Auction Fees - To Adjust or Not?

[PropertyEconomics]

Nancy,

The buyer paid $1,665,000. Every buyer knew that they had to pay the "buyers fee" and they calculated it into their offering prices. Therefore, the price paid was $1,665,000. If anyone tells you otherwise, they are wrong. End of discussion.

Jason Teynor

Little bit of a God complex???

If you post is correct Mr Teynor ... the buyer knew they had to pay X% more than their offering price ... thus they knew they would have to write a check for offer + x% and the total purchase price is $1,665,000 plux x%.
It has nothing to do with realtor fees but the fees the BUYERS knew they would have to pay on top of their offer for the Auction Company.
The buyer was willing to do so and the price must be adjusted upward as a result ... and thats my two cents but I wont say its the final word.
Not feeling like God today ...

 

[Elliott]

While I'm inclined to think the Sales Price is $1,665,000. Many
on this board have taken the position of what is 'typical' as
a way of not reporting concessions (buyer closing costs
paid by seller). So what the buyer should have done was
tell the auctioneer that he should pick up $165,000 of the
buyer's closing costs. So then the sales price would be
$1.5 million, but they could have financed the whole
$1.665 million. Doesn't that make sense?

Is there anyone who reports deliquent taxes, but doesn't
report seller paid concessions?

 

[Wayne Tomlinson]

I am with Ray on this discussion. For so many years Realtors, and appraisers have claimed that an auction sale is not a real sale and cannot be used as a comp.

In my market, that is definately not the case.

Most of the farmland in my area sells at auction. I wish it didn't but it does. I use auction sales, I attend a lot of auction sales to watch just what is going on. Sometimes what happens at the sale is very important to just how I view that particular sale.

I look primarily at what the buyer had to pay that day to secure the property.

I usually use that number in consideration of the sale as a comp. Sometimes, since the auction is going to happen that day. something may happen to cause some other outcome. but, what real estate peddler will claim that they never had a person come in to the office to enquire about a property the day after it went to contract, and had just heard the property was for sale, and would have paid more.

If a property sells the first day on the market, has it been exposed to the market adequately? Would a broker refuse to take an offer just because it was a new listing?

Auction sales are good sales, some are better than others. One thing is for surel, if you were there, if you read the auction advertising, you probably know more about that sale than you will ever know by looking on the MLS.

The price the informed buyer paid is the value that day.

Wayne Tomlinson

 

[JT1974]

Little bit of a God complex???

If you post is correct Mr Teynor ... the buyer knew they had to pay X% more than their offering price ... thus they knew they would have to write a check for offer + x% and the total purchase price is $1,665,000 plux x%.
It has nothing to do with realtor fees but the fees the BUYERS knew they would have to pay on top of their offer for the Auction Company.
The buyer was willing to do so and the price must be adjusted upward as a result ... and thats my two cents but I wont say its the final word.
Not feeling like God today ...

PE,

The bottom line is someone asked a question and was getting a bunch of wishy-washy answers. I answered the original posters question with clarity. You can call it a "god complex" if you like. I prefer to call it confidence in my opinion.

 

[Mountain Man]

Okay, so since I'm a broker, and am paid a co-brokerage commission, I get to keep 5%. As such, I'm "buying the property" for $1,665,000. But will really be paying $1,575,000. I just helped out my local market buy showing the sale as $1,665,000. Holly shyte! Thanks Dude... I'm laughing all the way to the bank!!

Ray... I'm not knocking your profession, and have even thought about adding that to our services, but in my area it's only investors who go to auctions. They are last ditch sales efforts. I've yet to go to any auction where the owner didn't say... we tried agents and MLS, so now it's the auction. It may be different in your area, but auctions are not the typical selling method here.

 

[Kevin A. Spellman]

The true test of an auction property is the future event. Will the property be altered or resold. Is this sale a market-changing event? Would my subject expereince a similar marketing technique.

I would qualify an auction sale. It would be necessary to explain the past marketing prices and days on the market. I believe an auction sale in a residential environment, not the farming areas of Kansas need significant explanation.

An auction sale may not be a reliable indicator of value. Using an auction sale can easily be challenge by anyone, not just a reviewer. I would place an auction sale in the 4th or 5th position, but not in the first three positions in the sales grid.

 

[murray stroupe]

Re ; General comment & Broker-Appraiser calls it ''last ditch''

[QUOTE
M Leggett=Ray Miller;1489971]I would have to say the auction method is not distressed effort to more property now days. It is becoming more and more common.

After all on auction day the finial bid, is it not a fair market bid, where buyers and sellers have come together at arms length to buy a product. At that time and place is that not the value that was felt by the free market system that is what that property was worth at that time and place? After all there is in most cases a better marketing, that includes local, regional, national and world coverage on such properties when listed with a company like J.B. King. They use hard print in local, regional, national, and international publications, as well as direct mail, email and there web sites. Many times this property is list at auction many months before the auction to the all sorts of markets.

I would treat the buyers premium as part of the selling price. After all they were not going to get the property unless the buyers premium is paid. If paid by the seller, I would consider a concession.

I would use the entire selling bid with the buyers premium added to it.

Visit www.auctioneers.org and my site www.raymiller.ws for additional information about Selling Real Estate at Auction.[/QUOTE]
======================
It may be ''last ditch'', but it is becoming more common here also.Seldom disagree with M Leggett, but what i still call a wet weather creek, local REALTOR she calls it a ''ditch'' LOL.

Probably see more auctions;
especially [if] creeks or lakes stay drier,longer.

Typicaly in this area, the higher the price ,the more RE commission is negotiated. 6% probably average, here also, Nancy. Any RE commission can be bargained, but on smaller properties, than can be counterproductive for repeat buyers.

Personally, like that sale as a 5th comp especially;
a] since seller was REALTOR & probably more informed than most,
b] owner agent[seller] turned down $2,ooo,ooo offer in summertime [ouch],
c] commissions[all comissions] are disclosed, including but not limited to, in writing @ closing.

 

[Nancy in Friday Harbor]

======================
It may be ''last ditch'', but it is becoming more common here also.Seldom disagree with M Legget, but what i still call a wet weather creek, local REALTOR she calls it a ''ditch'' LOL.

Probably see more auctions;
especially [if] creeks or lakes stay drier,longer.

Typicaly in this area, the higher the price ,the more RE commission is negotiated. 6% probably average, here also, Nancy. Any RE commission can be bargained, but on smaller properties, than can be counterproductive for repeat buyers.

Personally, like that sale as a 5th comp especially;
a] since seller was REALTOR & probably more informed than most,
b] owner agent[seller] turned down $2,ooo,ooo offer in summertime [ouch],
c] commissions[all comissions] are disclosed, including but not limited to, in writing @ closing.

Hmmm.....

just because your point [a] is correct, does not make seller any less greedy or less self-involved in his own property. Same for point .
Other realtors in the area felt that $1.5 - $1.6 was a reasonable price. Several actually had bets with people regarding the auction...that the auction price wouldn't go over $1.5.

There's a reason people keep saying things like attorney's representing themselves have fools for clients... And why we, as appraisers, probably lack the necessary detachment to appraise our own homes. Likewise, I think this realtor/owner/seller believed his own sales pitch a little too much ;-)

For any who are interested in the high end auction stuff, see

http://www.jpking.com/


I really appreciate everyone's comments and opinions on this. It has helped me work through in my own mind how I'll handle it. I hope, as I look for other sales to use in this appraisal, I have the luxury of using this as a 4th or 5th comp and not higher in the "pecking order". High end, non-waterfront, is a real challenge in the present market....

Nancy

 

[Ray Miller]

Another real estate auction company is Williams and Williams. They have several divisions now but real estate is a key division.


You can find them at www.williamsauction.com Lots of real estate across the United States.

The have also formed a new REO Division, where they are buying in large blocks distress REO property for pennies on the dollar and then block them into auctions. Look at some of their starting bids, they appear to be very low.

Yet these homes are selling for what the market will stand that day. As you can see at there website they are well marketed.

Just like my auction today at the ranch we had our two black teams and wagons sell for what we gave for them at arms lenght, when we bought them from a news paper ad. We gave $8,000 each in the spring of the year and sold them today at auction for $8,000 they were two years older and had made us money while we used them. To different methods of marketing. Yet they in some case one might say brought more money today because they were two years older and less useable life. Yet the general horse market is down. Matter of fact all the horses brought good money more then we paid, in the dead of winter, in what is considered to be the lowest horse market in 40 years.

I can no longer say that the auction method is discounted method of selling. It is just another method. It depends on the auctioneer and the marketing he does. Same for real estate it depends on the agent and how it is brought to the open market.

 

[Nancy in Friday Harbor]

Thanks Ray. I really appreciate your perspective on this....

N