Question: What type of property owners should consider using the auction method?Answer: Private and Corporate Property Owners, Living Trust and Decedents Estates, Federal and State Courts, Municipalities, School Boards, Prominent Families, Financial Institutions, Fiduciaries, Trustees, and Partnership Dissolutions.
Question: Is the auction method ever used as a first selling method?Answer: Yes - for quality properties that have never been on the market and many that are clear of mortgage.
Question: What situations warrant using the auction marketing method?Answer: When the clients objectives are to sell the property in the shortest possible time frame, at the highest possible price, under terms and conditions favorable to the seller.
Question: Should an attorney rely on two independent appraisals based on current market value, even when they are within 5% to 10% of one another?Answer: Appraisals, most times, are based on market comparables and the appraisers knowledge of the market. However, anyone can misjudge the value of a property, particularly in an escalating market. Since all real estate is unique, comparables can be misleading. Example: An attorney representing a decedent's estate had received two current value market appraisals for a property. One for $800,000, another for $850,000, and was receiving strong inquiries from potential buyers. The attorney thought it prudent to hire a professional auction firm. The result was astonishing - $2.3 million.
Question: Are the courts receptive to the auction method for the sale of decedents' real estate?Answer: The court system embraces the auction method as a proven way to insure fair market value in an arm's length transaction.
Question: Should an attorney advertise and conduct the auction?Answer: This is best answered by the following example. Example: On behalf of the Trustee, an attorney advertised and conducted his own auction hopeful of selling the property for $1 million, unfortunately without any success. He later engaged a professional auctioneer to promote and conduct the auction, which produced $2.4 million for the same property.
Question: Do attorneys have sufficient knowledge about the benefits their seller client receives from an auction conducted by a professional auction firm?Answer: The auction method should be considered no matter how difficult a possible sale may seem. A real estate auction professional will determine if the property and seller fit the profile of an auction candidate. Example: an attorney representing a school board was highly skeptical of the auctions ability to find satisfactory buying power for four school properties. Following the successful auction, the attorney publicly acknowledges that he now believes strongly in the auction method.
Question: Should land that is prime for a builder's tract be sold at auction, without subdivision contingencies, as opposed to selling it privately to a builder, subject to the normal one to two year land subdivision process?Answer: Yes. It should be seriously considered. Example: A sitting judge concerned about the liquidation of his former client's estate advised fiduciaries of the estate that he preferred that the decedent's important land property be sold by auction. His judgment proved correct, for the property sold for all cash, no conditions, for a price that was 50% higher than the estate's current market appraised value and to an out-of-state builder. In hindsight, had the property been sold using the conventional method with builders' contingencies, it would have taken seven years for the property to go to settlement and a substantial economic loss to the estate.
Question: Will builders buy a major land holding without conditions? Question: Will builders buy a major land holding without conditions?Answer: Most definitely. Particularly if it's a high quality property for future development.
Question: Can a bankruptcy auction be absolute and do the creditors usually end up as the high bidder?Answer: Today most bankruptcy real estate auctions are absolute, allowing for the creditors to credit bid. The purpose of having a professional auction firm perform a high profile marketing and promotion campaign is to develop a third party who will pay more than the credit bidder.
Question: When an absolute auction is conducted due to a partnership dissolution, may one of the partners legitimately bid at the auction?Answer: Yes. A partner may individually bid providing there is an even playing field.
Question: Is it possible for income producing property to bring a price higher than the normal rate of return based on the current income?Answer: Yes. Buyers analyze the return on investment differently and each will assign a different value. There are also certain kinds of investment properties that will sell best if they are offered in smaller parcels, as opposed to trying to find a single buyer for the entirety. Only the auction method allows for properties to be offered separately in order to create a broader base of buying power and usually a higher selling price, all in one day.
Question: Which is more effective: open public auction bidding or sealed bid auction?Answer: Although both methods are effective, most real estate sold by the auction method is sold via the open public bidding forum. The open forum allows the bidding to become more competitive and it provides an element of theater and emotions. While sealed bid auction method is used for a variety of transactions, it is sometimes replaced by the more effective open public auction.
Question: Should fiduciaries charged with protecting the public interest consider using the high profile public auction to sell real estate and personal property?Answer: Yes. The auction marketing process, when conducted by an experienced firm, is a proven method for greatly reducing the possibility that the attorney will be criticized for either under-exposing the property to the market or agreeing to a selling price that is less than fair market value. Example: A district attorney has found that using a professional auction firm is the best way to sell confiscated small and large real estate. The process generates positive news coverage giving the properties additional positive marketing exposure. Example: A state bar association used the auction method to sell one of its office buildings. The board of directors was most appreciative of the market insight the professional auctioneer provided and results achieved.
Question: Can properties with serious environmental problems be sold at auction?Answer: Yes. The auction method does not in anyway lessen the responsibility of the seller to disclose environmental problems related to the property.
Question: What if an attorney's client reacts negatively toward the suggestion to consider the auction method?
Answer: If the client owned an important painting or sculpture they would probably engage Sotheby's or Christie's Auction Houses in order to achieve the highest selling price. Experienced sellers of real estate have used the auction process for generations for the same reason.
Question: What are the costs associated with selling real estate by the auction marketing method?
Answer: The costs of having a real estate auction are the direct expenses of advertising and promotion, and the commission charged compares to the standard brokerage commission.