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auction question

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444nutman

Senior Member
Joined
Jun 20, 2007
Professional Status
Certified Residential Appraiser
State
Florida
I am currently doing a condo sale in a project where the last 10 sales were auction sales. I have never dealt with auction sales so I wonder if I am on the right track. The sale of the 10 properties included an auction fee. Do I need to subtract the auction fee out of the sales price? I know what the fee is and talked to the company responsible for the auction.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Auction sales are not arms-length transactions. Not only do you have the auction fee, but the sales are not publicly offered for a reasonable period of time. Rather, they're bid at the time, in a matter of minutes, and the bid-mentality can set in. So, you have non-traditional purchasers, in a non-traditional purchase process.


I would discuss and comment on these sales, but use sales from outside of the development, using listings from the project if available.
 

444nutman

Senior Member
Joined
Jun 20, 2007
Professional Status
Certified Residential Appraiser
State
Florida
Auction sales are not arms-length transactions. Not only do you have the auction fee, but the sales are not publicly offered for a reasonable period of time. Rather, they're bid at the time, in a matter of minutes, and the bid-mentality can set in. So, you have non-traditional purchasers, in a non-traditional purchase process.


I would discuss and comment on these sales, but use sales from outside of the development, using listings from the project if available.
There are other sales in the project. The listings in the project all reduced there prices after the auction sales. The auction sales have affected this condo project based on the listings. The listings after the auction sales are at the auction prices. The last 10 sales in the sub are the auction sales. The 10 sales are from 71k to 78.5k.
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
Auction sales are not arms-length transactions. Not only do you have the auction fee,

The auction commission can be paid by the seller or it can be by "Buyers Premium" which the buyer pays a % set before the sale on the last high bid. I still think that Buyers Premium should be considered as part of the selling price. After all the Buyers pays the commision when the seller know the broker is going to be charging 10% to sell their property.

but the sales are not publicly offered for a reasonable period of time.

What is a reasonable period of time, I have been marketing some of my auction property for several months, before that they were on the market with a listing broker. Heavy marketing starts 30 days before the auction I have a property that will sell the 21st of June at auction, The budget for this thirty days of marketing is $7500. Lot more being spent now then in the past.

Rather, they're bid at the time, in a matter of minutes, and the bid-mentality can set in.

It is what the market will pay that day. The people in most cases have a couple of open house to view the property, time to make a decision on how much they are willing to spend for the property.

So, you have non-traditional purchasers, in a non-traditional purchase process.

Auction sales are becoming part of the norm. Visit the National Auctioneers Association web site or Williams & Williams web site, or Zip Auctioneers web site or ProxiBid web site or any number of others.


I would discuss and comment on these sales, but use sales from outside of the development, using listings from the project if available.

The NAR is establishing an Real Estate Auction Division, I am working with the largest Broker in Wisconsin on CE class for RE on the Auction Method of selling real estate. So the I feel the auction method is now one of the traditional methods, has been for years selling farm and ranch property.

Myself I would not have a problem using auctions sale for comparables. After all that was what someone was willing to pay for the property on that given day.
 

Bama Bayou

Senior Member
Joined
Oct 19, 2006
Professional Status
Certified General Appraiser
State
Alabama
Auction sales are not arms-length transactions. Not only do you have the auction fee, but the sales are not publicly offered for a reasonable period of time. Rather, they're bid at the time, in a matter of minutes, and the bid-mentality can set in. So, you have non-traditional purchasers, in a non-traditional purchase process.


I would discuss and comment on these sales, but use sales from outside of the development, using listings from the project if available.

Auction sales may be more arms length transactions than any other type. Are people selling at public auction to their brothers, sisters, or children? I don't think so, at least not very often. Please explain the difference between a buyers premium at auction as opposed to a real estate commission.

As far as not publicly offered for a reasonable amount of time, most of the auctions I see are heavily advertised locally, regionally, and nationwide for two to three months. I'm talking retail auctions, not the dog and pony stuff on the court house steps where the lender "buys" the property from themselves for the outstanding loan amount.

Don't you think the "bid mentality" can set in during traditional purchase with a listing and selling broker using MLS. Happened all over SoCal, Florida, Vegas, etc. between 2003 and 2006.

Why would it be proper to discuss auction sales but not "use" them? I would think you are using them if you mention them.

I recently went to an auction that was selling 30 condos absolute and 30 more with reserves, all in the same building. Over 1000 people were there and almost 300 put up the required 10K certified check in order to register to bid. They sold 45 of them. Serious buyers and sellers. Sophisticated too.

This auction established the market value for new construction condos in my area. I think it might be proper to use them.
 

bart nathan

Member
Joined
Jun 9, 2005
Professional Status
Certified Residential Appraiser
State
California
chances are those auction sales were listed but didnt sell...........
 

Ray Miller

Elite Member
Joined
Feb 20, 2002
Professional Status
Licensed Appraiser
State
Wisconsin
chances are those auction sales were listed but didnt sell...........


Some are, many are not.

==========
"Buyers Premium" is the commission paid to the Auctioneer and/or RE Broker. It is added to the finial high bid on the property.

In my case I split the "Buyers Premium" with a listing broker/agent 50-50. I do this as a business decision for many reasons. One it allows the broker/agent to recover some of the expense of having listed the property in the past, not to be shut out in the cold. They will often bring people to the auction that have considered the property but didn't buy for some reason. By sharing the pie it keeps every one happy and in fact creates more auction business for me. It also gives me MLS coverage for the auction as well for both listing and closed sales. It gives me someone to handle the closing of the sale on the property.

Many auctioneers will work for a flat fee for a broker just to call an auction. That can be a % of the sale or set fee for the sale. Many auctioneers will not work with a broker/agent because they want the whole pie and will hire a lawyer to close.

If an outside broker/agent brings some one to the auction we will pay a 1.5% commission to that broker/agent. That 1.5% is split out from the commission that I and the listing broker/agent have agreed on. In most cases my commission will range from 8% to 12% for live on site auctions.

If I am doing a live on site auction and a live internet auction, the buyer’s premium will be 1% to 2% higher to cover the fee for the internet people like ProxiBid, who I use. That additional fee is only charge to the live internet bidder and goes direct to Proxibid. The buyer’s premium will show on the web site 11% instead of the 10% I will charge on site bidders. http://www.proxibid.com/asp/Home.asp

There are several ways you can sell a property at auction depending on the property. The high bidder takes all, Multi-Parcel, High bidder choice. You can sell with reserve, that means there is a bottom dollar set that the property must bring, you can sell absolute means if it is Johnny Carson side kick Ed's house in CA. that is in foreclosure for $6.5M with $660+K owed in back payments and it only brings $1M that is what it sells for, the $1M. Once a property is marketed as absolute it can not be change to a reserve auction. The entire auction would need to be canceled and remarketed.

I think most seller figure in the RE Agents commission when sitting a selling price on their property. So there is not a real difference of adding the Auction Commission to the high bid, I think.

I think the marketing is a lot more intense for an auction then for standard RE Sales. I know one small dairy farm I have coming up. The tab for the auction marketing is near $6000 in addition to what the RE broker/agent is doing.

Just my thinking.
 
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