brian Lord St. Louis - Real Estate Auction

1
Introduction to Real Estate
Auction
Brian Lord St. Louis

2
Goal of This Course
• Help you increase your revenue by
introducing auctions to clients and
customers as a tool for selling and
purchasing property

3
Table of Contents
1. Real Estate Auction: The
Opportunity
2. Identifying Sellers and Properties
3. Proposal to Closing
4. Getting Started in Real Estate
Auctions

4
Learning Objectives
• Define real estate auction
• Discuss benefits of real estate auctions
• Identify sellers, properties, and markets
for auction
• Explain how to establish alliances with
auction firms

5
Who This Course Is Written For
• Agents who want to introduce real
estate auction to their sellers and
buyers
• This course is NOT intended to
certify or accredit real estate
professionals as auctioneers.

6
Approved Elective for ABR®
Designation
• Successful completion of this course
counts as elective for REBAC’s
Accredited Buyer’s Representative
(ABR®) designation.
• For more info, contact:
Real Estate Buyer’s Agent Council
www.REBAC.net
800-648-6224
REBAC@realtors.org

7
Pursuing Career as Auctioneer?
• Successful completion of this
course counts as 1st day of 6-day
NAA’s Accredited Auctioneer
Real Estate (AARE) designation.
• For more info, contact:
National Auctioneers Association
www.auctioneers.org
888-541-8084, ext. 28
education@auctioneers.org

8
1. Real Estate Auction: The
Opportunity
• Defining real estate auction
• Discussing growth of this niche
• Identifying benefits
• Explaining how agents can work
with auction firms

9
What Is Real Estate Auction?
• Intense and accelerated real estate
marketing process that involves the
public sale of property through
competitive bidding

10
Effective way to:
• Convert real property into cash
• Turn unwanted property into
liquid assets
• Achieve a sale in a specified
time frame

11
Was typically regarded as sales
method of last resort for residential
properties in distress

12
• New-home construction
• Luxury and vacation homes
• Agricultural land (farms,
ranches, and orchards)
• Commercial real estate
Auction beneficial for many types of
real estate:

13
Fast Growing Business Niche
• From 2003 to 2007, residential
real estate auctions grew 46.6%.
• Land and agricultural real estate
grew 36.3%.
• In 2007, real estate auction as a
whole generated more than 58.4
billion dollars in sales.
Auctions are on the rise:
Source: National Auctioneers Association

14
Benefits to Seller
• High seller holding costs are
eliminated.
• Seller sets terms and conditions.
• Property sold at true market
value
• Seller knows when the property
is expected to sell.

15
Benefits to Seller
• Reduced time to market and
show property
• Large number of pre-qualified
buyers
• Competition among buyers
• Buyers make a firm decision
about the property.

16
Benefits to Buyer
• Motivated seller
• Reduced time to purchase
property, incl. negotiations
• No contingencies
• Favorable financing possible

17
Benefits to Buyer
• Exciting method of purchase
• Fairly and open competition
• Buyers—not sellers, agents, or
appraisers—determine property's
fair market value.

18
Benefits to Agent
• Opportunity to earn commissions
• Expanded services to sellers and
buyers
• Properties exposed to large pool
of qualified buyers
• Properties sold within short
period of time
• Referrals and repeat business

19
How Agents Can Work with
Firms
1. Referring agent/broker refers a
seller to auctioneer, then receives
a referral fee.
2. Listing agent/broker markets
property and represents seller
during sale and closing.
3. Buyer's agent/broker registers
buyer who buys property at
auction and earns a commission.

20
2. Identifying Sellers and
Properties
• Understanding sellers, properties,
and market conditions for which
real estate auctions are best
suited
• Applying the two-thirds rule

21
First Step in Auction Process
Analyze:
Seller
Property Market Conditions

22
Analyzing the Seller
• Seller motivated?
• Property overmarketed?
• Previous price "labeled" the
property?
• Why has property not sold?
• Seller’s reputation?
• If not an auction, what do you
suggest?
Auction is a commitment and
requires investment from the seller.Brian Lord St. Louis

23
NOT Good Seller Candidates
• Over-motivated
• Legal issues, eg, lis pendens
• Unrealistic expectations of the
property value
• Litigious
• Unwilling to level with you
• Multiple owners with differing
goals

24
Good Seller Candidates
• Have high holding costs
• Need immediate cash
• Are retiring
• Partnership or marriage break-up
• Moving out of the state
• Want to liquidate an estate
• Are auction minded
• Listing about to expire

25
• Never been listed
• Already purchased another
house
• Know auction will bring true
market price
• Financial problems
• Time sensitive—“just want it
sold”
• Can’t/don’t want to maintain
property
Good Seller Candidates

26
Analyzing the Property
• Zoning
• Back taxes
• Tax assessment
• Equity and mortgage
• Property condition

27
Good Properties for Auction
Owner has:
• At least 25% equity
• A lot of high carrying costs
Property is:
• Unique
• Vacant
• Difficult to appraise

28
Analyzing Market Conditions
• Market conditions represent
buyer interest.
• At time of listing, market
condition must be considered.

29
Favorable Market Conditions
• Dull market—too much
product, some buyer interest
• Seller’s market―high demand
and a lot of competition
• Emerging market—kick off
sales program of new
developments

30
Consider Auction for All
Properties
• Residential
• Industrial
• Agricultural
• Apartment buildings
• Shopping centers
• Nursing homes
• New housing developmentsBrian Lord St. Louis

31
Consider Auction for All
Properties
• Property in good condition and
desirable location usually sells.
• Even property that needs rehab
or construction can sell if there is
positive demand for it.

32
Negative or No-Demand
Properties
• Cannot be given away
• Examples are properties:
 Where list price
established the upper
limit
 Have been on the market
for a long time

33
Two-Thirds Rule
• Used to analyze market, property,
and seller
• If two out of three are favorable,
auction should be offered to seller
as a sales option

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