Remember that kid in high school that none of your friends liked, so you weren’t supposed to like them either? Instead of getting to know them and making your own assessment, you just went along with the crowd in condemning that kid as an unlikable person. Auctions are like that.
But that was then, and this is now. In today’s market, auctions are typically used at the extreme ends of the spectrum: distressed properties and ultra-luxury homes. Most agents don’t get to play in the ultra-luxury market, so I’ll discuss distressed properties.
There are three types of distressed residential property auctions: foreclosure sales, occupied real estate owned (REO) sales and vacant REO sales. For the most part, the bidders at these auctions are individual and institutional investors. However, in a recent survey by Auction.com, it was found that 15 percent of their registered bidders were trying to buy a home to live in.
1. Foreclosure auctions are still typically done on the courthouse steps, without the direct involvement of an agent. These properties are sold by an auctioneer, a trustee or a sheriff—all via a live auction—so there’s no listing agent. The majority of buyers aren’t represented either.
2. Occupied REO auctions are typically conducted immediately after a foreclosure process has been completed. In these cases, the lender, or noteholder, has decided to move the property right away rather than take title, manage the eviction, repair and re-market the property. This approach is growing. Generally, these sales don’t have a listing agent involved, but buyer’s agents are welcome. And they can usually get a referral fee as long as their buyer registers them online with the auction company.
3. Vacant REO auctions are the most like a traditional home sale. Many of these have a listing agent assigned by the lender and pre-set terms for agent compensation on both sides of the sale. Many of these properties are available for inspection, or have scheduled open houses. It’s incumbent upon buyers and their agents to take full advantage of the opportunity to do as much homework as possible before buying anything.
From a seller’s perspective, auctions have always been regarded as a way to get what they consider to be fair market value for a property since they pit interested parties against each other in an open competition. While a lot of people think of auctions as a way to buy things at a discount (and there are bargains to be found), the reality is that auctions often deliver higher sale prices than traditional sales methods in a variety of markets.
In the near future, agents and brokers will be able to begin posting traditional residential properties on sites like Homesearch.com and Auction.com. This will combine the marketing reach and efficiency of an online auction with the local market expertise and client management skills for which good agents are known.
Whether you love them or hate them, auctions are here to stay, and will become a bigger part of our marketing strategy. Seems like it’s time we let go of those high school days and made friends with online auctions.
Wendy Forsythe is executive vice president/head of global operations at Carrington Real Estate Services.
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