one way to find true market price, regardless of the market, or weather.
Thanks for your comments Mike. I appreciate your input!