Last Saturday, thirty sellers participated in a real estate auction in the Park City area. Sellers had to pay up to $5,000 as a marketing fee to the auction company and the buyer of each property had to pay a 2% “auction premium”, which is essentially the auction company’s commission. Both listing and buyer’s agents commissions were consistent whatever was in the listing agreement. The cash deposit was used by the auction company to pay for internet and local/national print advertising.
The auction took place in a large conference room at a nice hotel. Appetizers, punch, lemonade and water were served and a cash bar was available. There were about 100 people in the room when the auction began. More than half were local realtors who accompanied or represented clients or were there as observers. About 30% of the people in the room were sellers. Another 15% were employees of the auction company or title officers who were on hand to close transactions. Only about 5% of the attendees were buyers.
More than half of the homes had bids and “sold”. Most of those bids were received prior to the auction and were either at or below the minimum bid. Almost all the bids were the sole bid for the property. Only 4 of the homes were offered as “Absolute”. The rest of the offerings allowed the seller 5 days to consider the offer and that’s why I put quotes around the word “sold”. The bids were so low that I wonder if the sellers will try to negotiate them up or try again with the traditional system.
In my opinion, if the properties in the auction were posted on the MLS at the minimum bid price, they would have had a good chance of selling without the buyer and seller having to pay the extra fees. In addition, each listing agent had to sit open houses for a minimum of two weeks before the auction to give potential buyers an opportunty to view the listing.
At the end of the day, I sat two 3-hour open houses, coached my clients on the auction process, attended the auction, and we are back where we started. The only “benefit” is that my sellers have a sober view of the resort real estate market and may be willing to be more creative in their quest to sell their property.
Would I recommend my clients participate in this type of auction again? I doubt it.