Real Estate Auctions Offer a Faster Sale, Often at a Higher Price

Author: Beth Bresnahan
Publishing date: 01/31/06
 

RISMEDIA, Feb. 1 — (KRT) — Want to sell a piece a Real Estate for the most money you can? Or maybe you're a buyer who likes to sniff out good deals. Welcome to the world of Real Estate Auctions.

It is a popular trend in other parts of the country where high-end resorts, farms, and undeveloped land attract bidders on a big scale. But Maine's Real Estate buyers and sellers have, until recently, relied on traditional broker relationships. Real Estate Auctions were equated with bank foreclosures and distressed properties.

"I am trying to educate people that Auctions of Real Estate are good things," said Real Estate Auctioneer Thomas Madson who works with Cyr Auction Co. in Gray.

"With an Auction, you get a higher price -- fair market value or better," said Farmington Real Estate Broker and Auctioneer Adrian Harris, owner of Harris Real Estate, Appraisal and Auction Service on Wilton Road.

"These are very successful because it means a quick close and the only ones who participate are the serious bidders," he said.

His wife, Debra, said many sellers prefer the Auction method. "It eliminates having to constantly having to show your property. There are two open houses and a showing on the day of the Auction and that's all. People like that."

Auctions appeal to people frustrated with properties that have not sold, someone relocating who needs a new home fast, an heir who inherited a house, but doesn't want the hassle of maintaining it, or a developer who wants a buy-fix-and-sell.

Adrian Harris has been doing residential, equipment, wood lot and stumpage, or standing timber Auctions across Maine and New England for several years and says the Real Estate side of his business is booming.

"We are booked every weekend through April and last October and November, we had no free time," he said.

Real Estate was one of the most active Live-Auction categories across the country, according to the National Auctioneers Association.

Residential Real Estate Auction sales in the country showed an increase of 8.4 percent over last year, up to $51.2 million. Land and agricultural Real Estate Auction sales grew 7 percent and Commercial Real Estate Auction sales increased by 4.9 percent.

Cyr Auction has been in the Auction business for 30 years but entered the Real Estate Market recently, Madson said. The company has been successfully auctioning contents of homes, but was getting inquiries about selling the Real Estate as well.

He recalled one elderly client who needed to sell 34 acres and an 18th century house that needed repairs in Phippsburg. The property was assessed at $122,000, but the client needed $300,000. When the dust settled at the auction block, the property had sold for $610,000, and the deal closed in 30 days.

"Does it work? You bet it does. But you have to get people involved in the process. Then they bid a little more," he said. "The advantage to everyone is the quick turnover." Auctioneers Maureen Boyd of Eliot, president of the Maine Auctioneers Association, and her husband John, also have seen how successful Real Estate Auctions have become.

"The sellers in the Auction have the power rather than the buyer. They set the date for the Auction and the closing, they set the price and the property is sold as-is. The owner is the power-broker in the sale," John Boyd said.

Scott Dillon of Anson is a buyer who has purchased several wood lots at Harris Auctions. He likes the quick resolution of the deal.

"I like it because you know where you stand. I do the required due diligence beforehand and I decide what I can pay," he said. "But then sometimes there is a bidding war and you end up paying more than you expected." Behind the scenes of a Real Estate Auction is a complex, time-consuming marketing and research process that can cost thousands of dollars, a cost reimbursed through the commission.

"No two properties are alike. You have to research it, decide how and where to market it, and what people would be interested, whether it is a homeowner, a farmer, a developer, or for recreation," Harris said.

The broker provides potential bidders with a prospectus that includes a copy of the deed, if the sale is a bank foreclosure, a property description, lead-based paint disclosure, tax information, utility bills, maps, and terms of the sale. Also included is required information from the Maine Real Estate Commission's consumer guide.

The property is usually researched by a broker and an attorney to determine the kind of title the property has and if there is a lien or any back taxes owed, Harris said.

Auctions require a cash deposit with the registration that will be credited towards the selling price for the top bidder at the time of closing. The deposits are returned to the non-winning bidders on the day of the sale, and closings are usually within 30 days of the Auction.

Financing has to be in place before the day of the Auction.

Buyers can check out the property at one or two open houses, and on the day of the event that the Auctioneer/Broker staffs. Whatever is known about the land and the building has to be disclosed but a full title search and building inspection is the buyer's responsibility after the sale.

The Auction is usually held on-site with the reading of the terms and conditions of the sale and then the bidding begins at the publicized starting price. Only the Auctioneer and seller know the "reserve" bid -- the minimum amount of money the seller will accept.

"Once you meet the reserve, you know you have it. Then it's a lot of fun. It really gets your adrenalin pumping," Harris said.

The winning bidder puts down a deposit that could be as much as $25,000 and signs a purchase and sales agreement.

Harris, a former dairy farmer from New Sharon with a down-home style, has built up his Auction business over the years through word-of-mouth references and a reputation for honesty and results.

"You have to be open to new ideas in any business. You have to adapt," he said. "And the key to this business is keeping a positive attitude.

You have to be a people person, and I always love a challenge."

Copyright © 2006, Kennebec Journal, Augusta, Maine
Distributed by Knight Ridder/Tribune Business News.