Wrapping Up my Day Sale Home Auction Effort.

Hi Everyone:

I just want to take a moment to give everyone a summary of our  property 5 Day Home auction sales effort and its results on behalf of Kyle Cascioli and his www.AuctionBySeller.com (ABS), non-distressed, online real estate 5 Day Sale auction platform.

I’ve been a “fix n’ flip” property renovator for several years in the Denver metro area, and my last project in the Sloan’s Lake area – a very attractive, older urban core suburb –  gave me a little trouble     in selling during the latter half of 2010.  The property was initially listed in June at $439,000, and we subsequently lowered the price to $415,000, and had decent showing activity but no offers.

Kyle was introduced to me by another local “flipper,” who had used his platform successfully, and after    some discussion and exchange of ideas regarding ABS, I decided to give it a try.  The idea of being more proactive and aggressive in marketing the property through his non-distressed auction model was intriguing, and I knew that regardless of the result, I would not have to sell the property if I did not get an acceptable offer through the process.

We ran the 5 Day Sale home auction in early January of 2011 and found an unrepresented, 60% down payment  buyer at $395,000!  We put the property under contract, but within two weeks of doing so the buyer lost their job, and backed out of the transaction.  Kyle re-listed the property for me at $399,000 and simultaneously rescheduled the auction.  Interestingly enough, an aerospace engineer and his family were relocating to Denver from San Francisco, and very quickly expressed interest through their agent  in the property.  Kyle explained to the agent that the property had just been released from contract through the non-distressed auction process at $395,000, was listed and also being rescheduled for auction.  The agent produced an offer for $394,000 within days.  We agreed to pricing and put it under contract for a second time.

I’m happy to say that we closed on this transaction yesterday with a minor boiler concession of $5,000 at a final price of $389,000.  Interestingly enough, it was Kyle’s negotiating skills and the leveraging of the second auction date through ABS that got us a near replacement offer on the property.  Additionally, the rescheduled 5 Day Sale auction date kept pressure on the buyers as though we had  “back-up” offers, and provided us with some additional leverage through the due diligence process with our buyers. 

The end result was a surprisingly pleasant negotiation and due diligence process with the sellers who are now settling into their new Denver home, and I am able to move on to my next project.

I would highly recommend Kyle and ABS to anyone struggling to sell their property during these difficult times.  It worked for me.

Sincerely,

Steve Busheff
Denver, Colorado

March 15, 2011

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Why I chose to revolutionarily renovate this Sloan’s Lake Home!

Hi Everyone:

I purchased this home in Denver to renovate because of its unique, “Frank Lloyd Wright-esk,” architectural style and its wonderful location.

The Sloan’s Lake neighborhood was named as one of Denver’s “Best Places to Live” by 5280 Magazine in the May, 2010 issue. It’s rare to find a home of this size (2,710 SF) in the Sloan’s Lake neighborhood with a big lot (12,000 SF).

The property was clearly dated when I bought it, and needed a lot of work, but I had a vision for the property and thought we could really modernize it and create a very unique home.

The first challenge was that the home’s main level and lower level were separate spaces. The property was functioning as an “up and down” duplex.

The only way to access the lower level was through the outside north door. The stairway had been closed off to accommodate a separate lower level “mother-in-law space. So we decided to opened up the floor to the two levels and built a new stairway. We also gutted and completely remodeled all the bathrooms with granite countertops and custom tile.

The kitchen was remodeled as well. The kitchen cabinets were a nice retro style of cabinet that we decided to keep and paint. We added new granite countertops and new stainless steel appliances. The main family room that opens to the sun room that has a partial Sloan’s Lake Park view had windows separating them, so we removed the windows to open up the floor plan and the spaces would flow better.

The home’s interior and exterior has been completely repainted, and new double-pane windows have been installed. New carpet was added downstairs, and the home has all new lighting fixtures throughout.

Finally, a new roof was installed, we replaced the old chain link fence with a new cedar fence and installed a new garage door.

Steve Busheff
http://www.SloansLakeHomeAuction.com

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Non-Distressed Property Auctioning is the future of Real Estate Sales

Hi Everyone:

In my 2007 article entitled, “I’m mad as hell and I’m not going to take it anymore,” ( http://www.auctionbyseller.com/mad-as-hell.html ), I explained why the real estate down-cycle that began in early 2007 was the beginning of a “watershed” event.

For the many reasons cited in that article, this watershed event was a harbinger of things to come (pre-financial markets implosion of October 2008), and that its psychological impact would lead to a paradigm change in the way consumers looked at traditional real estate transactions. At the time, I wasn’t sure what form this paradigm shift would take, but I knew that significant changes in how consumers bought and sold real estate was on the way.
Needless to say, the financial markets implosion in 2008 cited above only further exacerbated consumer frustration with traditional real estate sales practices. This coupled with the ensuing real estate “structural price correction,” after a century of normal real estate business cycles, forced many consumers to both revaluate real estate as a percentage of their personal wealth and how they might buy and sell real estate in the new millennium.

So what have been the historic real estate consumers’ options when it comes to buying and selling real estate?

Real estate consumers’ traditional transaction options include the passive Realtor listing approach, For Sale By Owner (FSBO) efforts, and auctioning. While enough has been said about the pros and cons of the first two approaches, and any readers interested in more detail on those approaches can request our “Steps to Selling a Home” guide (http://www.barrettassociatescorp.com/content/view/84/282/ ), let’s take a closer look at the auctioning approach.

In my opinion, there is an historic negative bias in the United States when it comes to the auctioning of real estate. While real estate auctioning has been a normal, mainstream approach in the U.K., South Africa, and Australia for many decades, there has been, and continues to be a stigma associated with real estate auctioning in the U.S. Why is this?

Exotic art, cars, and Jewelry have been sold via the auction process for centuries. Since 1929, our American way of life has been financed by the auctioning of Treasury Bills, Bonds, and Notes. And with respect to these products and financial instruments, auctioning is the preferred and most efficient manner of sale. So why then is there so much stigma associated with the auctioning of real estate in the United States? The reason seems simple.

Historically, and especially since the S&L crisis of the late 1980’s real estate auctioning in the U.S. has primarily been applied to distressed real estate product such as foreclosures and bank-owned properties, and this certainly holds true in today’s marketplace.

I founded the “AuctionBySeller” ( http://www.AuctionBySeller.com ) family of online, non-distressed, auction platforms in 2007 to provide a fourth, price competitive, and viable real estate transaction option to those frustrated with the three traditional approaches to property sales cited above. Since that time, our model has been performing for our clients.

Change is constant and those who fail to change, evolve, and embrace new business models are often left in time’s wake. An entire new generation of real estate consumers are rejecting the traditional real estate transaction approaches, using technology to circumvent real estate intermediaries including traditional auctioneers, and looking for more efficient ways to buy and sell real estate in these challenging times.

We believe that our new, non-distressed, online real estate auction model is sustainable and will continue to be embraced by real estate consumers even after this severe real estate price correction has stabilized.

Kyle Cascioli
www.AuctionBySeller.com
November 21, 2010
© 2010Barrett Associates, Inc All Rights Reserved

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What’s Right about the Real Estate Auctioning Business Model?

Hi Everyone:

As a follow up to my earlier discussion about “What’s Wrong with the Real Estate Auction Business Model,” let’s talk about what the advantages are of pursuing this real estate sales property exit strategy.

By definition, auctioning “best practices” produce market offers (prices) at specific (static) points in time (date).
In my earlier piece on “What’s Wrong with the Real Estate Auctioning Model?” I explained what I believe is wrong with the traditional property listing model. In the traditional listing model, sellers typically overprice their property and passively wait for the market to engage them. National Association of Realtor studies consitantly report that over 80% of sellers dictate the listing price of their home to their agents prior to listing. This implies that less than 20% of all real estate agents are either trusted regarding their pricing recommendation or disagree with their clients perception of value. The apparent acquiesence of real estate professionals to sellers regarding the value of their homes (listing price) in the majority of cases is fine in a good market, but disasterous in a poor one. This is even more exacerbated in this downcycle by the unprecedented (structural) economic events (Circa 2008), and those events debilitating effect on residential property values in both the short-term and foreseeable future.
This approach does neither the client nor agent any good as the property languishes on the market, as both client and agent chase the market down through price reductions in utter frustration (Circa 2008). By the way, this traditional real estate listing pricing model is known as a “Dutch Auction,” an auction where the seller starts high and takes the first lower acceptable offer.
In my opinion, the biggest single advantage to the auctioning approach is that it produces “true market” offers more quickly, regardless of market conditions. The auctioning approach changes the dynamic of making an offer to the favor of buyers. Instead of a seller pricing a property high and challenging buyers to “make offers,” auctioning allows the seller to price low and empower buyers to challenge them (sellers) to “accept their offers.”
This is a dynamic that accomplishes two things. One it creates a comfort zone for buyers to engage sellers directly and “make their best offers” for the property without feeling as though they are wasting their time or insulting the seller. Two, auction methodology also intrigues and attracts the “fringe” buyer that is capable of purchasing but is perhaps not actively looking at properties (and likely not represented).
Fee structure aside, the auction model can increase the likelihood of a direct sale to an unrepresented buyer and potentially reduce transactions fees (commissions). The auction process also compresses the property sales cycle, flattens the lines of communication between buyers and sellers, produces more qualified buyers than the traditional listing process, increases sellers’ returns on their advertising (ROI), and is a true indicator of a properties market value.

Let’s discuss these advantages individually.

First, the auction models “proactive” marketing approach targets the consumer directly in addition to the real estate brokerage community. Whether it is that those who attend auctions

are more likely to be direct buyers (unrepresented), the consumer targeted advertising campaign promoting the auction, the current resistance of the Realtor community to embrace the auctioning model as a legitimate sales mechanism, or a combination of all of the above, most bidders today are unrepresented by agents (they have attorneys). In these cases, the seller saves money on fees and can be more competitive on sales price. Thus, another advantage to the auction/5 Day Sale model is that it is more likely to result in a direct sale.

Second the auction process compresses the property sales cycle because the auction is held on a specific date. The property is intended to be sold on that date, thus creating a sense of urgency for the interested buyers. When compared with the traditional real estate “Dutch Auction” listing approach described above, the auction model generates a timely sale, which allows the seller to benefit by avoiding additional carrying costs, exposing themselves to increased market pricing risk, and a shrinking buyer pool, given our deteriorating national economy and tightening credit at the retail mortgage levels.
The theory of the “Time Value of Money” applies to real estate transactions as well as cash. In a market such as ours (Circa2008) a sale today is worth more than a sale tomorrow for most sellers.

Third, the auction model – while relying upon the support and counsel of real estate/auctioning professionals – promotes direct dialogue between sellers and buyers. This facilitates the constructive exchange of information (unfiltered by intermediaries), and the process is a more consumer friendly one from the buyers perspective. This process also allows sellers to benefit by having “the market speak directly to them,” as bidders share what they like about the home, do not like, and what competitive properties they may be considering. It’s one thing for the sellers’ agents to “debrief” clients after getting showing-feedback from a buyers’ agents on a showing they (sellers’ agents) often don’t attend, but it’s very illuminating for a seller to get direct feedback from buyers in real time. Seller’s gain near perfect information regarding bidders’ interest, and often, a rapport develops between buyers and sellers during the inspection process that can be helpful when finalizing the terms of a sale.

Fourth, those attending auctions under formal auction models (where bidders are required to post “good funds” earnest monies to be eligible to bid), or less formal auction models such as the 5 Day Sale, those participating in real estate auctions are usually financially qualified and more likely to be all-cash buyers.

Fifth, when run correctly the auction model is the best real indicator of a given properties true “market value” at a given point. Appraisals, comparative market analyses, brokers’ opinions of values, they are all “well-informed guesses” based on historic sales data and a given real estate professional’s market perceptions and value opinions. The auction model identifies a pool of buyers (the “Buyer Pool”) at a specific date (static point in time) and then facilitates their (buyers) ability to compete for the subject property.

Sixth, the auction format increases seller’s return on investment (ROI) on his/her advertising dollar. In a soft market, all properties become commodities (with many substitutes) and a seller’s given real estate ad that advertises prices near or above the market gets lost in the crowd of similar real estate offerings, regardless of advertising medium (print, online, etc.). The fact that the auction format begins with a significant “discount-to-market” via “starting bid price” distinguishes the property from all of its competitors, garners viewing, gets clipped by potential buyers, has increased shelf-life, and is therefore more effective in generating market interest. If the advertising is more effective in generating above market interest based on pricing, then the return on investment (ROI) is greater than traditional real estate advertising with offerings priced at or above market.

In closing, anyone considering pursuing an auction or 5 Day Sale strategy for his/her home should weigh the “cost-benefit” of conducting that sale, given both the price point of his/her property and price expectations.

For more information on our auctioning and 5 Day Sale online real estate auction platform resources, expertise, and consulting, visit our websites at:

http://www.AuctionBySeller.com for sellers and …

http://www.AuctionByAgent.com for agents.

By: Kyle Cascioli – AuctionBySeller.com
December 22, 2008

© 2008Barrett Associates, Inc All Rights Reserved

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What’s Wrong with the Real Estate Auctioning Business Model?

Hi Everyone:

One day several years ago while I was director of real estate services for a “start-up” residential real estate e-commerce venture that failed, a key investor in the company asked me the question: “How do I sell a home for free?”

Being adjunct faculty in the real estate department at the business school of a prestigious university, a veteran of both the commercial and residential markets, and a frustrated member of the National Association of Realtors (NAR), I surprised myself by having to stretch for an answer. In a flash it came to me … and I replied to the investor that you can “auction the property.”

After all, at a traditional auction the seller pays the auctioneer to promote and manage the auction process, but no fees or commissions are usually paid to the buyer or the buyer’s representative(s) if he or she has one, which is not always the case.

Along with my role at the time in helping to “shape our real estate e-commerce business model,” and interest in verifying my naïve assumption that auctioning is a way to sell real estate for free, I decided to research the subject further.

I came across a book entitled “How to Sell Your Home in 5 Days (Bill Effros; Workman Publishers, New York), a “consumer-centric” work targeting the “do-it-yourselfer (For Sale By Owner).” The book does an excellent job in both explaining the process of auctioning and the fundamentals of running an auction on your home in 5 Days in order to get buyers to competitively bid on your property.

After reading the book in 2007, I decided that it would be a good exercise for my students to combine our study of real estate theory at the university with contemporary real estate practice. I solicited student volunteers to help document a 5 Day Sale/ Home Auction. We found a seller in Denver online who was in need of help in conducting his auction, and we offered to help in exchange for the right to videotape and document the effort as a case study. This auction/5 Day Sale was successful and you can view the video and review our case studies at: http://www.AuctionBySeller.com .

My curiosity peaked; I continued to research auctioneering industry practices and even joined our state auctioneering association. While not all auctioneers sell real estate, those that do must hold real estate licenses in their given state of operation. While all states require real estate practitioners to be licensed (and therefore regulated), not all states require that auctioneers be licensed.

Auctions can take many forms. On the one end of the spectrum, there is the “absolute auction” that results in a sale regardless of price as long as the minimum disclosed bid level is met (assuming there is one). On the other end of the spectrum, there is the auction with an “undisclosed bid.” In each of these approaches, the point is to start your bidding at an either artificially low – or minimal acceptable – price point so as to engage as many potential buyers available in a market at a given point in time, and then

to bid those potential buyers competitively to find the best buyer for the property. Best buyer is usually defined as most competitive bidder that meets or exceeds the seller’s minimal acceptable price (reserve). By definition, competent auctioning produces market prices at a static point in time.

I have since been engaged to assist and document multiple real estate auctions and/or 5 Day Sales, all of which have been successful, but not all of which resulted in the sale of the property at that time. That said, they all provided “perfect market” feedback directly from buyers to the sellers regarding the given properties’ features and those buyers perception of market value. For the record, I believe the auction methodology is a valid and legitimate real estate sales strategy. I am particularly impressed with the fact that auctioning is a much more “proactive” sales strategy than is the traditional listing of real estate, which I believe to be a passive sales strategy.

The question then becomes, is auctioning a cost effective method for selling real estate when compared to traditional methods of selling real estate? The fact is that it takes time, money, and effort to run an auction, sell the property yourself, or list it with an agent.

Most auctioneers will charge a significant auction marketing fee to cover promotional costs and their time. Additionally, most auction firms charge a “buyers premium” that the buyer pays net of their offer. This means that while the seller pays no fees directly, the buyers’ offers are “net” of any auction and buyer’s agent fees. Auctioneers’ “buyers premiums” for real estate transactions range from 5% to 10%, depending upon whether the bidders are represented by real estate agents or not.

We already know what’s wrong with the traditional real estate listing model where we start by overpricing our property and listing it. This approach does neither the client nor agent any good as the property languishes on the market as both client and agent chase the market down through price reductions in frustration together, (Circa 2008). By the way, this traditional real estate listing pricing model is known as a “Dutch Auction,” an auction where the seller starts high and takes the first lower acceptable offer.

So … what then is wrong with the auctioning model?

In its current form, the traditional auctioning model has the potential to lead to “conflicts of interest” between sellers and auctioneers, and they are just as expensive as – or more so – than the traditional listing of real estate. The expense is often justified, given the “time value” of a sale, but if that sale involves an auctioneer producing a buyer represented by an agent, then the fees – while paid by the buyers – decrease those buyers’ effective purchasing power net to the seller, and the seller achieves a lower effective sales price.

Whether it it’s an auction or a traditional listing the buyer always bears the cost of fees, because they are paid for from the proceeds of sale.

Is there an alternative auctioning business model for sellers and agents alike?

Yes … through our online real estate auction platform resources, expertise, and consulting.

Check out http://www.AuctionBySeller.com for sellers and http://www.AuctionByAgent.com for agents.

By: Kyle Cascioli – AuctionBySeller.com
December 20, 2008

© 2008Barrett Associates, Inc All Rights Reserved

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Hello world!

Hi Everyone:

Well, we’re getting ready for our January 9, 2011 next Denver home auction of a great Sloan’s Lake renovated property!

Stay tuned and visit:  www.SloansLakeHomeAuction.com

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