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How to Successfully Sell Your Property Via an Online Auction Site
By Neil Kaplan
With today's slow real estate market, selling properties using traditional sales methods can be difficult, especially if the starting price is too high. After a few months on the market with little interest, the seller, desperate to offload the property, then lowers the price - not once but two or three times -- but because the listing is stale, no one pays attention.
If this is your problem, selling your property on a real estate auction site may be an option for you. Not to be confused with traditional auctions held on the courthouse steps, these relatively new real estate transaction sites are based on the eBay auction model and feature all types of properties, including full equity and pre-foreclosure.
Online real estate auction sites offer sellers and buyers the advantages that made eBay successful: they create a sense of excitement when bidding goes up, you can view the bid history for any item, and you can bid at any time.
When considering selling your property on an auction site, keep the following three strategies in mind:
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- Start off with a low bid.
Auctioning your property at its fair market value or 10% below will elicit a yawn from experienced buyers - nowadays 10% is considered a standard discount.
Generate excitement and get the bidding started by opening your auction with a low bid - one-third to one-half the last listing price is a good starting amount. Although this sounds counter-intuitive, it works. Why? A low starting bid has no relevance to the final highest bid, and a high starting bid will turn people away and decrease the number of bids. You can always place a disclaimer in the property description stating that the highest bid is subject to owner approval, or use a reserve amount.
As an example of how the market forces work to ensure your property sells at a fair price, we recently had a seller whose Kingston, Massachusetts property - a run-down 1914 shack on a 5,000 square foot parcel, town sewage included - had been on the market for 15 months. He placed the property up for auction online; bidding started January 15, 2007 and ended 18 days later on February 2. The seller the started bidding at $120K; the winning bid was $189K. The seller walked away with $25K equity.
- Tell everyone you know that your property is up for auction.
The key to successfully auctioning your property online is marketing it well - because the more bidders you have, the higher the bidding goes. We've found that newspaper classifieds don't work in terms of reaching people who may be interested in your property and geographical area because many interested buyers may live out of state. (For a Bridgewater, MA property, the winning bidder was from Fort Myers, Florida.)
You'll want to list your property with the various Multiple Listing Services (MLS) as an "entry only" listing as well as with every online real estate site you can find, such as ISoldMyHouse.com or Zillow.com. You can also purchase a 30-day classified ad on eBay for $150. Direct all your listings to your auction property listing.
Additionally, consider holding two or three Open Houses, and place one Open House local newspaper ad just before the bidding ends (be sure this date is listed in your ad). Advertise your starting bid only, not the current bid price.
Don't forget to take quality photos and video. If you live on a busy street, consider a large "For Sale at Auction" sign listing the URL of the auction site.
- Scope out the auction site before listing your property.
To ensure you don't get stuck in a real estate deal from hell, you should perform due diligence with regard to any real estate website - just as you would with any "real life" agent or business concern. Ask the auction site owner about the following:
- Registration forms - Buyers and sellers should both be required to register for a real estate auction site using their full and legal contact information and must be age 18 or over. At our site, agencybid.com, we retain the right to refuse a listing to those people whose registration information seems questionable.
- Buyer's Premium - This is the amount added to the highest bid by licensed auctioneers for sales at auctions. For real estate sites, the licensed auctioneer is usually the person who owns the auction site, with the Buyer's Premium ranging from 1% to 10%. The Buyer's Premium and the highest bid are added together to form the actual sale price of the property.
- Pre-closing procedures - Because online auctions are considered binding legal agreements, you want to make sure that all forms, financing, and other procedures are in order before your auction closes. The auction site should require all potential buyers to send in signed offer forms, pre-approval letters from the bank, and offer deposit checks at least six hours before auction closing.
- Inspection services - Ask your online auctioneer if he has access to inspection companies in order for you to have the property inspected before placing a final bid. Sometimes a group of bidders will pool their resources with the inspection results available to the entire group.
- Title - Once the auction is ends, the sale is completed much the same as a traditional sale. The standard Purchase and Sale agreement, signed the day after the auction ends, ensures that the buyer will receive a clear and marketable Title.
Using an online auction site can be a fast and effective method for offloading a stalled property. Once you sell your first property via online auction, you may never go back to the "old way" again!
Neil Kaplan is the Founder of Agencybid.com, an online real estate auction site based in Massachusetts, and a Massachusetts licensed and bonded auctioneer. He can be reached by email at neil@agencybid.com or by phone at 781-249-0600.
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