Advice for Homeowners Seeking to Auction Their Luxury Estate from Industry Leader Grand Estates Auction Company
According to a recent article in Realty Today, real estate auctions have not only been a saving grace for private luxury homeowners through the recent recession, but have become a substantial segment of the residential real estate industry, growing “exponentially” to represent billions of dollars in home sales. Not a new concept, luxury property auctions have been popular worldwide. Celebrities and the very wealthy in the United States have been using auctions for decades. Luxury property owners who are seeking expediency and transparency in selling and buying a home are choosing auction more frequently. Most luxury real estate auction companies are reputable, however there are some that may mislead clients. Here are several things Grand Estates Auction Company CEO Val DeVine suggests you keep in mind when choosing a luxury property auction house.
Verify Personal Experience of Your Auction Representative
Of course you research the success rates of the auction houses, but you should also verify the personal experience of the staff participating in your auction. As the industry is growing, some companies are trying to accommodate that growth by hiring local real estate agents who may not have any auction experience. This is a huge mistake as the auction process utilizes an intensive marketing initiative in a concentrated period of time to generate excitement and interest. Auction professionals are not sales people who have the luxury of months or years to sell a property; they are closers who have a contract in 30 days. The same Realty Today article states “There are very few people who are appropriately trained and specialized in the field, which still has an imbalanced realtor-to-auctioneer ratio.” Grand Estates Auction Company never hires local people to sell your house. “We will work in conjunction with your broker, however, we bring in our experienced salespeople who are road warriors and manage luxury real estate auctions week in and week out,” stated Val DeVine CEO of Grand Estates Auction Company. “They know auctions, they know how to market the properties, and every one of them has been doing it for years.” Bottom line: personal experience of your representative matters.
Beware of Professional Squatters
One national auction company has a practice of having their staff reside in your home for up to a month. Finding that the person who is living for perhaps a month in your house and is new to the auction industry is not exactly a surefire way to ascertain the highest price for your home. Temporary hires are often times people who are not in the best financial situation, unlike a professional auction representative who would never ask to reside in your home. If there is subtext to this rule in your contract, start by not letting auction personnel live in your house for even a week, much less a month. We saw a Hawaii auction where a representative of a national auction company lived in the client’s house for three months while they repeatedly rescheduled the auction due to lack of bidders. Meanwhile, Grand Estates Auction Company was representing a neighboring home and came to town on a Thursday, held five days of previews, sold the neighboring house for a record breaking price, and left the following Tuesday night. The auction company squatter across the street was still there a month after Grand Estates Auction Company had already closed the sale. Protect yourself by defining a short timeframe for the preview in your contract.
Guard Against Bait and Switch Tactics
Have it clearly defined in your contract whether or not your auction is a reserve auction or an absolute (no reserve, no minimum) auction. There are benefits to both types of auction, and a professional should educate you prior to a contract being drawn. But once a decision is made, your contract should define the terms and should be clear enough that anyone reading it should understand it – when in doubt, handwrite in your own understandings of the terms as clearly as you can. Unfortunately, past clients of other auction companies have informed us that, not understanding the terminology and relying on the explanations of the auction company representatives, they contractually agreed to an absolute auction when they believed they were agreeing to a reserve auction. Upon discovering the discrepancy they tried to withdraw from the auction. However, they had forfeited their right to withdraw by contractually giving sole and exclusive power to the auction company to make final decisions regarding the auction withdrawal process. Ultimately, some of these properties were sold at absolute auction against the owners’ wishes, because the auction company was the only one who had the right to withdraw the property. In essence, the owners had forfeited all of their rights, and may as well have handed over the deed to the property. Do not let this happen to you and your home! As a homeowner you should always have the final say in how, when, and even if your home is auctioned. Always read the fine print and never sign a contract you do not fully understand.
Know What You Are Getting For Your Money
Nothing in life is free, although there are many different ways to assess marketing and advertising fees. The simplest and most direct method is to know exactly what the commissions and marketing fees for your auction will be and have a detailed outline of what services and advertising are provided for those fees. A good marketing plan breaks down the cost of every single line item and every single ad. One auction company charges an engagement fee, showing ads they have historically run, but there are no guarantees of what advertising you will receive. This is a definite buyer beware. Whether fees are paid directly or taken from the sales price, insist on seeing an advertising schedule, specifically detailing the marketing plan in place to sell your home. Always request copies of tear sheets of advertisements ran, as well as specific details verifying all marketing services conducted, to ensure you are getting what you paid for.
Know the Hidden Costs Of A Guaranteed Purchase Price
The latest scam running is an auction company guaranteeing to buy your property at an agreed price through their investors. At first this seems like a great deal – but here is why it is not. Let’s say you have a house valued at $8 million and were assured you would probably get your $10 million list price, but as a “worst case scenario” they will guarantee a minimum of $6 million. Realize this is not a net number. Out of the $6 million is deducted the auction company’s commission (typically 10% or $600,000), the listing agent’s commission (typically 3% or $180,000), and the selling broker commission (typically another 3% or $180,000), plus the marketing fees (averaging $75,000). Congratulations, you just sold your $8 million dollar house for $4,965,000! The investors now turn around and auction or relist the home with a much more intensive marketing campaign than was previously used and sell quickly at the $8 million it was worth. While you took a loss of $1,680,000 (the net difference in what you made selling at $6 million versus $8 million), the auction company, its brokers, and investors just profited $3,035,000. Who got the guaranteed good deal?
Industry leader Grand Estates Auction Company has a long-standing reputation of integrity in the luxury real estate auction arena, specializing in homes valued at $1.5 million and above. Over that time, the company has demonstrated a proven track record of successfully auctioning luxury real estate properties with more than 90% of homes sold on auction day, and the highest closing rate in the industry. Established in 1999, the company was the first of its kind.
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