Virgins, Foreclosures & Auctions

We usually associate real estate auctions with foreclosures and other unhappy events, but Pam McKissick argues that auctions should have a wider role in today’s residential market.

McKissick, a founder of Williams, Williams & McKissick, one of the nation’s largest auction firms, says “auction bridges the gap between buyers’ desires and sellers’ expectations. Auction is where real estate meets reality.”

Today when it comes time to sell the first step is usually to contact a local real estate broker. But McKissick — author of Auction Your Home? Absolutely! — says homeowners may want to consider an alternative, the use of an auctioneer.

Auctions, she explains, have been around a long time and have been used to successfully market a variety of, well, er, goods and services….

Virgins

“One of the earliest recorded auctions took place in Greece in 500 BC with the annual auctioning of brides,” she says. “Something as lovely and coveted as virgins required that competition prevail. In fact, it was illegal to sell a daughter outside of auction. Fathers of the less attractive daughters had to add dowries or other money to the bridal package to increase the sale price. In the ‘not much ever changes’ category, while women had to be gorgeous and virgins, men only had to drive by with drachmas.”

Cash or Mortgage?

In today’s marketplace auctions are widely associated with foreclosure, however auctions have been used to sell all types of properties including houses, farms and commercial structures. Local governments use auctions to assure that the bidding process for public property is open and transparent.One key to bidding success is for buyers to have financing in place before the auction begins. While many bidders pay cash there can also opportunities to use FHA loans, VA mortgages, and conventional financing. For specifics speak both with auctioneers and lenders.

Auctions

McKissick says auctions today are “competitive, efficient, exciting, entertaining, time definite, public, and proven.” She also says owners might want to consider auctions for a variety of reasons.

First, “you want your home sold quickly.” Successful auctions can provide a quick sale, especially when sold without a reserve.

Second, “you’d love more than one offer.” When markets are hot multiple offers are not unusual. There can also be multiple offers with auctions, however bidding wars are not assured otherwise banks would not be forced to buy back so many properties.

Third, “you want buyers with cash or financing in place.” When considering auction both buyers and sellers should ask about required financial arrangements, who pays what and how much, and who gets the money if the buyer does not meet payment deadlines.

Fourth, “you want motivated buyers.” If you’ve ever watched people buy at auction there surely is a lot of action when it comes to desired items. The auction process itself encourages competition, it’s designed to get competitive juices rushing.

Fifth, “you want to make plans, not contingencies.” A successful auction results in an instant sale and a sure closing date. For many sellers that may be a better deal than negotiating with the buyer who has 15 fuzzy requirements before closing can occur.

Sixth, “you want to know what day your home will sell.” An auction can provide a sale on a particular day. Given how long many properties now languish on the market the idea of an assured sale date is hardly unattractive. The catch is: What price will be fetched? The highest bid in a tough market may be disappointing to unrealistic owners.

Seventh, “you want to stop being held hostage by your house.” Here McKissick gets to a very important point. the idea that the longer homes are on the market, the longer they remain unsold, the more prices are discounted in terms of money spent by the owner for such expenses as monthly mortgage costs, maintenance, fees, insurance and taxes.

Eighth, “you want to close.” The fact that a home is under contract does not mean it will automatically go to settlement. In today’s marketplace most real estate agreements are contingent contracts, deals which depend on such things as a satisfactory inspection, specific mortgage rates, or certain repairs. Such contingencies effectively allow the offer to be renegotiated or ended. In contrast, auction sales are final.

McKissick’s book is well written and provides a useful introduction to auctions. It’s worth reading before making a bid or placing a property on the market.