How-to Monday: Selling at auction
Auction photo by Sun photographer Chiaki Kawajiri
If you’ve had a “For Sale” sign in front of your house for months, you want something to happen and you want it to happen yesterday.
William Z. Fox suggests an auction.
He would — he’s chairman and chief executive of Fox Residential Auctions LLC in Pikesville — but some homeowners heartily agree with his point of view. As sales and prices dropped nationwide last year, auctioneers’ revenue for home sales rose 5.3 percent to almost $17 billion, according to the National Auctioneers Association.
Sales revenue has declined since, but not to the extent that you see on multiple-listing services, the more common way that sellers and buyers find each other.
Sylvia Patterson can attest to that: Her Millers Island house was listed for nearly three years before she signed up for an auction with Fox this spring, not wanting the worry of a vacant property any longer.
“It was a burden and a responsibility,” says Patterson, who with husband Theodore moved into a Timonium retirement community in 2005. “So we thought, let’s try this — and it worked.”
The choice doesn’t necessarily pit real estate agents against auctioneers. Fox, who started his company in 2006 after years in the industry, has a partnership to auction off the homes of interested Long & Foster clients.
At a time when many prospective buyers have a “why rush” philosophy, “what auctions do is create a psychology of urgency,” he says. “You have an opportunity to buy the property at your price.”
But just as auctions aren’t for every buyer (you need money to put down on the spot and the stomach to purchase as-is), they’re not for every seller. Alex Cooper Auctioneers is turning down most of the people who call because they’re expecting unrealistically high prices for their homes, says Jon Levinson, a vice president with the company.
Expectations matter because many sellers opt for a “reserve” auction, in which they can reject the highest bid if they don’t like it. Only in an “absolute” auction does the highest bid win regardless of the seller’s feelings.
“People gotta come down to earth,” Levinson says. What matters “is not what it brought three years ago; it’s what it brings now.”
Most of the fees associated with the transaction — from commission to closing costs — are paid by the buyer, which also has to be factored into the price a seller can expect at auction.
For Patterson, the key benefit was speed. Just a little over a month after she signed up for auction, her Baltimore County house was sold and the deal had settled. People signed contracts back when the house was listed, but those deals were contingent on the buyer selling another house or getting financing, and something always went wrong.
She feels fortunate that the auction worked out.
“Recently, there were two other houses down there that went up for auction — and they didn’t sell,” Patterson says of her former neighborhood. “So you never know.”
Want to research local auction companies or see what's for sale? Here are some sites to get you started:
Chime in if you'd like to share other links or personal experiences.