Motivation + performance = price: Auctioneers agree the time is right in this market

Market fluctuations influence all of the relevant stakeholders in a real estate transaction to one degree or another. So why are real estate auctions proliferating now? Will the 'trend' have staying power? Is it right for me, and my client? Auctioneers would agree that the time has always been right, and especially now when a market is in transition. Successful real estate transactions consistently include: a motivated Seller, a ready, able and willing Buyer, and an agreed price. Rather simple, isn't it? Why then, are there so many properties on the market? Rather than go into the economic contributors, let us assume that just one of the key components mentioned is not aligned with current market conditions. No sale. Either the motivation was not there, creative financing was not available, or the price point was not aligned with the active market. An auction can address each of these dilemmas with ease and efficiency. Motivation All sellers want to sell their realty asset; At least, that is what they set out to do. No, you say? Some are on a fishing expedition? Carefully questioning the Seller prior to taking the listing can eliminate these costly clients from your rolodex. Auctioneers are inundated with "motivated' sellers. An experienced auction Team will review the seller's ability to sell - equity ratio, title issues and their reason for disposition before taking on the client. Commercial clients are often the beneficiaries of the tax code whereby the asset has been depreciated and today's market values may actually result in a recapture of the write-off. 1031-exchange procedures may afford the client a welcomed opportunity to acquire a desirable asset while deferring the ultimate tax consequences of the selling transaction. Residential sellers are beset with rate-adjusted mortgages, extended credit lines or similar economic 'motivators. Those issues comprise a majority of calls these days. Opportunities still abound. Long-term property owners have plenty of equity and small or no debt on their homes. They are committed to a super-motivational event - retirement, relocation or aging which necessitates new living arrangements. These individuals are selling regardless of the market prices and are seeking the best competitive offer they can obtain. Auctions are a fantastic tool for them to employ given the "no-contingencies" process typically utilized by an auction firm. Buyer Ability to Perform The auction "terms," which are available well in advance of the auction, inform all prospects about the auction process and the steps required to make a purchase. Pre-auction diligence periods can range from a few days to several weeks before bids are called. During this time, buyers are becoming aware of market values of comparable assets and beginning to formulate their purchase ability. The 'terms' normally specify the down payment amounts required at the auction and establish the amount and timetable for a second down payment which is increasingly becoming a common practice. (This second down payment is usually due within 24-48 hours of the auction, and most often by the close of the next business day). Credit cards are being used more frequently by prospective purchasers to fund the initial down payment requirement since the alternative is almost always guaranteed funds or cash. The closing timetable is included in the "terms" and can range from several days to a more common 45 or 60-days. Time is of the essence is also a common denominator in auction-based transactions. The good news for Buyers utilizing conventional financing, while not an allowable contingency, is that lending institutions respect the contract terms and often process their side of the transaction speedily. Price Market driven and determined by the interested bidders. What better way is there to establish value than by having several, or many, interested buyers give their opinion of worth? This is the Free Enterprise System in action! While most people accept the auction of stocks, race horses and master's artwork as the 'norm', they are unfamiliar with the notion of applying this concept to real estate. Auctioneers witness the meeting-of-the-minds in real-time speed. The fairness of valuing an asset by an assortment of ready, willing informed buyers is very effective. While there is only one winner of the final bid position, the other participants are satisfied that they had a say in the construction of the price. That high value may have been more than they were willing or able to pay, but no other buyer was able to purchase that particular asset for that or a lower amount than they were willing to pay. Combining these key ingredients of a successful real estate transaction by auction establishes price with fairness for all. Why are auctions in demand? The stakeholders in real estate transactions are driving the change. Just like the fluctuation of oil prices or electricity rates, consumers expect to have a say in what they pay; some even demand it. Those are the people for whom an auction is the perfect solution. Absolute Auctions & Realty are licensed real estate brokers in New York, New Jersey and Connecticut, with associates in all 50 states. We auction residential and commercial owner-initiated properties, as well as tax foreclosure properties. Though onsite auctions are certainly an option, most owner-initiated auctions are held at our full-service Absolute Auction Center in Pleasant Valley. The foreclosure properties are generally auctioned on behalf of New York State Counties, and are sold via NYSAuctions, a joint venture between Absolute Auctions and Haroff Auction & Realty. Frank Pietrzak is a real estate coordinator at Absolute Auctions & Realty, Inc., Pleasant Valley, N.Y.