Posted by kathi on August 21, 2002 at 08:13:43:
You are absolutely aright Dave. I must have had a braino.
Using Absolute Auctions to sell rehabs - Posted by Mike
Posted by Mike on August 19, 2002 at 15:44:58:
Hi.
Has anyone ever used an absolute auction to sell their rehabs before?
I spoke with a gentlemen that runs the auctions and it sounds like a good way to move inventory. Obviously, the catch being, you don’t know what price your going to wind up getting. So, I suppose you could be greatly disappointed or surprised with a better than expected price. Although, I doubt that happens very often.
Any feedback is appreciated.
Thanks.
Re: Using Absolute Auctions to sell rehabs - Posted by wm-pa
Posted by wm-pa on August 20, 2002 at 17:46:10:
If the house sells for more than market value, then are you not takeng a note for the difference in what the buyer’s bank will lend and the selling price? What I mean is if I auction my rehab for FMV of say $70k and the winning bid is $80k will the bank Loan $80k ? If not I would have to accept some form of owner financing correct??
Thanks,
wm-pa
Re: Using Absolute Auctions to sell rehabs - Posted by Erin (detroit)
Posted by Erin (detroit) on August 20, 2002 at 08:15:02:
Where do these Absolute Auctions take place? Is it a Trade Name (“Absolute Auction”) as I have not heard of this. Can anyone help as I am in the detroit area and would like to move some of my lower end stuff.
Erin
Thanks for the advice…Another question - Posted by Mike
Posted by Mike on August 19, 2002 at 20:44:50:
Thanks for the comments all.
It seems that the concensus is that an auction will likely stimulate a better-than-expected sales price.
However, my biggest concern is that auctions are for bargain hunters. The clientele that would generally buy newly rehabbed property are not what I would consider auction type people. What is the likelihood that an average homebuyer is going to show up at an auction and even attempt to bid on a property? Also, the market I sell to are first time homebuyers, that usually don’t even have 5% to put as a down payment let alone 10%.
Am I barking up the wrong tree??
Re: Using Absolute Auctions to sell rehabs - Posted by MikeAnmar
Posted by MikeAnmar on August 19, 2002 at 18:32:43:
Probably the best strategy I’ve seen is the one at nodiscount.com.
It’s like an auction but more like a bidding system. Yet it’s neither because there are other variables that come into play that are used to motivated buyers.
Mike
Re: Using Absolute Auctions to sell rehabs - Posted by DB
Posted by DB on August 19, 2002 at 16:55:23:
Mike,
I will be the first to admit, I have never been to an “Absolute Auction”.
I want to know if there is anyway you could set a “reserve price” for your rehab? This way no one can purchase it real cheap. Plus, you know exactly what profit you are going to make.
I am just curious.
dave
Re: Using Absolute Auctions to sell rehabs - Posted by JT-IN
Posted by JT-IN on August 19, 2002 at 16:52:34:
Mike:
I don’t know about selling rehabs, but the approach of selling a fixer-upper at absolute auction seems to work quite well. I see some properties selling far in excess what you could fetch for them on the open mkt… Auction mentality does move the buyer to pay more… it is proven over and over again.
I had an absolute auction in May on a piece of Comm’l prop… It brought considerably more than I would have been happy with. These auctions are a viable solution to stagnant inventory turnover… and they eliminate the contingencies of inspection and the like. The bidders do their due diligence up front, and then you are done with that; close 30 days down the road… Next!
JT-IN
Re: Using Absolute Auctions to sell rehabs - Posted by mrwi
Posted by mrwi on August 19, 2002 at 15:48:48:
Re: Using Absolute Auctions to sell rehabs - Posted by James Strange
Posted by James Strange on August 21, 2002 at 10:13:41:
No, you would not have to carry a note it is the buyers problem.
You could get a higher price at the auction if you advertised that you would carry with a % down.
Re: Using Absolute Auctions to sell rehabs - Posted by Kathi
Posted by Kathi on August 20, 2002 at 11:59:11:
An absolute auction is an auction in which there is no reserve (minimum) bid. The property goes to the lowest bidder regardless of price. Most auctions take place at the property. There is usually a period of time (1 hour is common) prior to the auction for examination of the property. Property is sold as is where is. Most auctioneers charge a 10% buyers premium which pays the auction house. This fee is added to the bid price to determine the final sales price. Most auction houses expect 10% down day of sale and cash within 30 days.
Auction houses can be found in the phone book. You may want to look in the Real Estate section of your Sunday paper for auction ads.
Re: Thanks for the advice…Another question - Posted by Dave T
Posted by Dave T on August 20, 2002 at 13:23:40:
I second what Phil said. After all, just look at the HUD property sales for evidence. There are a lot of instances where “bargain hunters” bid more than the list price, while the rest sell near list price.
Re: Thanks for the advice…Another question - Posted by phil fernandez
Posted by phil fernandez on August 19, 2002 at 20:58:34:
Believe it or not, you will attract retail buyers because it is an absolute auction scenerio. I have a good friend that is a well known auctioneer for years and he’d tell you the same. The auctioneer tries to create frenzy and a carnival type atmosphere where the buyers get excited and NEED the property.
As far as where the money comes from with 1st time buyers. Often I’ve seen grandparents or parents fronting the money for junior to overpay for the house.
Re: Using Absolute Auctions to sell rehabs - Posted by phil fernandez
Posted by phil fernandez on August 19, 2002 at 20:29:50:
Absolute Auctions are great fun and excitement cause when you attend one you know that the property is going to sell unless there are no bidders or just one fellow shows up. If one guy shows up. No auction cause there is no bidding.
Now when dealing with an Absolute Auction it depends on what side of the fence you are sitting on. As a buyer you first think that you are going to the auction to steal the property. I’ve been to many and you don’t end up stealing it. It steals you. Due to the absolute nature, bidding fever sets in. And the price just goes up and up until some IDIOT gets the property and he says Whoops I messed up.
But as a seller of the property at an absolute auction, there is a good chance that you will get top dollar. And as Joe says, the 10% non refundable deposit isn’;t bad either. Take a property that goes off at $100,000 with the winning bidder plunking down 10% or $10,000 and then can’t go through with the sale. I’d pocket the money less what the auctioneer would get and do it again. NEXT.
Re: Using Absolute Auctions to sell rehabs - Posted by James Strange
Posted by James Strange on August 19, 2002 at 18:13:28:
At an “Absolute Auction” it sells regardless of price so a reserve is not an option. The idea of an “Absolute Auction” is everyone knows that it will sell so everyone comes looking for a bargain.
I think they’re great… - Posted by David Krulac
Posted by David Krulac on August 19, 2002 at 19:32:36:
the person who said have a reserve misses the whole concept. the idea is that there is NO RESERVE!!!
I like 5-day concept, but it has a reserve, a safey net, a cushion. The absolute auction has none of that.
The absolute auction is a very powerful tool, and with proper advertising will bring out those buyers with the knowledge and where-with-all to actually become buyers. The absolute brings out buyers who know that no matter the price the property will absolutely be sold today. There is that certainty. the only exception being if nobody bids. I’ve never seen that happen. The bidders are all looking for that bargain, and the absolute auction draws them out.
I went to one where in order to bid you needed $10,000 in cash deposit or certified funds before you got a bidding number. That eliminates window shoppers. There were exactly 7 bidders, all of them serious, including me. The deposit was refundable to the 6 that didn’t get the property.
David Krulac
Central Pennsylvania
Re: Using Absolute Auctions to sell rehabs - Posted by JoeKaiser
Posted by JoeKaiser on August 19, 2002 at 17:07:41:
And don’t forget about the big nonrefundable deposit . . .
Joe
Re: Using Absolute Auctions to sell rehabs - Posted by wm-pa
Posted by wm-pa on August 21, 2002 at 16:53:17:
James,
I realize it would be the buyers problem to make up the difference, but then this would become the sellers problem if the buyer’s bank only lends $70k and not $80k, the winning bid. So in reality I would have to lower the price or take a note if the buyer can’t get the $80k from the bank.
What do you mean "carry with a % down? Is this not a note???
Thanks,
wm-pa
Re: Using Absolute Auctions to sell rehabs - Posted by Dave T
Posted by Dave T on August 20, 2002 at 13:17:56:
I agree with most of what you say, but I hope you really meant that the property goes to the “highest” bidder.