- - Thursday, July 14, 2011

If your home has been languishing on the market and you are getting anxious to move, selling via an auction just might be the right choice.

Contrary to what many people think, an auction is not only for bank-owned foreclosures or builder closeouts. In fact, many companies that handle auctions in the Washington area say the majority of their business comes from individual homeowners.

“Some of our sellers have had their home on the market for a long time and are turning to an auction to see if they can sell the property using that method,” said Gloria Lynn Gardner, president of Homeland Auctions in Leesburg, Va. “Some of the sellers, though, are people who want to sell their home this way right from the start.”

Ms. Gardner said most sellers appreciate the short time frame of an auction.

“It takes about six to eight weeks total from the signing of the auction agreement to settlement,” Ms. Gardner said. “We try to streamline all the preview activity with one or two open house dates, too, so the sellers have fewer times when the home has to be available to show.”

John Levinson, vice president and partner at Alex Cooper Auctioneers in the District, said his company schedules an auction within three weeks of meeting with the sellers, with the settlement scheduled for 45 days after the auction.

“The big benefit to sellers is that they know the time and the date of when their home will be sold,” Mr. Levinson said.

While Alex Cooper Auctioneers and Homeland Auctions work with properties in every price range from inexpensive studios to multimillion-dollar estates, Concierge Auctions focuses on unique, high-end properties.

“The homes we auction range from $1,000,000 to $20,000,000 or more, depending on the location,” said Laura Brady, vice president of marketing for Concierge Auctions. “The main reason our sellers choose the auction process is for the time certainty, knowing that the home will sell by a particular date and by a buyer who has financing in place.”

All auctions sell property “as is,” so sellers also are relieved of the burden of a contingent contract requiring a home inspection and repairs. The non-contingent auction contracts also require the buyers to have financing ready so the settlement can occur as planned.

“Buyers can preview the home and have a home inspection for information purposes,” Ms. Gardner said. “When we get a property in pristine condition it is a nice surprise, but every property is sold as is. At an auction, we are selling an opportunity more than the features of the home.”

Prospective buyers often see an auction as the place to find a bargain, but when they are competing against other buyers, the price for a particular property may rise. Many homes sell for prices similar to their current market value.

“We are looking for motivated sellers who are ready to be realistic about the market value of their property,” Mr. Levinson said. “A lot of real estate agents out there will tell sellers what they want to hear in order to get the listing. We won’t do that because we are in the ‘sell it now’ business.

“Many of our sellers are ready to relocate or are forced to sell quickly for some reason, so the focus is to get the home aggressively marketed in a short time span,” he said. “Our marketing shakes the trees and gets the buyers to make a move by a certain date rather than to think about the house for six months.”

A key element of the auction process is extensive marketing, which is one reason auctions are particularly popular for luxury homes.

“Part of the process is identifying the true market niche and placing a spotlight on a property,” Ms. Brady said. “Auctions bring out a lot of buyers who have toyed with the idea of buying but were worried about overpaying for the property. As long as there are enough bidders, both the buyers and the sellers can be confident that the property is being sold at market value. Our average number of bidders is eight.”

Dustin Oldfather, a Realtor with Ocean Atlantic Sotheby’s International Realty in Rehoboth Beach, Del., is working with Concierge Auctions to auction more than 500 acres adjacent to a wildlife preserve in southern Delaware. For this auction, which closes Tuesday, buyers can bid online before the auction date as well as during the auction by phone, in person or online. Buyers can also opt for a “buy it now” price, which will take the property out of the auction process.

“In 2010, Concierge Auctions sold 85 percent of the homes they signed on to auction,” Ms. Brady said. “We are very selective of our properties and of the sellers, to make sure the property is unique and outstanding and that the sellers are motivated and willing to accept the results of the auction.”

Attracting motivated buyers is equally important to the process. Ms. Gardner says her website has more than 1 million subscribers around the world who are actively looking for property to buy.

“Good, bad or ugly, we’re trying to make the market step up with an offer within a short time,” Ms. Gardner said.

Auction sellers need to realize the home will sell for what the market will bear the day of the auction, which could be less or more than the sales price using a traditional sales method. Auction company representatives typically show the sellers recent comparable sales within the previous 90 days to six months to give them an idea of what their home might be worth.

“The sellers can set a minimum sales price if they wish or they can do a reserve auction, which means the sellers can choose to accept or reject the highest bid,” Ms. Gardner said.

Mr. Levinson said that while sellers do not always get top dollar for the property, they often come close to it and have the additional advantage of a quick settlement.

Sellers at an auction typically cannot be “underwater” on their mortgage because that could mean negotiating a short sale with their lender.

“Lenders require us to market a short sale as a ‘preforeclosure sale,’ which a lot of sellers dislike because of the stigma associated with the word ‘foreclosure,’ ” Ms. Gardner said. “But a preforeclosure sale at auction can be the best way to handle a short sale because it is streamlined and generates a lot of interest among buyers.”

Sellers typically pay the auction company for marketing costs, which Ms. Gardner says is about $1,800 for a single-family home. Realtor commissions are paid by the buyers. Mr. Levinson said the marketing costs depend on the property, often approximately 0.5 percent of the home value. Concierge Auctions negotiates its fee with each seller.

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