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Online Boost For Property Auctions
By Joseph Dobrian,
Wall Street Journal
Saturday/Sunday, August 2-3, 2008
Buyers and sellers of
real estate are increasingly
discovering the advantages of doing
business through auction, rather
than through a broker. And auctions
with an online component offer added
advantages.
Auctions ensure a
timely sale, reducing the costs that
accumulate on an unsold property,
and assign an accurate market value.
And the excitement they generate
often drives the sale price higher
than expected. These advantages are
especially relevant in today’s
market, when differing expectations
of buyers and sellers are slowing
sales and depressing prices.
“For several years
we’ve seen unbelievably easy lending
standards and overgenerous
appraisals, and now we’re seeing a
reaction,” says Mike Jones,
president of Kansas City, Mo.-based
United Country Auction Services.
“The wild prices are not there
anymore—especially for recreational
properties in the $1 million-plus
range.”
Mr. Jones predicts
that because buyers are becoming
fewer and more discerning, the
important of real estate auctions
will grow, relative to brokered
sales. We’ll see more overseas
buyers, he says, due to the current
weakness of the dollar. Therefore,
Mr. Jones urges, whether you’re
buying or selling, it’s usually best
to work with an auctioneer who has
strong online capabilities.
“We conducted the
first auction with an online
component 12 years ago,” says
William R. Bone, president of the
National Auction Group in Gadsden,
Ala. “It was a 7,000-square foot
ocean-front mansion in Rehoboth
Beach, Del., that belong to Phil
Zaffere of Stove Top Stuffing and
Lean Cuisine fame, and it was sold
sight-unseen for $1.8 million. It
cost us $50,000 to set up the
online-auction facilities. Since
then, it has become much easier and
cheaper to arrange online auctions.”
For higher-quality
property, a live auction is held,
with remote bidders logging on to a
Web site where they can observe the
action and place bids in real time.
Clerks stand by at computers at the
auction site to record and announce
remote bids. Virtual tours of the
properties are always available
online, and occasionally someone
will buy without ever visiting the
property in person, but that’s rare.
“It usually makes the
seller feel better when people
actually gather to bid,” says Mr.
Bone, “and it’s easier for us to
encourage them to bid more if
they’re there in person, so we
always have a live component to our
auctions.”
Remote participation
in these auctions have to put up a
deposit (by credit card or wire
transfer) to be held by a licensed,
bonded title company, just as live
bidders do. The default rate for
online bidders is slightly higher
than for live bidders—3% compared
with 1%—says Dean C. Williams, CEO
and chairman of Williams & Williams
Worldwide Real Estate Auction in
Tulsa, Okla. “But it’s nominal,” he
adds.
“Adding online
bidders can maximize the value of
the property,” says Mr. Williams.
“The bulk of the market for any
asset tends to be local, and online
participants are the high bidders
only 15% to 20% of the time, but
online bidding encourages foreign
participation and thus becomes more
important with each passing quarter
that the dollar stays low.”
Generally speaking,
if you’re auctioning a luxury
residential or higher-end commercial
property, you can expect the most
serious bidders to show up at the
site of the auction to place their
bids. But certain property types
tend to attract a good many online
bidders, who will inevitably drive
up the price.
The higher the asset
value, Mr. Williams says, the more
likely the winning bid will come
from a live participant, but for
lower-priced properties the winning
bid often comes from cyberspace.
Some auctioneers
prefer to start collecting bids on a
property online, before the actual
auction, and in rare cases the
seller accepts a bid and the auction
is called off. John P. Hanenfeld,
president of Seaford, Del.-based
buyatauction.com, accepts online
bids weeks in advance, but the
process almost always ends with a
public outcry auction.
With regard to
checking out the property before
completing the sale—the
due-diligence process—a real estate
auction company will offer the same
information and assistance that a
conventional broker would, Mr.
Hannefeld says.
“We’re not like those
companies that advertise on early
morning TV, ‘Buy foreclosed property
with no money down,’” he adds.
“We’re selective about what we sell;
we put the property out for
inspection several weeks in advance,
with brokers on premises, and we
guarantee that the property you see
today will be in like condition when
you close on it.”
Several reputable
vendors offer robust, secure,
private and customizable auctioning
software. Live and online bids
usually flow together, legal issues
are the same for online and live
bidders, and in most cases a
complete due-diligence package can
be downloaded from the auctioneer’s
Web site.
“The unique, high-end
properties do better at live
auctions than they would online,”
says J. Craig King, president and
CEO of J.P. King Auction Company in
Gadsden, Ala. “But a portfolio of,
say, 20 fast-food restaurants, all
net-leased [the lessee pays for
utilities and taxes], might sell
well online. In that situation,
you’re bidding on the income stream,
so you’ll be looking at the
capitalization rates rather than at
the bricks and mortar.”
United Country Real Estate and United
Country Auction Services are the only
national real
estate and auction franchise systems
specializing in residential, farm and
ranch, trophy,
commercial and recreational properties
in cities and towns across America.
The company
currently publishes nine niche real
estate magazines and executes a
marketing program that attracts more
than 2.4 million visitors a month to its
725 owned and operated web sites
including 925,000 visitors a month to:
www.unitedcountry.com, the leading real
estate web site in its market. United
Country®
reaches more than 90 million homes each
week through its national advertising
of franchisee-listed properties in
various local, regional and national
print media outlets. With a heritage
that dates back to 1925 and
headquartered in Kansas City, Mo., the
company supports 700 franchisees in 44
states and markets a national database
of properties valued at over $9 billion
at
www.unitedcountry.com.
NATIONAL
HEADQUARTERS
2820 NW Barry Road, Kansas City, MO
64154
816-420-6200 www.unitedcountry.com |
