For us it is NOT a “Numbers Game”
Many of my Auctioneer friends and colleagues sell portfolios of bank-owned or institutionally-owned real estate. That is a fine and needed business, and my friends make a good living selling those assets, but our business is much different. As a small company, we have established our niche as agents for individual owners who have a need to liquidate one or sometimes a few properties, and whose goals are necessarily different than those of banks and institutions.
Banks have to go through processes to sell properties acquired through a foreclosure in order to meet guidelines of insurers, investors and the FDIC. While we sometimes wonder why a bank does not just liquidate and move on, there are numerous reasons why that is not possible for them. Thus, they contract with an Auction Company to “try” and sell large numbers of properties, and pay those companies up front for marketing, and going through the auction process. Rarely are those properties offered as “Absolute” or with a minimum bid reserve price, but they are sold subject to the seller’s confirmation. The company is paid for their efforts through a commission IF the property sells, and through an administrative (“no-sale”) fee if it does not. So in effect, the Auction Company wins either way. Not a bad deal – but also NOT a good way to keep buyers coming back for more. You see if they are only able to sell 20% of the properties offered, they still do very well, but it is all a “Numbers Game”.
Our business model is very different. Three bad things result from our failure to sell a property on Auction day. 1) We lose a referral – and our future business is dependent on word of mouth referrals. If we have spent someone’s marketing money and NOT delivered a result (a sale) then we will not be getting good word-of mouth advertising from the disgruntled seller. 2) We lose potential buyers/bidders for future auctions. Folks will not keep coming back if they are unable to buy what they have come to buy. 3) We do not make money if we do not sell a property.
So, for us it is definitely NOT a “Numbers Game”. Since changing our model seven years ago to sell ONLY Absolute or with a disclosed reserve (minimum bid), we have sold 93% of the properties we have brought to Auction. The properties we sell are a large portion of each seller’s net worth, and so the disposition of that property is very important to a human being – and we take that responsibility VERY seriously.
So if one’s client is a business who deals in numbers, and the consignments keep coming, there is certainly nothing wrong with the “Number’s Game”, but we think the more important number for us is the 93% success rate we have achieved by making each Auction a “must succeed” event.
While we still conduct on-site and on-site/on-line simulcast Auctions for more high profile properties, we also are keeping up with technology and understand the advantages of on-line only auctions for some of our real estate offerings. If you have not considered an on-line only Auction, and if you are a little skeptical, we do not blame you. It is a leap of faith, and a learning curve, but the advantages are real. Consider the following reasons that this option MIGHT be the best one for YOUR Auction.
- On-Line Auctions expand the pool of bidders and buyers. Bidding from the comfort of home or office on their own schedule with no travel, means that buyers can bid whenever they like and not waste an entire Saturday for what can be done with a few clicks of the mouse from any state in the union or any country around the world.
- Signing Documents and wiring money over the Internet makes the purchase easier for the often very busy buyer.
- Because we are eliminating the costs related to on-site sales, like facilities, travel, food and staff, we can use that money to enhance marketing and/or save our clients some money.
- Similarly, because we can advertise and sell multiple properties in the same on-line event, we can combine advertising and marketing costs and save each individual seller hundreds or thousands of marketing dollars, and still achieve the same advertising “reach”. Because we do represent individual sellers, we are careful not to bundle competing properties in the same sale, but we do understand the power in combining advertising to reach more people at a much lower cost per property.
- For the same reasons we can afford to Auction lower-priced properties than we could sell on-site in a single event Auction. In the past it was difficult to make an economic case for selling these types of properties in a traditional single event format. This technology gives us much more flexibility.
- Many other sale-day worries like bad weather, parking, angry neighbors and sanitary facilities are also eliminated by utilizing this technology.
- We can cover more ground because we can complete several Auctions on the same day, thus making our services faster and more affordable.
- Having the Auction period open for some period of time encourages early participation by buyers. The earlier we identify a potential buyer, the sooner we can communicate with them to answer questions and encourage further bidding. Once a bidder has participated, he/she is much more likely to bid again to protect that ownership investment.
- On-Line Auctions provides some degree of anonymity for bidders who do not necessarily wish to be seen at the Auction, whether that means a neighbor, celebrity or well-known and well-heeled local.
- Finally (and importantly) having bidders compete in privacy, as is the case on-line, can help thwart the occasional, but problematic collusion of those who would seek to infringe upon free trade by bid-rigging. While punishable by huge files and imprisonment under the Sherman Anti-Trust Act, there are still those who are lured by illicit gains.
Read the P&C article about the Seabrook Auction and the Real Estate Auction process. Page 13
If you ever thought that two or more bidders “getting together” and agreeing not to bid against each other is a “harmless” bidding strategy, think again! There are some HUGE fines and criminal penalties involved, and the Justice Department is SERIOUS about enforcement. Click here to see what these 35 California real estate bidders found out the hard way.
[John], thanks for the question. It is a tough question to answer, and as the saying goes, “if I knew that, I would not have to be doing this”. But seriously, I do not think this would be a waste of your time for several reasons:
- This is an absolute auction, meaning NO reserve and NO minimum bid, so someone IS going to buy this at THEIR price. If they like it more than you, then you stop bidding and let them have it. I count on having one guy like it best, and hope to approach HIS number. That is what makes this process work. I do not tell you – you tell ME!
- I often have folks call me the day AFTER the auction and ask either “did it sell?” – well sure, it was an ABSOLUTE Auction! OR ” what did it sell for?” Almost always their response is “If I would have known that, I would have been there to bid!” I don’t need to tell you how I feel about that response.
- The nature of Auctions is that the seller gets the advantage of selling NOW rather than next year, AND he gets seller-friendly terms, like a large deposit and no post-auction contingencies. The buyer, because he gives up the frills and contingencies of traditional brokerage, shows he is serious, and gets a bargain price. Everyone gets what he needs, making our process a true win-win.
- Only you know your needs and the value of the property to you, so you decide on your price before we start – so does everyone else. I LOVE this business.
Now having said all that – which IS important and true, I can always make educated guesses, like you, and we would love to approach $XXX, which we doubt will happen. I’m guessing at half that, but we are committed to sell this for WHATEVER the high bid is. The owner believed it was worth $XXX when he/she bought it in XXXX, and the County believes it is worth $XXX. We expect 3-6 bidders for this rather unique property, so it will definitely NOT be a waste of your time to participate. That is why we sell only Absolute or with a disclosed reserve – we NEED bidders to show up to our auction KNOWING that they can buy and the property WILL SELL, rather than the “bait and switch” tactics associated with “subject to confirmation” or “undisclosed reserve” auctions. We DO NOT want you to waste your time. Even if you do not “win” this auction, we want you at the next one.
I hope this answers your question.
We are a small company, and we like it that way. We have had lots of opportunities to become a franchise or to join national alliances, but we know that our small size and the flexibility and nimbleness that comes with that size is one of the strengths that distinguish us from other companies in a competitive environment, and make us a better choice for the individual seller.
Large Nationwide firms depend on institutional clients (Banks, Government, Relocation Services and the like) for the bulk of their business. This means that they can sell lots of properties in a year and with volume comes stability and profits. There is certainly nothing wrong with stability and profits, but large volume is necessarily accompanied by large overhead, many employees, and BUREAUCRACY! Individual sellers like YOU get lost in the shuffle while these large companies cater to their “bread and butter” clients, Banks and Institutions.
We do things differently at Harper Auction & Realty, and we do it because we CHOOSE to do it this way. We are a Regional company, and are Brokers / Auctioneers in NC, SC & GA exclusively. We do business where we KNOW the market, and we sell only at Absolute or Disclosed Reserve Auction, so that our loyal following of buyers KNOW that when they do their due diligence they will be able to BUY on Auction day. This matters a great deal to serious and savvy Auction Buyers. We sell for individual owners rather than large Institutions, which means that you always deal with our business owner, not some new employee, and NEVER get shuffled around. We keep our overhead low, which means that you do not pay for our employees’ Health Care, Worker’s Comp, 401(K) and vacation time, nor do you cover the costs of an office building or large suite of offices. We do not have any “Associated Companies” that make a profit charging you for printing, advertising, marketing and the like, in order to pad the bottom line. No, we shop the marketing world for the best price and the best value for your marketing dollar. Yours is not just one of numerous properties mentioned in an ad or an e-blast because we design marketing specifically for YOUR property and target the market accordingly, rather than taking a “cookie cutter” approach as some firms do. We have the same advertising presence as the “Big Boys” and we have a loyal following with a very large bidder/buyer data base, yet we treat you like a member of the family for the ten weeks or so we are associated selling your property. We are available 24/7 – no weekends off around here!
Because we are frugal and have a very low overhead, we are able to pass savings to you in a number of ways. We invite you to compare our proposal and your costs with ANY other Real Estate Auction Firm, and you will immediately see what we mean.
Most firms rarely if ever repay up-front marketing fees at closing, but that is our normal practice. Every deal is different, and we will crunch the numbers on costs and commissions with you in our proposal, but we are confident that because our costs of doing business are lower and because we are not trying to get “rich” on each deal, your costs will also be lower with us, even though you will be receiving SUPERIOR service!
Have I mentioned that Mike Harper has over 38 years of experience in Auctioning Real Estate? “Experience Sells”
Is smaller BETTER? - YOU be the judge!
Look for Mike’s Real Estate CME courses at the Charleston Trident Association of REALTORS Real Estate School entitled: “Selling Land using Multi-Parcel Auction”, “Dealing with Lien Issues to prevent Closing Problems”, “Buying & Selling Real Estate at Auction”, the 8-hour “Loss Mitigation Designation” Course approved by NAR, and the new “Foreclosure and Tax Lien Sales for Investors and their Agents” starting in September 2013.
See our front-page story in the Real Estate section of the Wilmington Star concerning our Figure Eight Island Auction