Why is it that the real estate industry is so self-centered and resistant to change? In times like these, couldn’t you argue that this is the most critical time to embrace change? You can’t seriously expect that practices of old will work equally as well when the market tips. The value proposition changes. Values change. So why aren’t we changing with it? Time is money right? Lately, time has put many out of business.
Lets look at the big picture. Traditional brokerages are starting to lose market share nationally. Deals are falling through. There is more market stagnation, and property values are still declining significantly. There is more urgency to sell as a result of rising foreclosure rates, bankruptcies, less leveraging potential…and buyers are still holding back waiting for the market to continue to fall. According to the Urban Land Institute, there were 80% fewer real estate transaction in 2008 than there were in 2007! If you are a broker or agent…I wish you luck and bid you well. I also suggest you change your perspective.
Take a look at history. I find it interesting to see that auction marketing trends are becoming far more common. Real estate auctions have grown by 30% over the last 5 years in the U.S. The National Association of Realtors, and the National Auctioneering Association, both concur that 1 out of every 3 real estate transactions will be sold through an auction by 2010/2011. In comparison, 20% of all real estate transaction in this country are already being transferred via the auction method today.
We are already seeing the shift. Real estate auction marketing has historically become the method of choice during times of economic stress. Some of the most well established niche based auction companies grew most successful when times were tough. That is how many started out.
Wondering why you know very little about auction methodology? Maybe you know a lot, but If you’re from the West Coast…you wouldn’t. It is far more common in the Midwest and on the East Coast, but that is changing. The Auction Method of marketing is perhaps the oldest and fastest method of converting hard assets into cash. It has been adopted and used by all Federal, State and Local Courts and Governments as the acceptable methodology of hard asset conversion. Here are the top 5 reasons auctions are gaining so much popularity:
- Auctions create a strong sense of urgency – why wait months for buyers to make up their minds? The seller sets the deadlines and forces the market to respond through a carefully planned and aggressive marketing campaign.
- Auctions set the seller apart from other competitive sellers. There is no haggling or negotiating and everything is sold as-is, contingency free – reducing frustration.
- Auctions create increased competition between & among buyers- why place yourself at the mercy of a single buyer who not only determines price: but may also demand unusual or stringent demands prior to actually closing the transaction?
- Auction transactions are accelerated, intense campaigns, that often result in selling the property much faster than through traditional methods. The savings in carrying costs alone can make a big impact on the bottom line for a seller.
- Auctions do away with a list price. Determining value today is tough. If an asset is under-priced, the asset may be sold quickly and there may be money left on the table. If it is priced too high, the result is time delays, loss of money to maintain, frustration by the seller and no offers of any type or size from potential buyers. When price reductions occur, it negatively motivates potential buyers to wait and see “how low will they go:” meanwhile, nothing has happened to the asset except that it is stale on the market and potential buyers begin to think that something is wrong with it.
At the end of the day, the asset will be sold to the largest audience of ready, willing and able buyers. Auctions are arguably the best barometers for fair market value. If you are a property owner, bank or institution that needs to sell – you might be thinking it’s time to talk to your real estate broker about auctions. I am here to urge you to avoid doing this without speaking to a qualified auctioneer first. Your broker or agent is very likely unfamiliar with how an auction works and will be extremely under qualified to conduct one…so he or she will not support it. If you think about it, your broker would have suggested an auction as a potential solution if it were understood and familiar to your broker. The broker would also lose commission potential. Even still, if your broker hires an auctioneer – make sure your broker allows you to speak with the auctioneer freely. If you cannot, then your broker does not have your best interests at hand.
If you are a broker or an agent, I suggest you open yourselves to the opportunity of collaborating with an experienced auctioneer (please note that the word experienced is highlighted) to get your properties sold. You’re purpose is to sell property, not to just get the listing and have it sit for 6 months, a year or more as the properties drop in value. Focus on the Net and not the Gross – you’ll do better and save your client the pain of market stagnation and carrying costs. You are not a full service broker if you don’t offer the service, and I am willing to bet you are sitting on some listings that will likely expire or already have. Co-listing property with an auctioneer might just be your ticket to selling those stubborn properties that are unique or tough to value. It’s time to learn something new and evolve with the market.