We are an auction company. We represent auction sellers. We have a legal duty to get them the highest possible offers for their properties. So if we come to interview you for a potential auction sale, we’re not going to offer you cash for your property. We’re not going to put a contingent, assignable contract in front of you and ask you to quickly sign it. We’re not going to try to control your property and wholesale it for a profit. Sorry. If you’d like this service, it is available… just not from us.

At our meeting, we’re going to talk with you about the auction method of marketing and why you are (or are not) a good candidate for auction. We’ll make you feel comfortable every step of the way if we move forward from there. We are a respectable, fair auction company. Our model ensures that when we conduct a successful sale, we are adequately compensated and at the same time you are satisfied with the results. Skimming equity from you just doesn’t fit with our business model.

If you are fair, honest and professional, people can confirm this from their business dealings with you. If you aren’t, you can spend thousands upon thousands of dollars in advertising dollars trying to convince people otherwise (but you can’t really expect anybody to believe it).

So I’ve been surfing a bit lately, checking out the ever-evolving landscape of internet auctions. One of the latest fads seems to be the countdown auction on a pay-per-bid system. It goes a little something like this:

• bidders purchase bids
• each bid entered for an item raises the bid price by a predetermined amount (often  $0.01)
• as the clock ticks down bids finally get placed
• each new bid extends the auction a bit

So I watched a few of these and pulled out my mental calculator. It’s downright scary what some folks are able to get away with.

Here’s a common setup. Bidders buy bids for $1.00. Each bid increases the sales price by $0.01. As you might imagine, all of the bidding occurs late in the auction and auctions with bidder interest get extended, extended and extended again. The winner is the one who has enough time to still be bidding when the auction finally ends. This is usually the same fool who purchased enough bids at 100 times their value to make sure he won’t run out.

I watched a Nintendo Wii sell for $15.55 the other day (sure wish I was the winner — I paid retail this Christmas). It only took 3 hours of extended bidding time to get to that final price. According to my calculator, the final sales price (at roughly 10% of retail) netted the seller the aforementioned price (less any fees and commissions) and the auction site earned $1555 from the sale of the bids that were entered at this “auction”.

The next time I hear someone complain about paying a Buyer’s Premium I am going to send them a link to the latest “revolutionary” online auction site. Ptooey.

This is a unique opportunity. Most of our auction properties are not the subject of blog entries. This group of properties deserves a little extra attention.

What makes our March 15, 2010 11am commercial property auction in Hyattsville so unique is the location. This offering involves street retail and office space plus an interest in a large parking lot, all located at the corner of Baltimore Ave (US Route 1) and Farragut Street, close to the DC border and right next to the District Court and County government buildings. Property addresses are 5100-5108 Baltimore Ave and 4342-4344 Farragut St. As a bonus, EYA is about to break ground on phase 2 of the Arts District, a massive project. Phase 1 has already been completed. One recently improved parcel is leased to a busy beauty salon. A long term bail bond tenant occupies another unit. All office space is leased except for one large unit built out to be 10 or so shared office suites. The prime retail space at the corner at street level is vacant and awaits an owner-occupant’s headquarters or a smart vendor.

Due to partnership dissolution, these properties will be offered as an entirety at public auction on Monday, March 15, 2010 at 11am. Prospective buyers can bid online (online bidding starts February 22) or in person. High-end multiple use properties such as this may have suitors across the country or around the globe, and permitting remote bidding provides these prospective buyers the opportunity to make their best offer without physically attending a sale. The starting bid for this property is $649,000. There is a 10% Buyer’s Premium. It is a reserve auction sale. The property will be shown by appointment by calling the auctioneer’s office at 888.704.TRAC (8722) x100 for Paul Sobwick, Auctioneer, or myself at x111.

All types of properties including high-end, unique and commercial properties are being taken to auction by their owners - following a new trend in real estate sales. TRAC works with and in addition to listing agents to employ cutting-edge marketing tools to attract buyers in a short period of time. The TRAC auctioneer and his team work with the seller in choosing the best options for marketing their real property, strategising right up to sale day, utilizing tools such as entertaining pre-auction offers, sealed bids, internet and live outcry auctions. Buyer agents are invited to become part of the auction process, and when representing a client in a sale, they are paid a commission for their efforts.

Click here to view more property details and to bid online. We’ve just posted due diligence including owners title insurance policy, a recent survey. Contact us directly for leases and rentroll.

2.5% Broker co-op; 10% Buyer’s Premium; 60 day settlement required. Even if you don’t have or know a buyer, if you would help us spread the word about this property and the 3/15 auction, it would be greatly appreciated.

-–Tom Gimer, Principal, 888.704.TRAC (8722) x111

Quite frequently we come across certain deals which we call “no brainers” — these are properties which we think simply must sell because it makes no sense for buyers NOT to make the purchase.

Here’s an example.  A commercial property will be sold to the high bidder at $100,000 or above. Of the six units in this building which is located on a busy street, three of them are rented for a total of $2000 per month. The rents are slightly below market value, the tenants have a solid payment history and although they are month-to-month, they would be willing to sign long term leases at increased rental rates if asked.

The property already has positive cashflow and it is 50% vacant. A new owner would have several options — move in and operate his or her own business; bump the rents; renovate and resell; hold, rent and make a tidy monthly income; a combination of any of these; more.

So, where are the buyers for this deal? Will they be lined up on auction day for the opportunity to compete for this property? We’ll see. But smart buyers are buying now while property values are at their lowest.

Do you know….

• a homeowner looking to sell real estate fast
• a business owner liquidating assets
• a “gatherer” looking to sell years of collected items
• an executor, attorney or other person in charge of an estate
• some other person who could benefit from our live and online auction services

We’ve got a new program that rewards our valued clients for referring these types of sellers to us. Here is the scoop:

Registered users who refer anyone to us that results in the signing of an auction service agreement for real estate or personal property will get a $100 finders fee simply for making the introduction. Just make sure you tell your friend, family member or business associate to tell us that you referred them!

TRAC is preparing now for a Spring 2010 ballroom real estate auction in the Baltimore-DC corridor.

The ballroom auction format offers sellers who have one or just a few properties the opportunity to combine theirs with properties from other sellers. This creates more inventory to choose from, increasing buyer participation. Ballroom auctions also allow for joint marketing. So while a typical auction seller would pay for a full advertising budget (often a few thousand dollars), ballroom sellers pay only a modest fee.  When combined, these fees are used to create an extensive marketing campaign.

Online bidding will be available but this will surely be an event to attend in person if you can make it. Stay tuned for more details.

When I walk into a home we’re evaluating for a potential real estate auction, I often know immediately who is going to buy it. No, not the identity of the buyer (that only rarely occurs)… but the type of buyer.

Generally speaking, a property is either going to be purchased by an end-user (a homeowner for a residential property, a small business owner who is going to operate his or her business from a small commercial property, or some other buyer who is going to immediately occupy the property) or an investor (someone who is intends to hold the property for long or short term profit by renting it, rehabilitating it or otherwise).

The type and location of the property as well as its current condition are important factors in determining who the ultimate buyer will be. A end-user is probably not going to purchase a shell or a property in need of considerable repairs. An investor is probably not going to purchase a luxury home in turn-key condition in a neighborhood with few rental properties. You get the idea.

The end-user will, in evaluating the property as a “home”, consider such criteria as proximity to shopping, where the kids will play, the suitability of the layout of the home, future improvements, etc. Since the investor has no intention of residing in the property, she will have far less emotion involved in the process, allowing her to evaluate the financial aspects of the transaction using one or more of several commonly used formulas.  The “value” placed on the same property by the two groups will often differ considerably.

One of our most important jobs is determining the price at which a property will be considered for an auction campaign. Having the foresight to identify the buyer is an essential element of that process. We enroll only a small portion of the properties we evaluate (often because their owners value them differently than would-be buyers will), and sitting down with one of our associates to go over the details is usually an eye-opening experience for sellers, and something we highly recommend.

We evaluate hundreds of properties per month, so I can tell you this with certainty: unless you’ve made considerable home improvements, your home is worth LESS now than it was worth in 2006.

So, if you purchased real estate in 2005-2007 and you did so without putting much money into the deal, you are upside down. What does this mean, in a nutshell? It means that unless you plan to bring money to the table (or short your lender), you aren’t going to sell your property — traditionally or at auction. So live in it. Enjoy it. Rent it. Or walk away from it.

Anybody who tells you anything different has ulterior motives — like taking yours on as a traditional listing but planning a short-sale!

Not to discourage you from submitting a request for a property evaluation (we’re always happy to evaluate potential deals), but please consider this information when planning your future.

Local clerks need to read the code.

In a prior post I complained about the practice of certain local clerks taxing deeds based upon the assessed value rather than the consideration paid. As unfair as that seems — using an inflated, pre-bubble assessment to calculate transfer tax — at least it is predictable. Buyers and sellers know in advance what their closing costs will be. They can plan for it.

Some Maryland clerks are now making a mess of things and holding up recordings when they have no right to do so. They need to read the code and stay out of it. A deed contains a statement made under oath as to the consideration paid. If the code says deeds are to be taxed based upon consideration, that should be the end of the inquiry. However, within the past month I have had 2 Maryland clerks reject and/or hold up recordings, asking for a letter from the seller explaining why the property is being sold for $x when it is assessed at a higher amount. When pressed on the issue, the recording was permitted to pass through. This behavior is inappropriate, unacceptable and actionable.

Property values have plummeted. The “value” some foolish assessor placed on a parcel three years ago means nothing. We don’t care about the coffers being empty. Stay out of our real estate deals — put up another speed camera.

I have asked myself this important question, often on Saturday morning reading the local paper. Why must these auction firms deceive the buyers? I am referring to the almighty phrase “Absolute Auction sold to the highest bidder over $275,000″ or “Absolute over 140,000″. The price is not the point here; it’s the misrepresentation of the method. Is it absolute or not? As a CAI (Certified Auctioneer Institute) graduate, I know as well as all others who have graduated with this prestigious degree that it is unethical and illegal to have a price restriction on an absolute auction sale. Many times when I discuss absolute auctions with my clients, they cannot believe how candid I am when they ask, “can we have a minimum bid and advertise an Absolute Auction?” I always say the same thing… NO! An absolute auction has no minimum price, the property will be sold to the highest bidder regardless of price with no reserve.

Please don’t get me wrong, I love absolute real estate auction sales as long as the property and the seller qualify for the program. The seller must have the desire (and ability) to sell the property regardless of the price. This does not mean the property will sell for a fraction of its value. As a matter of fact, an absolute auction will more than likely bring more money than if it was sold with a reserve price attached to it. Absolute auctions generally sell 10+% higher than other types of sales because they are attended by many more bidders than if the property had a reserve. Generally if you are interested in the property offered for absolute auction you will attend the sale. After all if it is truly an absolute sale all the buyers/bidders know the property will change hands that day, the property is going to sell, and they want the opportunity to buy it at their price on that day.

Getting back to a remedy for my brother auction companies, it is simple: Stop doing the easy stuff and call the sale what it is. Instead of “ABSOLUTE AUCTION OF BEAUTIFUL ESTATE HOME to the highest bidder over $478,000″ , just say Beautiful Estate Home to be sold to the highest bidder over $478,000. PLEASE stop misusing Absolute, as I have worked and continue to work very hard to have it mean something.

Here are what a few well-known sources of reliable information have to say about the topic:

Absolute Auction: an auction where the property is to be sold to the highest bidder, with no required minimum amount. The seller is not allowed to bid personally, or through an agent. This is also called a no-reserve auction. Source: Websters.com

Absolute Auction: an Auction in which the property is sold to the highest bidder regardless of the amount of the winning bid. Source: Answer.com

Absolute Auction: type of auction where the highest bidder acquires the item being auctioned (irrespective of the bid amount) and where the item does not have a reserve price below which it will not be sold. Source: BusinessDictionary.com

Absolute Auction: an auction 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. That means there may not be any limiting conditions such as a minimum bid or hidden reserve price. The auctioneer may not bid for himself at an absolute auction, it is unethical and illegal. Source: NAA, National Auctioneers Association

Will the practice stop? Probably not until more of us speak up about it.

Paul Sobwick
Auctioneer, CAI, AARE, CES
Direct Line - (410) 707-6361