We’ve spoken quite a bit recently about the restrictive and compromising nature of the traditional real estate auction revenue model. Auctioneers generate their revenue mainly through a brokerage fee referred to as a Buyer’s Premium. This fee, typically between 2 and 10 percent of the value of the property, is added to the final purchasing price that a buyer must pay to complete their purchase.
Let’s say you or your client, if you are a REALTOR®, are interested in California residential real estate auctions and you find an opportunity to bid on a $100,000 house (starting bid). If you end up winning the auction at $105,000, you would be required to pay up to $10,500 on top of the final winning bid price. That’s $10,500 dollars more than you intended to pay for the actual house, and that anyone would naturally prefer to put towards closing costs, renovations, or trips to Hawaii for the next couple of years.
Three issues emerge from this typical scenario that, for now, still occurs every day across America:
1. Buyer Capacity Is Compromised – Technically, what would have happened under the $105,000 home auction example, if you had lost the auction to another buyer, is that you could have had another $10,500 to put towards winning the property. But because you knew you had to pay a ‘Buyer’s Premium/Penalty’ on top of the final winning bid, you would have had to stop your bids at $105,000, as your total payment at that price level would have been $120,000 (price of the house plus $10,500 for the auctioneer)!
2. Home Value and Home Seller Are Compromised – What this example highlights is the loss the home seller incurs under current Buyer Premium auction models. Instead of capitalizing on an extra $10,500 that bidders could use towards the purchase of your home, that same money has to go to the auction house. This caps the actual property value at $105,000 instead of a possible $120,000 ($105,000 + another $10,500 that has to go towards the Buyer’s Premium fee).
3. Slower Selling Environment/Market – The higher the price, the fewer the pool of buyers who can afford to buy a specific property. As simple as that. With an extra $10,500 taken out of play to pay for the auctioneer’s fees, fewer buyers are available to participate in the auction. More buyers directly lends to a more active, faster moving market where sellers can exit and can go on to purchase their next home more quickly, and where overall market inventory can turn at a healthier pace.
An entirely free model where neither buyer nor seller pay any fees to buy or sell at auction is packed with benefits for everyone involved, and is a recipe for a more efficient market where everyone wins:
- More money available to buyers to put towards a property;
- Optimized property value and more money for the seller; and,
- A healthier, faster moving market.
We’re pleased to announce the release of a new consumer handbook on real estate auctions, ListedBy – Real Estate Auction Primer for Consumers.
One of the terminologies explained in the booklet, which will be available for download right here within this blog post next week, is Transparency.
Transparency is one of the key advantages of real estate auctions, specifically online real estate auctions. That’s when bidders can see each others’ bids at any time, and can look up each others’ information, such as account profiles. Much like on LinkedIn and other social networks.
This kind of transparency gives everyone a greater sense of trust and confidence in the process, equal chance, and optimizes a property’s market value. New platforms such as ListedBy.com allow everyone to view other’s bids and member profiles including any ratings, recommendations or comments.
The guide also emphasizes the importance for consumers to engage an experienced REALTOR® when considering selling or buying a home through auction.
Click to DOWNLOAD ListedBy – Real Estate Auction Primer for Consumers.
Meanwhile here is the full News Release capturing the content of the booklet:
ListedBy Releases Real Estate Auction Guide for Consumers
Downloadable handbook outlines and explains basic auction terminology, strategies and ‘must-know’ guidelines for home buyers and sellers
NAPA, Calif. – November 30, 2012 – ListedBy (www.ListedBy.com), the first free online real estate marketplace and social network with live bidding auction and ‘Best Offer’ functionality has released ListedBy – Real Estate Auction Primer for Consumers, a ‘must-know’ guide for anyone looking to buy or sell real estate through auction.
“As the auction market gains traction, important terminologies and factors are a must for both buyers and sellers,” said Stephan Piscano, CEO and Co-Founder, ListedBy. “ListedBy’s model changes the auction practice almost entirely and adds new dimensions even experienced real estate professionals can greatly benefit from.”
ListedBy – Real Estate Auction Primer for Consumers will be available for download, free of charge, in the Knowledge Centre on ListedBy Blog, starting December 4, 2012. Consumers considering auctioning their home or purchasing a property at auction can also tap expert advice on the ListedBy Member Forum.
ListedBy – Real Estate Auction Primer for Consumers
Basic Terminology and Strategies
1. Auction – The term auction is derived from the Latin ‘augeō’, which means ‘I increase’ or ‘I augment’. It is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder at a pre-set set auction expiry date and time.
2. English Auction – Is an auction where the price is driven up by buyers and where the highest bidder wins, at auction expiry.
3. Dutch Auction – A process where the starting price of an asset begins higher and scales down until the offer meets a bid.
4. Reserve Auction – A ‘Reserve Auction’ sets a minimum price below which the seller is not obliged to sell the property at the expiry of the auction. As a home seller, use this strategy to secure an absolute price below which you are not ready to sell, and to advise bidders that bids must go higher for an acceptable agreement to be reached.
5. No Reserve Auction – A ‘No Reserve’ auction, also known as an Absolute Auction, legally binds the seller to release the property to the highest bidder above the set starting bid price. This strategy is usually used to create early excitement around an attractive, lower but acceptable price. The approach can drive a bidding competition that can result in a final sale price higher than originally expected by the seller.
6. Buy It Now – By placing a bid under a Buy It Now price option set by the seller, the bidder instantly wins the auction and both seller and buyer are obligated to transact at the set price. Leverage Buy It Now to avoid entering into a competitive bidding scenario and to secure and close on the property quickly.
7. Buyer’s Premium – A traditional practice that new business models such as ListedBy.com are eliminating. Also referred to as a Buyer’s Penalty, or the fee that a winning bidder must pay over and above the price of the subject property. The premium is typically between two and ten percent of the asset value.
8. Open Outcry – Unlike sealed bid auctions, ‘open outcry’ auctions are ‘open’ or ‘fully transparent.’ The identity of all bidders is disclosed to each other during an open outcry.
9. Auction Expiry – An auction has a start date and time, and a close ‘expiry’ date and time after which new bids are no longer accepted. In cases where a last minute bid comes in just prior to the expiry, certain auctioneer rules may include a short extension, to give former bidders a chance to counter the late coming bid.
1. Fees and charges – New, advertising and service driven business models are doing away with all fees associated with buying or selling property at auction. As a seller, look for auctioning your property through a provider or platform that does not charge any fees or commissions. As a buyer, look for auction venues that do not charge any Buyer Premium or penalty.
2. Transparency – Sealed bids may have some advantages in certain cases. However, in buying or selling your home, it is important to first consider a fully transparent environment where everyone gets to see who is bidding and how much. Transparency gives everyone a greater sense of trust and confidence in the process, equal chance, and optimizes a property’s market value. New platforms such as ListedBy.com allow everyone to view each other’s bids and member profiles including any ratings, recommendations or comments.
3. Online Auctions – New, entirely Web-based auction platforms and service providers offer a simpler, quicker and more efficient avenue for buyers and sellers to engage in auction. An online avenue also does away with the added effort, inconvenience, resources and expenses needed to organize and run a physical, on-location auction.
4. Engage a REALTOR® – While buying and selling at auction online is relatively easy, look to engage an experienced representative who understands real estate marketing, knows the area, the auction process and various strategies that can be used to maximize your property value or clinch you a better deal, if you are a buyer. A local REALTOR® who also has experience in online auctions can bring significant advantage to the process. The Member Directory on ListedBy lists agents from across the U.S. and can be a great place to begin your research.
Benefits of Online Auction for Buyers
· Knowledge that the property will sell at auction expiry.
· Knowledge of who you are bidding against and where the bids are at any point in time. A fair play environment.
· Ability to participate free of charge and from anywhere, anytime.
· Ability to conveniently view and bid on multiple properties.
· No Buyer Premiums means additional funds to put towards a desired property.
· Significantly cuts down price negotiations time typically consumed in traditional buying and selling.
Benefits of Online Auction for Sellers
· Expose your property to cash-ready, pre-qualified buyers.
· Let the market reflect the right value of your property.
· Create excitement around the sale of your property.
· Certainty that the property will sell and by when.
· A way to potentially sell your property more quickly.
· Create competition among buyers.
· Less back and forth negotiations lends for an overall faster, easier process.
- ListedBy on LinkedIn and Twitter @ListedByYou
Americans are on the move. The United States Census Bureau estimates that 12.5 percent of Americans – nearly 40 million people – changed residences each of the past two years. While many turned to moving professionals for assistance, some learned the hard way that not all moving companies are created equally. In fact, the Federal Motor Carrier Safety Administration (FMCSA) received nearly 3,000 complaints about moving companies last year alone – a double-digit increase from the prior year.
Some good news arrived in October in the form of a new law that provides additional protection for victims of “rogue” moving companies that hold belongings hostage in the interest of scamming consumers to pay unexpected fees. The new law gives FMCSA the authority to force the return of consumer belongings in addition to the ability to levy fines of up to $10,000 per day.
Unfortunately, our industry has been plagued by moving ‘companies’ that advertise unbelievable ‘deals’ that turn out to be consumer scams,” says Jon Sorber, executive vice president of Two Men And A Truck, the nation’s largest franchise moving company. The new regulations are a welcome change for those of us committed to operating legitimate moving companies, but they are just a start. Education is really the key to making sure consumers avoid the hassle of a moving scam in the first place.
Sorber suggests consumers ask the following questions before hiring a mover:
1. Can your family, friends and co-workers make a referral? It’s likely that you know several people who’ve hired a moving company in the past year. Why not tap the resources of people you trust to share their experiences?
2. Does your mover have a brick and mortar facility you can visit? Often the “rogue” mover operates from a storage unit or perhaps with no office at all. If you are dealing with a legitimate moving company, they will have an office with trucks, employees, boxes, supplies, etc.
3. Is your mover licensed in your state? The majority of states require a formal license to operate as a mover, and selecting a licensed, insured mover is your best bet in guaranteeing a hassle-free experience.
4. What community or industry associations does the moving company have? Is your mover in good standing with the Better Business Bureau? Are they active members of the local Chamber of Commerce? Choose a mover who is valued and trusted within your community and you’ll likely eliminate any concern of questionable practices.
5. Does your mover offer free moving quotes? A legitimate mover is going to provide free estimates of your move before a single item is moved. If they refuse to do so, keep shopping regardless of how good the deal sounds.
Paul Oakley is senior vice president for Government Affairs at the American Moving and Storage Association (AMSA), the moving industry’s largest trade association. He and his team began working with Congress in 2008 to develop the new regulatory provisions that go into effect this month. Like Sorber, he believes the new laws provide some measure of safety, but cautions that more work must be done to eliminate dishonest moving practices.
The laws going into effect in October directly impact policing of the industry, says Oakley, but ultimately we must have safeguards that make entry into the industry more difficult, tougher enforcement against bad actors, and a greater effort needs to be made to educate consumers on how to choose a proper moving company.
Two Men And A Truck offers more questions consumers should ask before hiring a mover at www.twomenandatruck.com/moving-questions. Consumers might also consider AMSA’s Before You Move checklist at www.moving.org.
First impressions are everything when it comes to selling a home, and peeling paint, stained carpets and unpleasant odors can be an instant turn-off for buyers. Fortunately, you can take simple and inexpensive steps to prep your home for a quick, top-dollar sale.
Paint is an easy, cost-effective way to improve any interior, and a new coat can make all the difference in selling your home. Cracked or peeling paint will repel potential buyers, and faded or boring walls can create a lackluster overall appearance.
Make your home stand out with a fresh coat in a vibrant color, such as those found in Dutch Boy’s Crayola palette. Perfect for showcasing a finished basement, kids’ room or accent wall anywhere in the home, these bright shades will make any space “pop.” With 96 colors to choose from – from Marshmallow and Ice Pop, to Wild Strawberry and Inch Worm – you’re sure to find a shade to help make your home memorable. And as you are updating walls with new color, use a paint that not only adds beauty but also reduces odors. Along with the exceptional coverage Dutch Boy is known for, Refresh features Arm & Hammer Odor Eliminating Technology to rid your home of unwanted odors, leaving your home smelling clean and inviting. Available for walls, trim and ceilings, use Refresh throughout the home to create a pleasant walk-through experience. Add a few scented candles or potpourri to make the home even more appealing to buyers’ noses.
The little things can make a big difference when it comes to the appearance of your home. Many buyers are looking to make as few improvements as possible, and even tiny cosmetic repairs can seem like a huge project. The more move-in-ready your house appears, the faster it will sell, and more likely buyers will be willing to pay the asking price. Some easy fixes include replacing broken counter and floor tiles, patching holes in any surfaces, making sure all lights work properly and doors open and close smoothly.
Organize and de-personalize:
To give your home a spacious showroom feel, take time to remove any superfluous “stuff.” Show off your kitchen countertops by storing unnecessary appliances, clear the sink and dishwashing machine, and organize refrigerator contents. Keep the bathroom vanity clear of personal items, neatly fold or hang clean towels, and clear or cover clothing hampers. Organize your cupboards, closets and drawers to maximize the appearance of your home’s storage capabilities.
Clearing your home of visible clutter will not only make it seem more spacious but also make it easier for potential buyers to picture it as their own. Minimize family photos and personal items to help visitors more easily see themselves – and their things – in your home.
First impressions can make a world of difference, so don’t neglect your home’s exterior as you prepare to sell. The mailbox should be in good condition and the house number easily visible from the street. Keep exterior doors, including garage doors, free of flaking or fading paint and freshen the trim around windows and shutters. A fresh coat of paint on the front door can add to your home’s curb appeal and affixing a seasonal display of flowers or a festive wreath on the front door also makes a warm, welcoming statement.
A few simple projects can vastly improve your home’s overall appearance, and with these tips, your home will be sold in no time.
Investors are snapping up real estate deals including rental properties with high cash on cash return that can reach 24 – 26 percent annually, time shares for dimes on the dollar, and solid parcels of land in great locations. Gold also seems to remain high on investor lists, including central banks. World Gold Council Analysts offer some explanations in this great piece posted on ARA.
“Since the onset of the recession when many investment portfolios took a hit, there has been a lot of talk about the value of investing in gold as one way for investors to protect against market volatility and preserve wealth. Now, as policy makers both here and in Europe take steps to stimulate economic growth, there is a group of investors quietly adding gold to their own portfolios: the world’s central banks.
As a legacy of the gold standard that backed many of the world’s currencies prior to 1972, Western central banks such as the United States of America, Italy, France and Germany, hold large quantities of gold. In contrast, many of today’s emerging economies including China, Russia, Mexico and India have until recently held little to none. While the 8,133 tonnes of gold held by the U.S. Government in Fort Knox (and other locations) no longer directly backs our currency, it has returned over 8 percent a year over the past 30 years for the long term wealth of the country.
For years, the Western central banks were net sellers of gold, to the tune of 400-500 tonnes per year, in large part because they saw the need to diversify away from gold. But that trend began to shift in the second half of 2009 as Western market central banks all but halted their gold sales while emerging market central banks increased the pace of adding gold to their monetary reserves. Globally, central banks bought 77 tonnes in 2010, and for all of 2011 bought an astonishing 456 tonnes of gold.
So what’s caused this change in how central banks view gold? Analysts from the World Gold Council (www.gold.org) offer the following explanations for why the central banks are buying gold:
* Central banks are trending away from investing primarily in the U.S. dollar and the Euro. The recession in the U.S. and the debt crisis in Europe have caused banks to take pause when investing in assets from these countries. While the U.S. dollar will form a large portion of overall reserves for years to come, gold is being added by central banks around the world to diversify their asset base.
* As countries including China, India, Mexico and Russia get wealthier, they are increasingly focused on storing that wealth. Many are finding that an allocation to gold of between 2 and 10 percent provides protection against risk in their overall portfolio.
* Gold is one of the few assets that central banks are allowed to buy. Other assets include U.S. Treasuries, Euro bonds, and Japanese Yen. Unlike bonds, gold is one of the few universally accepted assets that central banks can own that has no credit risk, meaning, gold does not represent an IOU from another country, company or person.
* Gold is considered a hedge against the U.S. dollar. This makes it an attractive tool for central banks to protect against any further declines in the value of the U.S. dollar.
“The trend that we are seeing where global central banks are increasing their gold holdings reinforces the critical importance gold plays in an investment context. Gold serves a function no other investment asset can: it preserves capital, diversifies portfolios, and is highly liquid. These principals hold true for central banks as well as individual investors,” says Ashish Bhatia, manager of government affairs at the World Gold Council.</p><p>According to the World Gold Council, central banks are on pace to purchase at least as much gold this year as they did in 2011. The increased investment in gold by these banks highlights gold’s role as an asset that provides diversification and wealth preservation during uncertain economic times.
The information provided is for educational purposes only. Consult your financial adviser before making any investment decisions.”
A still murky economy and uncertain real estate market may have you wondering if buying a home is a good idea. Whether you’re thinking about buying, or already have and just need some affirmation, you may find it comforting to know there are still plenty of good reasons for financially stable people to buy a house. Here are a few:
* Homeownership can help make good credit even better. If your credit is in poor shape, you’ll want to monitor it before seeking a mortgage. But if you have good credit, live within your means, and consistently make good financial decisions, a mortgage can be the kind of “good debt” that helps your overall financial health. Making regular payments on a mortgage shows potential lenders that you’re a less risky candidate for a home loan. Before you begin home shopping, it’s a good idea to check your credit. Enrolling in a product like freecreditscore.com can help you better understand and leverage your credit.
* A mortgage can function like an automatic savings plan. By now, you’ve read the news reports about how little we Americans save these days. Well, every year you pay on your fixed-rate mortgage, is a year of building equity, and equity is like money in the bank. When it’s time to sell – whether you’ve stayed in your home seven years or the full 30 year term – you’ll have created equity and should be able to sell your house for more than you owe.
* Homeownership comes with plenty of financial perks, including an income tax credit for property taxes you pay on your home. For detailed information on tax breaks check out IRS.gov. Buying a home also affords you the opportunity to halt your housing costs. Rent will always go up from year to year, but if you have a fixed-rate mortgage (avoid adjustable rates) your biggest annual expense – housing costs – will be locked-in.
* Mortgage interest is a good deal when stacked up against other types of interest that don’t do much for you – such as high credit card interest rates or low rates on savings accounts and CDs. Mortgage rates are low right now, meaning you can pay less over the life of a loan than at practically any other time in recent history. Plus, it’s the only kind of interest that you can deduct from your taxes.
* Prices are still relatively low and inventory is high. It’s been a buyer’s market for a long time, but that’s going to change. The question is: when will the market start to improve in your area, taking home prices with it? You’ll have to do some legwork and astute research to determine when is the best time for you to buy.
If you monitor your credit and are on a sound financial footing, buying a home can still be a good idea. And now is as good a time as any to make your purchase.