Recently, I received a few calls from some real estate investor friends of mine here in North Carolina venting their frustration with working out short sales with some lenders. It seems some lenders are stalling in making any decisions as to whether they will release a mortgage for less than what is owed. If you have a buyer waiting for a decision from the lenders, believe me, they will not wait around very long.

It seems some lenders may be unwilling to short sale the property thinking that the Federal government will purchase these bad loans at par, thus no need to take a loss by short selling. What has been your experience?

In September of 2007, we made an offer on a pristine home in a golf community in Wake Forest, North Carolina. The lender sent out a local real estate agent for a BPO (Broker’s Price Opinion). The BPO figure was way above the current payoff and the lender refused our offer thinking they could sell the property and not take a loss.

If I recall right, the BPO was for about $680,000 with a payoff of approximately $600,000. We offered $535,000 and I was turned down. I don’t need to tell you what has happened to the price of real estate since September 2007. I drove by the home last week and guess what? The home has not sold. It has been vacant since April of 2007. I sometimes wonder if the lender wished they had accepted my offer. I am beginning to see this scenario more and more, especially in the economic environment we are in.

I don’t know who coined the phrase, “Cash is King”, but it is certainly true in the real estate market we are currently experiencing. I have been talking with other investors who are waiting for the market to bottom out. The problem is that no one knows when that will happened.

I  told them that if they can buy today and make a reasonable profit, then by all means buy today. But the greed factor is too great for most of them. They want to wait a little longer. I would prefer inventory and keep cash at a minimum because there are so many uncertainties in our economy today that can affect the value of our dollar.

I am also hearing rumors about the possibility of a Real Estate Resolution Trust. If that happens, I hope the Feds turn to professional auctioneers to help liquidate these properties. No doubt the Feds will suffer a loss but not as much of a loss if they use bank employees or attorneys to auction these properties.

For more information about real estate auctions, go to my web-site http://www.cansellnow.com

What is being proposed by the Federal government is socialism, spelled with a big S. Webster New World Dictionary defines socialism as following:  1. any of various theories or systems of the ownership and operation of the means of production and distribution by society or the community rather than by private individuals, with all members of society or the community sharing in the work and the products; 2. the stage of society, in Marxist doctrine, coming between the capitalist stage and the communist stage, in which private ownership of the means of production and distribution has been eliminated.

Our federal government is about to “nationalize” the mortgage market, the insurance, the financial institutions, and soon, the big 3 automakers, to the tune of $700 billion dollars, and as one economist said, the true cost is closer to one trillion dollars.

What does $700 billion or one trillion really look like? I was listening to Chuck Swindoll on the radio in my car this past week when he had another businessman explain to him the difference between one million dollars and one billion dollars. The businessman said if you had a single three foot stack of tightly bound one hundred dollar bills that would be what a million dollars look like.

On the other hand, a double stack of one hundred dollar bills tightly bound as tall as the Empire State Building would equal one billion. If this is true representation, we can say that $700 billion is doubled stacked one dollar bills 700 times taller than the Empire State Building.

Now where does all this money come from? It will come through increased taxes or by monetizing the economy, viz., start up the printing presses, which will produce inflation.

If the current proposal passes Congress, it creates a “Czar” position for Henry Paulson which gives him power that, according to the language in this proposal, is” non-reviewable by any court or any administrative agency.” Paulson will have more power than our president that no one can challenge.

I keep asking the question but I cannot get an answer, “Where in our constitution does the government have the authority to do what is about to happen?”

There is talk about the Fed forming a Resolution Trust to liquidate all the bad loans these banks have accumulate. I suppose as a real estate auctioneer, I should be excited about this but I can’t, not at the expense it will have on our country. And now, we are hearing talk about our government bailing out foreign banks as well because these banks have lent money to Americans.

Some think that an auctioneer shows up on the day of the auction, starts talking fast, sells the house, and he/she is done. Actually, the activities that take place on the auction day, represents about 5% of the total auction process.

The perception of a realtor may be closer, viz., a contract is signed, a sign is posted in the yard, information is listed in the local MLS, and the listing agent hopes and prays that it gets sold. We know that is not always true but that is how the public portrays us.

Now back to the question “should realtors become auctioneers?” My answer is, “It depends.” Most auctioneers are a second, third or even fourth generation of auctioneers. They are in the business become they love it and have been around it since the beginning of time. Most auctioneers are specialist in a particular area such as farm equipment, heavy duty equipment, antiques, cars and trucks, land and yes, real estate, both residential and commercial.

I don’t know what the licensing laws of your state are, but here in North Carolina you must go to a state approved school for pre-licensing requirements which may involve ten days to two weeks of your time, then you must past a state administered test.

There are annual renewing requirements, professional associations to join such as your state association and/or the National Association of Auctioneers [NAA] in addition to continuing education requirements [CE] each year. Add all this up plus your NAR and state dues, MLS dues and CE requirements; you can spend several thousand dollars a year on licensing and professional dues requirements.

Then you must become a marketer, that is, know how to market and get bidders to your auction. Who coordinates the marketing process? Who makes up the25 to 100 page proposal to the client?  Who’s responsibility is it for placing line and display ads in which newspapers? What income range are you targeting? Who makes up the flyers and ads mats?  Who checks on the cost of these things? Who sets up information on dozens of web-sites? Who draws up the Property Information Package (PIP)? Who registers the bidders and records the auction? Who keeps the client informed as to what is going on? And it goes on and on. Being a one man or one woman operation will not work.

Rather than trying to re-invent the wheel, unless you have a real love for the auction industry, your best bet would be to partner with a local auctioneer in your area.

For more information about auctioneering, go to my website at http://www.cansellnow.com

Yet, several of the major on-line networks reported this morning that foreclosures doubled during the first half of this year and that 2009 doesn't look any better.

As a North Carolina auctioneer, I have tried and tried to approach lenders in North Carolina to let us auction some of their REO properties. With very few exceptions, the answer has been a resounding no.

Reality has not set in with many of these lenders and banks. Surely they understand that these "non-income producing assets", as they call them, will affect their book value. If they get too many, the Feds will step in.

The BPO agent (Brokers Price Opinion) seems to hold the key to the lender's decision. In hopes of "getting a listing", what we in the auctioneering business call the "list and wait" method of selling, the BPO agent gives a range of unrealistic values to the lender/bank.

Why pull comps that are three to six months old or older, to determine a range of values, when we are in a declining market? Hello! The home sits on the market for many months, some over a year. The home deteriorates, some are broken in, not to mention the holding cost and the loss value of money while it sits.

An auction determines "market value." When you have a group of people in a room bidding on a home, when the bidding stops, market value is established, viz., what a  buyer is willing to pay for the home.

"Market value" is not what sold next door three months ago or three streets over six months ago but what someone is willing to pay today.

My mother recently passed away leaving property, both real and personal, to me, my two sisters and brother. My dad died a few years earlier. He was a pack rat, never willing to throw anything away. He was always buying things that he felt was a good deal, even though he didn’t need the items. Some items appear to have value and some we are not sure about. We received a letter from a company that claims they are “estate sale specialist.” My brother says we need to talk an auctioneer. What’s the difference?

An excellent question! When a family member dies and leaves real and personal property to the heirs, in most cases, the heirs have no idea how to liquidate the assets in the most cost efficient manner, assuming liquidation is the goal.

An estate sale is basically a “tag sale.”  It doesn't even come close to being compared to an auction. It can be very impersonal. An estate sale is more like a garage sale.  A “specialist” normally conducts the estate sale and receives a percentage of the revenue generated. Estate sales can last from one to three days, normally with a price reduction on day three.

The “estate sale” industry is an unregulated industry without any professional standards or Code of Ethics. There are areas of conflict in that unsold property ,in some cases, go to the estate sales company. Their idea of marketing is to run an ad in the paper and put out a sign.

Auctioneers are specialist in marketing. Auctioneering is a profession that is regulated at both the national and state level and does have a Code of Ethics to operate by. Most are full-time professionals while some may be part-time due to seasonal work. An auction ensures a wide range of bids, letting the bidders determine “market value.”

An auction creates excitement through the competitive bidding process. Compared to estate sales, auctions can bring highest possible fair market price for your property. Both real and personal property can be sold in one day, not over days. There is no haggling over price. An auction exposes your property to the largest pool of qualified buyers.

 While estate sale specialist do not want owners present on the day of the sale, (I wonder why?), the auctioneer encourages the owner to be present. Before you consider an “estate sale,” talk to your local auctioneer.

For more information on auctions, go to my website at www.canSellnow.com.

However, if the auction is to be a “reserve” auction, meaning a minimum price level must be met before the hammer falls (property is sold), we will not front the marketing fee. Only in a few rare occasions where the reserve is very low compared to what we feel the property will sell for, we will fund the marketing fee and get repaid at closing.

The auctioneer should give the seller a proposed marketing schedule showing all the estimated expenses and get a check from the seller based upon this estimate. If the expenses are less than what was proposed, any excess expense money is returned to the seller with a statement showing where the money was spent.

The marketing fee cover such expenses as but not limited to: (1)newspaper, radio and TV ad, (2) signs, posters, photos and pennants, (3) postage and addressing (4) labor for tagging, clean up, security, etc.

For more information on real estate auctions, visit my website at www.canSellnow.com.

The passive seller has a predetermined dollar figure in mind they want from the sale of their home. In a lot of cases, it is very unrealistic. They are very demanding of the auctioneer. They do not want to spend a lot of money in marketing the property for an auction, but they want a lot of people to show up at the auction. They have been told by friends, neighbors, or realtors, not to take less than such and such for the home. This kind of seller does not fit the auction criteria.

The motivated is very realistic and understands the current market. While not wanting to give away their home at auction, they understand the market value is determined by a group of potential buyers and the hidden costs of holding onto the property for an extended period of time. These hidden costs include the time value of money, additional mortgage payments if they were to use the list and sell method, additional pro-rata property taxes, continued maintenance expense on the home such as utilities and lawn, etc.

The motivated seller is an excellent candidate for an absolute auction, that is, the highest bidder will buy the home regardless of price. The absolute auction creates more excitement and draws larger crowds.

 If you have questions about auctioneering, visit my website at www.canSellnow.com.

 Ringmen are the men or women who stand in the crowd and relay the bids to the auctioneer. Other terms such as bid spotter, bid assistant or ring person, do the same thing. All refer to the person taking bids during the auction for the Auctioneer.

Especially with large crowds, the duty of the Ringmen is to watch his/her section of the crowd that has been assigned to the Ringmen. The duty of the Auctioneer is to watch the Ringmen rather than the crowd. With large crowds, the Auctioneer could miss some bids if he tried to spot the bidders himself.

The Ringmen should try and establish a relationship with the bidders before the auction seeking to get as much information about the items the bidders are interested in, answer any questions and let them know when those items are up for bid.

The Ringmen is a very important asset to the Auctioneer. There is even a school to teach you to become a professional Ringmen.

 For more information on auctions, go to my website at www.canSellnow.com

A “reserve” auction is when the seller or his agent reserves the right to accept or decline any and all bids. A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time.

Ron Taylor and Sons Auctioneers discourages sales with a high reserve price and asks sellers to disclose any minimum or reserve price prior to a sale. In the case of bankruptcy and certain court ordered auctions, many properties are sold subject to a reserve price or final ratification by the Court before the sale can be completed.

If the auctioneer does a good job with marketing, the home will sell at auction. The problem comes in when the expectations of the seller is not fully explored by the auctioneer prior to the auction.  Many sellers do not understand that if you have 25 or 30 potential buyers bidding on their property, market value is reached when the bidders stop bidding.

If the seller at a reserve auction rejects the high bid, there may be a “no sale fee” the seller will have to pay to the auctioneer.  The auctioneer should have a good feel as to what the home will bring. If the reserve is higher than this figure, the auctioneer should take a bye on the property.

For more information on real estate auctions, go to www.canSellnow.com.

There are basically two type of real estate auction. An “absolute” auction is where the property is sold to the highest qualified bidder with no limiting conditions or amount. The seller may not bid personally or through an agent.  Also known as an auction without reserve, this type of auction means the property will be sold to the highest bidder regardless of price.

A “reserve” auction is when the seller or his agent reserves the right to accept or decline any and all bids. A minimum acceptable price may or may not be disclosed and the seller reserves the right to accept or decline any bid within a specified time.

Ron Taylor and Sons Auctioneers discourages sales with a high reserve price and asks sellers to disclose any minimum or reserve price prior to a sale. In the case of bankruptcy and certain court ordered auctions, many properties are sold subject to a reserve price or final ratification by the Court before the sale can be completed.

If the auctioneer does a good job with marketing, the home will sell at auction. The problem comes in when the expectations of the seller is not fully explored by the auctioneer prior to the auction.  Many sellers do not understand that if you have 25 or 30 potential buyers bidding on their property, market value is reached when the bidders stop bidding.

If the seller at a reserve auction rejects the high bid, there may be a “no sale fee” the seller will have to pay to the auctioneer.  The auctioneer should have a good feel as to what the home will bring. If the reserve is higher than this figure, the auctioneer should take a bye on the property.

For more information on real estate auctions, go to www.canSellnow.com.

Someone recently asked me if an auction should be the last resort to sell their home. She and her husband lived in a nice neighborhood where the homes and yards were kept in pristine condition. They thought their home would sell pretty fast.

They had listed their home with a realtor with a six month listing agreement. Since then, they have had very few showings. The agreement expires at the end of the month and they are not sure what to do.

It was her understanding that selling a home by auction was only for distressed properties, like foreclosures, or government seized property. I tried to explain to her that things are different today, that more and more homeowners are using the auction method.

The National Association of Realtors (NAR) verified this several months ago by stating that in a very few years, 25% or more homes will be sold through auctions. In February 2003, The Wall Street Journal ran a story with the heading, “Auctions Are No Longer Only for the Desperate.” The National Association of Auctioneers (NAA) reports that the sale of residential properties  by auction continues to be on the increase.

A seller does not need to be desperate to be motivated. Many sellers have reasonable price expectations and prefer the speed and excitement of the auction process.

It may still be true that foreclosed properties are still big business and carry the “last resort” image but don’t view all real estate as a last resort.  I told her a live auction should had been her first consideration. I encouraged her to attend an auction or two to get a feel how they are conducted and the prices that homes are being sold for.

And I also told her to visit my website at www.canSellnow.com to learn more about auctions. J

Consignment Auctions

My mother recently passed away and left her home and furnishings to me. My husband and I want to move into the home but we do not need all the furnishings. I don’t want to do a “yard sale” as I feel some of her things are of value and may not get a good price.  A neighbor told me to find someone who would sell them for me on consignment.  Would an auctioneer be interested in something like this?

There are many auctioneers that have galleries that conduct consignment auctions. There is a caveat though. Most auctioneers do not like consignments with a reserve, meaning the seller has a minimum dollar figure the seller is willing to accept.

Ironically, some sellers want more money than what a group of buyers are will to pay because the sellers are not familiar with the market or the item to be auctioned. That is why the auctioneer likes the absolute auction, meaning the highest bid wins regardless of the price. If the auctioneer has done a good job in marketing the auction, you should get a good price for your items.

Many auctioneers will buy pieces or the total furnishings from an estate. The auctioneer needs to make a profit when he sells, so you need to take that into consideration. For information on North Carolina auctions, go to my website at www.canSellnow.com.

Do I need an Auctioneer?

I own my home and have been thinking about selling it and moving to another state. I have talked with several realtors and just can’t get excited about listing my home with them, especially in today’s real estate market. I need to sell quickly.

I have been doing some reading about auctions. It seems home auctions are becoming more popular as a way to sell homes fairly quickly. My question to you Ron, is, why can’t I just auction the home myself?

As owner of your own home, you could but do you really want to. You could operate on yourself but I wouldn’t suggest it.  Most states require a license if you don’t own the property that is being auctioned.

Before becoming an auctioneer, as a real estate broker, some home owner’s would tell me they could sell their home and save on the commissions. Some did but most didn’t because they didn’t understanding marketing.

Their idea of marketing was to run a FSBO (For Sale By Owner) ad in the local  newspaper on the weekend, and to put a sign out front of the home.

Auctioneers are specialists in marketing. Auctioneers are not really auctioneers but marketers. They know how to expose your home to the greatest number of people in a cost effective way. Most FSBO sellers are targeting the local market only while auctioneers are national and in some cases , international, in their marketing efforts.

A professional auctioneer knows how to get people to the auction, how to create excitement and get the best price for your home. In addition, there is the paper work you will need to understand, viz., contracts and disclosures, handling escrow money, getting pre-approve, qualified buyers to the auction, and the follow up after the auction that leads to a quick and smooth closing.

My suggestion is to use a professional auctioneer.
 
For more information on auctions, go to my website at www.canSellnow.com.

Ron, I recently attended an auction in another state while on vacation. There were some nice pieces of furniture that were being auctioned. The auctioneer stated before the auction that they would accept credit cards for payment but they would charge a 3% processing fee along with the buyer’s premium.

The buyer’s premium was 10%. When you add the credit card fee of 3% plus state sales tax of 7%, it doesn’t seems to be that great of a deal.

There’s not a whole lot you can do about the sales tax but pay it, whether at an auction or at the local grocery store. At an auction, the best way to pay is cash, but I realized that is not always an option for everyone.

The credit card company charges the auctioneer or any merchant, a processing fee. This varies from vendor to vendor. If there was a 10% buyer’s premium, and if someone used a credit card with a 3% processing fee charge to the vendor, the gross to the auctioneer is 7% and then his expenses (labor, utilities, liability insurance, facility charge if he is renting, etc., has to come out of the 7%, thus reducing his margin of profit.

My suggestion is that if you are going to use a credit card at an auction for your purchase, bid accordingly, viz., "does the price I pay for the merchandize, plus the processing fee, make me feel I made a good decision with regards to price versus value?"

Keep, in mind, if you don’t pay that card off within the next billing cycle, you paid more for that item than what you bid, particularly if you have one of those 18 to 24% credit cards.

For more information on auctions, go to my website at www.canSellnow.com.

How does auction value differ from market value?

The differences between auction value and market value stems from the auction process itself.  By this, I refer to several characteristics which are more dominant in the auction process than in the ”list and sale” technique.  They are:

1.    The necessity to make a decision as to buy or sell at that moment.  There is not time in which to deliberate and think about it. There is a sense of urgency.

2.    The auction process creates an atmosphere of competition among the bidders which could result in at least one or more bidders to offer more for the property than they would have under different circumstances.

3.    Buyers are not competing against sellers, but instead are competing against other buyers.  Therefore, the activities are not those of negotiation between a high and low price but instead it is a contest of how high one bidder is willing to go above another.

 Logically, it would appear that if all of the bidders present at an auction were all well informed as to the market price of a property, then the market price would tend to represent the ceiling of the selling price. 

However, an auction many times acts on the emotional side of a buyer’s personality.  And when a person starts to add emotion into value judgments, then those judgments may lose some objectivity and, in the buyer’s eyes, more value may be given to the property than is shown by market comparisons.

 On the other hand, there is a possibility that the auction price may fall short of the market value.  For example, the time allotted to expose the property to the public may be in reality not long enough to attract that buyer who is willing to pay the highest price for the property.  Then, the seller who is emotionally prepared to sell the property may accept a lower price rather than wait any longer.  Also, if all of the buyers are able to remain objective and the auctioneer has failed to inject emotionalism into the bidding process, then the auction price may also fall short of the market value.

For more information about real estate auctions, visit my website at www.canSellnow.com.