Some agents believe that instead of including a property in a real estate auction, the Seller should just reduce the list price. This is conventional real estate agent thinking because auctions did not used to be an option for an agent. Now that auctions are becoming known not only as an option but a powertool, and the agent is fully compensated, there are many reasons why an auction can be better than simply reducing the price.
Consider the needs of the Seller. If your Seller must sell their home in the next 60 days, you need to offer them the most aggressive marketing program available. Remember, you work for the Seller. If your Seller is willing to sell for less because they have to sell, you have a responsibility to meet their needs. If you are not willing to meet their needs, another agent will.
What happens if you reduce the list price and the property still does not sell? Your Seller is now in a position where they really needed to sell and you advised them to not auction. You have discounted the property even further making it more difficult to include the property in an auction. At least if the property was included in an auction and it did not sell for some reason, you can confidently say, "you tried everything possible." When the property is included in an auction, you might get a much greater price reduction than you would with a traditional price reduction. The lower the price, the greater the chance the property will sell. And at least your Sellers would have the option of accepting a solid offer with no contingencies and quick close.
With an auction, the property is reintroduced to the market. The amount of activity generated from buyers will increase. Why? Because an auction is new and different, it generates more interest than a conventional sale.
Having two marketing teams working to sell the property also dramatically increases the chances the property will sell. If you reduce the price and the property still does no sell, the Seller still has a problem -- they own the house. When they do decide to include the property in an auction, it means that their minimum bid has to be even lower than it would have been had they included the property in the auction prior to the price reduction. Discounting a property over a long period of time can do more harm than good.
If the property has been on the market for a year, what good is "another" price reduction going to do for you? All you are doing is more of the same and expecting a different result. When you are losing the ball game, change your strategy.
Keeping listings for an extended period of time costs you money. It is in your interest to sell as many properties as quickly as possible. Your time is valuable. If you are going to be successful and meet the needs of every Seller, you have to be ready to participate in creative and aggressive marketing programs.
If you drop the price too much, buyers and agents are going to wonder what is wrong with the home. They will ask, "Why is the price so low?" With an auction, the Seller has a reason why they are going low on the price and all participating buyers already know the reason -- they need an aggressive minimum bid for the auction.
AuctionFirst specializes in real estate auctions and works with listing and buyer agents as well as directly with property owners.
