There are distinct advantages and differences in each method. There is one common goal shared by both the Auctioneer and Real Estate Professional: to successfully sell the real estate and meet the needs of the Seller. By understanding what each method has to offer, the Auction Company can evaluate the Sellers objectives and property potential to determine the most beneficial marketing plan for the Seller. Many properties are suitable for the auction method of marketing compared to the traditional listing real estate method -sometimes referred to as "private treaty" sales.

Marketing Factors

The auction method provides a defined time to sell the property. With a determined Auction date, we know precisely what date your property will sell. The Auction date creates a sense of urgency with potential buyers and the auction process will put your property in the spotlight for all to see. The auction method places multiple, qualified buyers together in the same competitive marketplace, at an established time of the Auction. Together these factors will establish the market price The seller is in control of the timing, thus controlling the financial impact of carrying costs.

Marketing property traditionally in a slow or down market is challenging. It is possible that the property will remain on the market for months or even years. Typically, we see the Seller offering price reduction after price reduction to try to get ahead of the market and catch the interest of a buyer. The buyer has many available properties to choose from and it is difficult to get his/her attention. A property that remains on the market for an extended period can become stagnant in the market and become a serious drain on the seller and his/her equity. Mortgage payments, maintenance, taxes and insurance can add up to thousands of dollars a month for some properties. In addition to carrying costs, inflation, cost of living and the time value of money are all cost that should be considered. If the seller is able to sell the property quickly, the auction method may serve the Seller's needs more effectively.

Marketing property traditionally in a steady or up market can bring a new set of challenges and opportunities. When selling in an up market, the traditional sales tools becomes very inadequate to determine value. Properties are worth more today than they were yesterday. The auction method can capture the momentum of this market as buyers pay premium prices. This upward momentum not only assures top dollar for the Sellers property, but also attracts a vast number of potential buyers for your property. All taxes, insurance, interest and other costs have been eliminated and the property has topped the market in value.

If for some reason the property fails to sell at auction, the high bid may be considered as a valid offer on the property. The Auctioneer may begin negotiations between the high bidder and Seller to determine a sale price agreeable to both parties. In the case an agreement is not reached, the Auctioneer generally has a pre-determined time period, usually specified in the listing contract, to try and sell the property. This time period can range anywhere between 30 days to six months. Law requires the listing agreement to have a termination date. During this time, the Auctioneer may decide to contact the buyers registered for the auction and sell the property using the traditional real estate listing method. To list the property first before utilizing the auction method may be very counterproductive to a successful auction. Placing a property on the market prior to an auction, establishes a maximum or ceiling price for the property. When that price has been publicly advertised, it affects the psychology of the potential buyer and limits the current market value. In essence you are telling the world my property is not worth more that the asking price.

Auctions work best when bidders are allowed to make their own decisions regarding a property's worth. If, after the competitive bidding process of the auction, the final outcome should fall short of the seller's predetermined expectations, the seller still has the advantage of accepting the offer. Again, the seller remains in control of the marketing process.

Precision Marketing

With a traditional listing, the property is one of many properties listed with the Agents/Brokers. The property information is then distributed to other Agents/Brokers. This approach exposes the property to a larger number of people, but not necessarily the "target market" for the property. Your property may be one on a long list of properties for sale.

The marketing strategy for the sale of real estate property at auction is more customized to located potential buyers. The auction method is an accelerated marketing campaign that usually requires an up-front investment from the seller. This targeted and customized approach is designed to build value and create interest in the property. The marketing fees should be considered an investment rather than an expense. This marketing campaign becomes the driving force for a successful Auction.

When using the auction method, the property is marketed separately, and exclusively. This provides maximum visibility among those interested in the property. It is a customized marketing approach, specifically targeting qualified buyers. This insures the greatest return on dollars spent.

Sale Price Determinations

In the auction process, the price of the property is negotiated upward through the competitive bidding of interested buyers. The current market value of the property is what a buyer is willing to pay at the time of sale. Auctions establish this value and eliminate guesswork in determining the asking price through negotiating multiple offers one at a time. This eliminates unscheduled showings and long frustrating periods of negotiation. In traditional real estate sales, the Seller determines an "asking price". The Seller now runs the risk of overpricing and killing interest or under pricing and selling for less than the property is worth. The actual selling price may be negotiated over a long period of time and the maximum sales price potential is usually limited by the original "asking price".

Contingencies

When property is sold using the auction method, there are usually no contingencies. The property is generally sold "As-Is, Where-Is" with no warranties other than title. The sale of the property is not subject to financing or repairs. This limits the liability and further financial obligations by the seller. Auction terms and conditions are set by the seller prior to the auction. With a traditional listing, the marketing process is put on hold, and the property off the market, while the contract contingencies are being met.

Auction process and Time Line:

The Auction Process

In today's options of marketing methods, we are seeing a huge increase in the people that choose Auctions as their first choice of marketing. Virtually anything can be sold at auction. Real Estate, equipment, Livestock and personal property are just a few of the auction areas. While much of the auction terminology is generic to all type of auctions, we will address real estate in this informational forum.

A real estate auction is the sale of real property in "As-Is" condition for the fair market value, using a competitive bidding process. "As-Is" is a legal term and concept used to disclaim liability for an item being sold. "As-Is" denotes that the seller is selling, and the buyer is buying, an item in whatever condition it presently exists, and that the buyer is accepting the item "with all faults," whether or not immediately apparent. The Seller has an obligation to disclose any material defect and the Buyer has the ultimate responsibility to determine the condition and usefulness of the property being sold./

Every Auction is unique and must be evaluated on its' own merits. The following information is a quick overview to help sellers learn more about the auction process. These events are in the order of occurrence.

Due Diligence

Prior to selling real estate by auction, it is important to have sufficient knowledge of the property as well as knowledge of the current market. Entz Auction & Realty conducts due diligence by gathering facts and information about property and includes it in information available to all bidders. Entz Auction & Realty will work with the Seller to carefully evaluate their objectives and preferences to insure a successful marketing event. Roger Maris, world renown baseball player said it best when he said "You hit homeruns not by chance but by preparation". These consultations and property evaluations are done at no cost or obligation to the Seller.

Auction Proposal

Once due diligence is complete, Entz Auction & Realty will develop a proposal to outline the details of the auction process. We outline how and where the property is going to be marketed. The auction proposal includes a property analysis, marketing plan, advertising budget proposal, financial projections, fee/expense structure, and closing information. Entz Auction &Realty will prepare an Auction contract, outlining the terms and responsibilities of all parties, for the Seller's review and signature.

Property Information Package or PIP

The Property Information Package (PIP) is a comprehensive packet that outlines important details of the property. It may also contain demographic and geographic information that is relevant to the property being sold. This PIP helps all potential buyers better evaluate the true value of the property. Buyers come to the Auction assured they are getting good value for their money.

Marketing Plan and Budget

The marketing plan is a major factor in the success of the Auction process. The plan must be customized to the Seller's timeline and expectations. The marketing plan must be targeted to the most qualified and likely buyers. It must be attractive and informational to spark the interest of potential buyers. Because the marketing window prior to the auction is generally short, the marketing program must be comprehensive, intense, and on target. Real estate Marketing efforts typically begin five (5) to six (6) weeks prior to the sale date.

Auction Day

The auction begins promptly at the appointed time. The process begins with the Auctioneer making opening remarks, summarizing the terms of sale, the methods of bidding, and any last minute changes or disclosures. These comments usually take only a few minutes, concluding with the auctioneer answering any final questions from the potential buyers.

The Role & Responsibility of the Bidder Assistant

The Bidder Assistants are auction staff members trained in the auction process and are well informed about the property being sold. They convey the bids to the Auctioneer and answer any questions a particular bidder may have. Bidders place a bid by raising their bidder card or by signaling to the bid assistant or the Auctioneer. Any tie bids or other issues regarding who has the high bid are always resolved by the Auctioneer, who has complete and final authority.

The Auctioneer says SOLD!

From the first bid, things move quickly with bidders offering their bids up to the price they are willing to pay. The bidding process will slow down and when the Auctioneer determines that the final bid has been made, the Auctioneer will announce the parcel "Sold" and identify the high bidder. If the auction is "Subject to Confirmation", the Auctioneer may "Rest the Bid" and take a short break to speak with the Seller. In a "Subject to Confirmation" auction, the seller retains the right to accept or reject the high bid within a specified period of time. If the auction is for a single property this concludes the auction event. The Buyer and the Seller executes the Real Estate Purchase Agreement.

CLOSING the Transaction

The closing process begins with the abstract being brought up to date. In some states where abstracting is not used, a title insurance commitment is obtained. A title opinion is written by the buyer's attorney and any title defects are corrected by the Seller. Closing on the property typically takes place within 30-45 days from the date of the auction. Closing is not contingent on anything other than clear title.

SELLERS FAQ:

• What are the advantages of selling real estate at auction?

• Why would a property successfully sell using the auction method if it did not sell using the traditional real estate listing method?

• Who is the ideal auction seller?

• How is a real estate property marketed?

• What does it mean when property is sold in "As-Is" condition?

• How does a potential buyer inspect the property?

• Is the high bid always the total amount paid for the property?

• What are the Terms and Conditions of Sale?

• What is the difference between an "absolute" auction and a "reserve" auction?

• Q. What is the difference between a Buyers Premium and a Seller commission?

A: Selling real estate at auction allows the seller to take control of the marketing process and establish the terms of the sale. The property is sold on the seller's time schedule, not the buyer's. The Seller is "selling" and the buyer is "Buying" a real estate property in "As-Is" condition so there is no negotiation process of contingencies including financing, inspection periods or repairs. Eliminating financing contingencies gives the seller a far greater certainty of closing on an auction purchase contract. The auction creates a competitive bidding environment giving the seller the best opportunity to obtain the highest possible price and the current market value of the property. The traditional overpricing of property to allow for negotiations many times kills buyer interest before the process even begins The Auction process allows everyone to participate regardless of their level of interest. The final price is determined by competitive bidding with no limitations to the top side of the market value. A: It is common that a property listed traditionally is unrealistically priced. When an asking price does not represent the current market value of a property, buyers are reluctant to make a lower offer. With an auction, there is no asking price so that problem is eliminated. In addition, the short time period for promoting a real estate auction provides the opportunity to expose the property to more people in a given target market. The Auction generates a sense of urgency for the Buyer to act now. This typically is not the case in an open-ended traditional campaign. A: The goal of a successful auction is to generate the highest possible sale price for the property in the shortest amount of time. The ideal auction seller is a seller that is interested in completing the sales process promptly without waiting to the market to finally recognize their property and then negotiate a sales price. The ideal seller is motivated to sell the property and is ready, willing and able to accept market value. Your property may be owned with other people as joint ventures. The auction process provides a very fair and timely process in selling these types of properties and in the distribution of proceeds. A: One advantage of the auction process for real estate is the benefits of a customized marketing plan. The property is exposed to the widest possible buyer audience, increasing the possibility of a successful sale at the highest possible price. Using an auction marketing campaign, the property will usually be marketed separately, differentiating it from other property listings. In areas where multiple properties are for sale, the property being sold by auction will gain the most attention. A: The material defects of a property, known to the Auctioneer prior to the auction, will be disclosed to all bidders. However, at a real estate auction, the Auctioneer makes no representations, guarantees or warranties as to the property's condition. The property is sold in whatever condition it is in the day of the auction. Buyers should conduct inspections prior to the auction in order to know the condition of the property on which they are bidding. A: Typically a property is open for inspection during a series of open houses. Some sellers may choose to show properties by appointment only. Representatives for the Auction Company are on hand toanswer question about the property and/or the auction process. Specific information will be available in the auction brochure, the property information packet (PIP) and in advertising materials. A: Although not used in all regions or at all auctions, a buyer's premium may be added to the high bid to reach the final sale price. The buyer's premium is a percentage or an amount added to the high bid to determine the total purchase price to be paid by the buyer. For example, if the the high bid is $100,000 and the buyer's premium is 5%, then the buyer's premium is $5,000 ($100,000 x 5%). The $5,000 buyer's premium is added to the high bid of $100,000. The total purchase price on the property is $105,000. Closing costs, as applicable, are the sole responsibility of the buyer unless otherwise stated by the seller. Refer to the Terms and Conditions of Sale in the marketing information to verify if a buyer's premium and/or closing costs are applicable. A: The sale is administered based on the Terms and Conditions of Sale of the auction. The Terms and Conditions of Sale provide information on the required deposit, closing date, etc. All bidders should become familiar with the Terms and Conditions of Sale prior to the auction. Note that at an auction sale, any announcements made by the Auctioneer on the day of sale take precedence over previously published or verbally conveyed Terms and Conditions of Sale. A: An "absolute" auction (without reserve) means that the property is sold to the highest bidder, regardless of price. A "reserve" auction (subject to confirmation) gives the seller the right to confirm the high bid at the conclusion of the sale. Unless advertised as "absolute" and disclosed in the auction Terms and Conditions of Sale, auctions are considered to be "reserve" auctions. A: The sellers commission is the fee charge to the seller by the auction company for their services. This fee is usually a percentage of the sale price. The buyer premium is the fee added to the auction price to determine the final contact price and is paid by the Buyer. The Buyers Premium may be a percentage of the auction price or a flat fee. At closing, an amount equal to the Buyer Premium is paid to the auction company for their services. Auction fees are usually contingent upon the amount and quality of services provide.