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AUCTION SALES
Why Sell at Auction? Auction Events vs.
Traditional Sales
Everyone Wins! Auction Marketing Process FAQ's


WHY SHOULD I CHOOSE TO AUCTION MY PROPERTY??

COMPETITIVE MARKETPLACE

The auction method of marketing creates a form of competition that cannot be duplicated. Each bid reinforces the market value of the property. This affirmation of value encourages other participants to continue bidding. Within all of us is a tremendous need to win. In a traditional real estate sale the buyer satisfies this need by negotiating the seller down. In an auction the buyer can only win if he outbids all other bidders.

The auction brings all interested parties into one place at the same time for a single purpose - to determine who will pay the most for the property. All interested parties are "forced" to make a decision. Getting an interested person to act is the most difficult thing for a conventional broker to do.

HIGH EXPOSURE TO PROSPECTS

Auctions incorporate multi-colored brochures, detailed web sites, brightly colored signs, and unique public relations techniques to create a marketing package that normal brokerage can not rival. The intensity of these marketing packages can quickly saturate the market of targeted prospects.

SELLER CONTROL

Traditional brokerage allows the buyer to control the terms of the sale, including closing date, amount of deposit, inspections, etc. However, the auction method places this control in the seller's hand, eliminating most contingencies which would cause renegotiating or slowing down the sale in the conventional method.

The style and terms of the auction are established by the seller. All buyers are bidding based on a common set of terms and conditions. The seller stays in the driver's seat throughout the process. There are four basic types of auctions:

  1. Absolute Auction - The property will sell to the highest bidder regardless of price. This will bring the most buyers to the sale due to them knowing that they will not be wasting their time at an auction where the property may not sell. In drawing a bigger crowd, the excitement level will be raised and the bidding will be much more intense which will guarantee that the property will sell for top dollar on auction day.
  2. Reserve Auction - Allows the seller to either accept or reject the highest, final bid. While this may generate less enthusiasm, it does allow protection to the seller.
  3. Minimum Bid Auction - The seller agrees to sell to the highest bidder after a pre-set minimum price is reached. Minimum bid auctions work well when the pre-set minimum is set below fair market value.
  4. Sealed Bid Auction - Bidders have a deadline and all bids must be submitted prior to that deadline. Not typically used, but can be effective in certain circumstances.

HIGHER NET SALES PRICE

When listing a property with a traditional broker, the listing price is listed for more than the owner expects to receive. This generates counteroffers from buyers that are well below the listed price, to drive the price down. The result can be a negotiation process which lasts for a long period of time or an immediate sale because the listing price was below market value. Auctions benefit from numerous bidders competing against each other for the property many times, driving the price up over market value.

SELL WITHOUT PAYING A COMMISSION

The buyers pay a Buyer's Premium for the privilege of buying at auction. The Buyer's Premium will be added to the high bid and the gross selling price shall be calculated by adding the Buyer's Premium to the high bid price. Many sellers prefer this option rather than pay a seller's commission.

ELIMINATE CARRYING COST

The carrying costs of the property are eliminated upon selling the property at auction. The auction will eliminate expenditures such as the property's mortgage, property taxes and insurance, and maintenance. These can be extremely expensive on larger properties.

MISSED OPPORTUNITIES

There is a cost of lost opportunities associated with holding idle real estate. Consider what investments might be lost while your equity is tied up in unproductive properties.

TIME VALUE OF MONEY

The principle of time value of money suggests that a dollar received today is worth more than the same dollar to be received at a later date. The traditional method of private treaty sales has little ability to capitalize on this principle. While real estate may never be as liquid as stocks or securities, the auction method increases your liquidity significantly.

An auction's accelerated marketing and closing dates allow the seller to get paid quicker. Now that you have your money sooner, rather than later, it can be reinvested to start earning dividends on that money!

QUALIFIED BUYERS

Auctions virtually eliminate the non-serious prospects with their 'low-ball' offers. A non-refundable deposit (up to 10% of the sales price) is due from the buyer at the auction. This deposit reassures sellers that the buyer is serious and has the ability to secure financing quickly.

PROMOTION

This is one of the strongest advantages of our auction method - the promotion of your property. With any product that is sold in the free enterprise system regardless of the value of that product, there is a certain amount of the price of that product which must be attributed to advertising costs. It is inconceivable to believe that anyone would attempt to sell a product such as a house or other real estate without properly advertising it. However, real estate agents find it difficult to do a proper job of advertising simply because the funds are not available. No one knows when or if the property will sell; therefore, it is difficult to risk a large expenditure on advertising. With an auction, we can effectively determine when the property will sell; therefore, the owner can afford to attribute a certain amount of that sales price to advertising. By using signs, print media, electronic media, the internet and a direct mail campaign we can perform a media blitz that will reach all the prospective buyers.

We can expose your property to more people in 30 days time than you would otherwise see in two years!

EXCITEMENT

Excitement and motivation are used to the fullest with a public auction. Our professionally trained staff applies continuous motivational pressure to the buyers to gain every dollar possible. This sense of excitement works to create the psychology of impending sale, which is so critical to the success of your auction.

URGENCY CREATED

Prospects can no longer drag their feet on negotiating price, due diligence, or securing financing. With the property set to sell at a specific time on a specific date, buyers know that they must act decisively or otherwise lose the property. This urgency creates momentum which can cause buyers to bid above their original self-imposed price limitations.

FROZEN MARKET

During the time prior to auction in which a prospect learns of the auction (approximately 30-45 days), most potential bidders will wait until the auction before putting any similar properties under contract. This basically 'freezes' the market of similar properties because a buyer is reluctant to buy another property and miss out on a 'good deal' at the auction.

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AUCTION EVENTS vs. TRADITIONAL SALES
Auction Event Traditional Sale
Focus is on your property alone. Property of many being advertised and shown by broker. No concentration on your property alone
Results in offers in 60-90 days or less. May remain on market for months or years.
Extensive advertising featuring your property exclusively. Minimal advertising; heavy reliance on Multiple Listing Service.
Buyers act on your schedule. Little motivation for buyers; you wait for them.
Auction provides catalyst to promote buyer interest. Price reduction encouraged to create buyer interest in activity.
Realizes the property's true market value. No limit on upside potential. Upside potential limited by asking price.
Eliminates guesswork in determining the asking price of the property. Seller risks overpricing, and thus seeing little interest, or under pricing and selling for less than the property is worth.
All conditions of sale set in advance, thus eliminating negotiations. Seller must negotiate all aspects of sale.
Property sold without contingencies. Contingencies are common.
All offers are presented to the seller before and during the auction. Few offers are received, multiple offers at one time are rare.
Reduction / elimination of carrying costs (mortgage, taxes, insurance, maintenance, etc.) due to a timely disposition. Carrying costs can be incurred for months and even years which eat away at the bottom line number the seller will net at the time of sale.

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At The Lyons Group Auctions EVERYONE WINS!!
Benefits to the
SELLER:
Benefits to the
BUYER:
Buyers come prepared to buy

Smart investments are made as properties are usually purchased at fair market value through competitive bidding

Quick disposal reduces long-term carrying costs, including taxes & maintenance

The buyer knows the seller is committed to sell

Assurance that property will be sold at true market value

In multi-property auctions the buyer sees many offerings in the same place at the same time

Exposes the property to a large number of pre-qualified prospects

Buyers determine the purchase price

Accelerates the sale

Auctions eliminate long negotiation periods

Creates competition among buyers - auction price can exceed the price of a negotiated sale

Auctions reduce time to purchase property

Requires potential buyers to pre-qualify for financing

Purchasing and closing dates are known

Ensures an aggressive marketing program that increases interest and visibility

Buyers know they are competing fairly and on the same terms as all other buyers

The seller knows exactly when the property will sell

Buyers receive detailed and comprehensive information about a property via a Property Information Package (PIP)

Eliminates numerous and unscheduled showings

Allows YOU, the buyer, the ability to set YOUR price

Takes the seller out of the negotiation process

 

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AUCTION MARKETING PROCESS

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FAQ's

You're only going to pay one bid more than someone else was willing to pay.

What is a Real Estate Auction?

A real estate auction is an innovative and effective method of selling real estate. It is an intense, accelerated real estate marketing process that involves the public sale of any property -- most certainly including those that are nondistressed -- through competitive bidding.

How will auction benefit me?

The real estate auction is a win-win proposition for everyone involved. (See 'EVERYONE WINS' Link)

What does the term "RESERVE" mean?

Under a reserve auction the auctioneers will submit the highest and best bid to the seller. The seller has the right to accept the offer as is, reject the bid if it is unreasonably low, or negotiate with the high bidder to reach an acceptable selling price. The reserve price is not usually communicated to the public. If the property is not labeled as absolute, it will be sold on a reserve basis. The phrase 'subject to seller confirmation' is commonly used for this type of sale.

What does the term "ABSOLUTE" mean?

In an absolute auction, the property will be sold to the last and highest bidder regardless of price.

This is my first auction and I'm not sure how to bid?

Step 1: Register to bid by filling out a bidder card at the registration table. By registering to bid, the buyer acknowledges that they have reviewed and understand the Terms & Conditions of Sale and the Auction Real Estate Sales Contract. The bidder also acknowledges that immediately following the auction, they are prepared to execute the Auction Real Estate Sales Contract and pay the appropriate deposit at that time in a form that has previously been deemed acceptable to the Auction Company.

Step 2: Determine how much you are willing to pay for a piece of property. Since your needs and desires are unique, your evaluation of the property will be different from anyone else's.

Step 3: As the auctioneer progresses in his call for bids, simply raise your hand when you want to bid. If you're not sure if you're in or out, raise your hand again and the auctioneer will keep you in. He will not let you bid against yourself. The auction will be conducted under the total control of the auctioneer.

Step 4: If you have any questions, motion for one of The Lyons Group Auction Team members. These associates are here to help you understand the process completely.

And remember, You're only going to pay one bid more than someone else was willing to pay.

Do I need to qualify to buy before attending an auction?

No. We normally do not require any pre-qualification to bid; however, if you intend to obtain bank financing, the bank will require you to qualify for their loan. The deposit you make on auction day is not contingent upon financing.

What is a buyer's premium?

A buyer's premium is a percentage that is added to the bid price to determine the total purchase price. In most auctions there will be a 10% buyer's premium added to the successful bid amount to create the total purchase price.

How much money do I need at the auction?

The Earnest Money (pursuant to the Auction Real Estate Sales Contract) is normally 10% of the purchase price; will be non-refundable (except as otherwise provided in the Auction Real Estate Sales Contract); and due on the date of auction in the form of a personal or business check. The balance of the contract purchase price shall be due at closing.

Can I make the contract contingent upon financing or inspections?

No, the auction contract is contingency-free. For this reason, it is very important that you finish your property evaluation and arrange any needed financing before the auction.

If somebody didn't make an offer on a property when it was offered through an ordinary listing, why would he or she bid at auction?

The most common reason is that they never knew about the property before. The compressed time period for promoting an auction allows us to bring the property to the attention of far more people than would be possible in an open-ended campaign. Another common reason is that the property may have had an unrealistically high asking price. When an asking price is out of line with the true market value of a property, many buyers feel that there is no point in making a lower offer. With an auction, there is no asking price, so we don't have that problem.

What if I'm a Real Estate Broker?

We offer a Broker Participation Commission to any licensed Real Estate Broker who properly registers a client. Registration forms must be completed at least 48 hours prior to the scheduled auction by calling 888-420-0011 to request a Broker Participation Form. The amount of the commission shared varies by auction.

Explain the process of "high bidder's choice".

At some auctions we use a method of selling called "High Bidder's Choice". It is a simple process that is much harder to explain than it is to understand. When you go into a sandwich shop you go through a two step process. First, you choose what bread you want (how much you are willing to pay). Second, you choose what meat you want (which parcel).

High bidder's choice works the same way. First, there is a round of bidding to determine the price of the parcel. Second, as the successful bidder, you have your choice of which parcel(s). You may choose one parcel or as many parcels as you like.

Ex. Assume there is a piece of property that is 50 acres in total. There are five parcels, each of which has 10 acres. The property will be sold "dollars per acre", "high bidder's choice".

The bidding commences and you are the high bidder at $5,000 per acre. Since you are the first high bidder, you have your choice of any parcel. Let's say you choose parcels #2 & #3.

Those parcels are marked off and a new round of bidding commences. The next high bidder will have their choice of any parcel except #2 & #3. The process continues until all parcels are sold. Then the "regroup process" begins.

Again, not all auctions are sold by the method of "high bidder's choice". Check with a member of The Lyons Group Auction Team regarding any particular sale.

You're only going to pay one bid more than someone else was willing to pay.

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