The Life of Foreclosed Real Estate

Every home buyer today is looking for a great deal and that has led them to consider foreclosed properties. However, most are unaware of the life cycle of such properties and the opportunities that exist at each stage. So here’s a breakdown of the life of a foreclosed property and the benefits at each stage.

Pre-foreclosure
A pre-foreclosure is a property that is in distress and the owner is facing foreclosure. Often times, the owner is being foreclosed upon a mortgage but homeowners associations and bankruptcies can also force foreclosure proceedings. A pre-foreclosure (also known as a short sale) usually results in a seller selling the property for less than what’s owed. The listed price of the property is set by the owner and their agent (if listed) and then later approved by the bank. Ultimately, the selling price is determined by either an appraisal of the property or an opinion of a local real estate broker (not the buyer’s agent or listing agent). These properties are also sold As-Is, regardless of condition or age.
The approval process by the bank can take up to 4 months or more depending on the workload of the bank’s loss mitigation staff. Also, the paperwork can be cumbersome and you’ll need to have a participatory seller. The bank may require them to hold a promissory note or they may face tax penalties if they agree to the terms of their pre-foreclosure sale. Ultimately, for the buyer, pre-foreclosure properties are best in markets that have faced a substantial price decrease in a relatively short period of time.

Foreclosure Sale
In North Carolina, a foreclosure sale occurs at the local court house of the property being sold. At this point, the bank has hired a trustee (an attorney) to sell the property and a judge has held a hearing and found in favor of the bank to sell the property. The sales are a matter of public notice and anyone may bid on the foreclosing property. However, before you do so, you need to do your homework. These are auction style sales officiated by the court. They aren’t true absolute sales as the foreclosing bank or party will secure their interest by bidding the amount owed to them.
First, understand that you are buying this property sight unseen most often and cannot have an appraisal or inspection. If the home is listed prior to the sale, go that a look at it. It is a HUGE risk to purchase a home without seeing the inside.
Second, you’ll either need a hard money loan, an equity line on a current property, or cash to make the purchase. Because you don’t have a right to access the property, you cannot have an appraisal done. Therefore, this is inappropriate for 99% of home buyers.
Third, you need to know what is foreclosing on the property. All too often, a novice investor will bid on a $400,000 home for the balance of the HOA dues and think they’ve purchased the deal of a lifetime. What they’re purchased is a world of trouble as they purchased a junior lien. That buyer would need to satisfy the primary lien or risk being foreclosed upon. Anyone interested in pursuing these types of sales should hire someone to do a title search to find out what they’re bidding on and what else is hanging over the property (IRS tax liens, etc).
Finally is the price. If you’re bidding on a first mortgage foreclosure, the foreclosing bank will bid the balance of the mortgage to secure their interest. If no one outbids the bank, the bank buys the house back and it becomes a bank-owned property.
These homes are generally still occupied and it’s up to you to evict the tenants or former owners. Again, this can be very sticky so hire a good attorney to guide you through the process.

The Foreclosure Upset Period
After the high bid has been reached in a foreclosure sale, there’s a 10 day bid upset period. Rarely, on a home with two mortgages, the second mortgage can come in an upset the bid to secure their interest in the foreclosing property. Anyone can upset a bid and some investors do nothing but upset high bidders.

The Bank Owned Sale (REO)
If a bank has foreclosed on a property and they are the high bidder, the property is listed for sale with a real estate agent. That agent lists the home through the MLS and anyone may make an offer. At this point, the home is vacant and clear of any liens. For most buyers, this is a great opportunity to buy a distressed home however there are a few areas where many run into trouble.
First, you need appropriate financing for the condition of the home. Many of the properties are not move-in ready and may require repairs. DO NOT EVER UNDER ANY CIRCUMSTANCES REPAIR A PROPERTY THAT IS NOT YOURS!!!!! I have been in properties where the only visible damage was that someone removed the kitchen cabinets. Other times, an A/C unit is missing. It is imperative that you obtain financing appropriate for the home you’re purchasing, which usually means Cash or Conventional. FHA and VA are inappropriate for most bank properties with the exception being HUD and VA owned properties.
Second, you will need to do inspections. The properties are sold As-Is, where-is, no conditions, no contingencies, no repairs. Some feel that since that’s the case, you wouldn’t want to waste the money on an inspection. However, you may uncover a serious issue that may result in the home a bad deal. Hire a good inspector to know what you’re getting yourself into.

The Bank-Owned Auction (REO)
Often times, a bank will have a number of properties listed on the market without a suitable buyer. Because they’re not in the business of owning a bunch of real estate, they will often sell their currently listed homes at auction. These aren’t new properties but ones that have failed to sell. Here in Raleigh, there’s an auction like this once a month or so.
Buyers can utilize financing and can do inspections BEFORE the auction sale. Also, as with any real estate auction, there’s a buyer’s premium that the buyer pays (the auctioneers commission) that is tacked on to the highest bid. Therefore, you will need to be aware that you may have the high bid of $400,000 but after the premium of 10%, the sales price would be $440,000.
Investigate the properties, know you’re bidding on the right home, inspect the homes you’re interested in, and get approved for any mortgage ahead of time.

As we continue with the down market we are in and banks are getting more back up with properties, you will see more and more bank owned auctions.

Certified Auctioneers Institute

The Certified Auctioneers Institute weighs in as the most prestigious and honored course available to auctioneers. Is a three year Master Level Program offered by Indiana University and National Auctioneers Association.

Held in Bloomington, Indiana, each year for a week in March, CAI is a three-year certification program that graduates the most professional and well-educated auctioneers in the industry. Attendees are housed in the hotel attached to the world’s largest campus union building at Indiana University.

CAI kicks off on Sunday with an opening brunch where class I is welcomed and awards are given to project winners from classes II and III. After a brief orientation, the course wastes no time getting auctioneers to class. The bulk of CAI is made of nine class sessions, 3.5 hours each, with activities most evenings. Wednesday night holds a benefit auction and Friday morning holds the final exam, followed by a final general session.

The course materials covered at CAI include a mix of instructors from both within and without the auction industry. Experts on a wide range of topics ranging from finance to marketing and from technology to real estate provide insight, examples and materials to help auctioneers learn to be more professional, proficient and powerful in their businesses.

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Designed for leaders in the industry and auction firm decision-makers, the CAI is an executive development program focused on developing the skills and providing the tools necessary to run a top-notch auction firm.

Designation holders have the knowledge and skill necessary to provide high-quality services to all types of clients.

In addition, their designation indicates to attorneys, trust officers, government officials, financial planners, accountants and others who seek the services of well-qualified auctioneers that the CAI designation holder is an astute business person whose conduct will follow the highest professional standards.

With all NAA educational offerings, the true value of the materials is exacerbated by the networking inherent in the aggregation of over a hundred auctioneers from various sectors and experiences.

There are many CAI auctioneers who claim that this networking of auctioneers with different ideas and experiences is as valuable as the course materials presented, though we’re pretty confident that the networking wouldn’t be as valuable without the course materials. There’s no question that the networking from CAI results in life-long friendships and business relationships.

Accredited Auctioneer Real Estate

Why is AARE Designation Needed By Real Estate Auctioneers


The sale of real estate at auction has become an increasing trend in the United States. Having long been the default method of liquidation for distressed properties, real estate auctions are becoming mainstream. More and more buyers and sellers of real estate are realizing that the auction method of marketing can many times be superior to traditional real estate listings.
$58 billion in real estate was sold at auction in 2008
The National Association of Realtors claims that “[all] types of property can be sold at auction. For sellers, auctions mean immediate cash and no long-term carrying costs. For buyers, auctions can save time and money.” The National Auctioneers Association claims that over $58 billion in real estate was sold at auction in 2008. Real estate auction volume has increased each year since the NAA started tracking it in 2003.
Having long recognized the importance of real estate as a component of the auction industry, the NAA offers a professional designation called AARE - Accredited Auctioneer Real Estate. AARE is a prestigious designation, held only by several hundred auctioneers worldwide.
An auctioneer with the AARE designation has gone the ‘extra mile’ to ensure they offer the highest level of professionalism and the most up-to-date information when it comes to selling properties. Whether selling residential, agricultural, commercial or industrial properties, AARE auctioneers have enhanced knowledge in all pertinent areas, such as:
 Marketing techniques
 Financial/investment calculations
 Evaluating cash flow
 Holding-period analysis
 Tax consequences of buying and selling properties
 Multi-parcel real estate auctions
Most real estate brokers are taught how to sell real estate the traditional way by listing the property and putting it in MLS. They either learned this through going to a state approved real estate school or the real estate agency they work for or both. The auction method is not taught in real estate schools, though there is nothing wrong with selling real estate the traditional way - not all properties are good for auction and, on the flip side, some properties will do better at auction. The NAA Education Institute designed the AARE designation to fill the knowledge void both for Realtors(R) and auctioneers and real estate brokers of the auction method of how to sell real estate at auction.
The AARE course is offered is three classes. Each AARE class is two days in length.
 100 Emphasizes how to market residential, agricultural, commercial and industrial properties
 200 Learn the techniques for evaluating cash flow, holding period analysis, tax consequences of auctions and the challenges associated with each
 300 Working in groups, students evaluate properties, design a proposal to get the sale, and plan, conduct and prepare a post-auction report
The NAA requires that each auctioneer with the AARE designation successfully complete all three classes as well as submit documentation of ten auctions, an auction summary report and an application to gain the designation. In addition to the initial requirements, there is the standard yearly designation fee and requirement for continuing education.
As with all NAA courses, the benefit of camaraderie with others adds so much to the course materials. Knowing that there are other auctioneers who have dealt with the same problems you’ve had and can walk you through solving them is an invaluable benefit.”

How Auctions Work

Just about anything you can think of can be found at an auction. Anything from jewelry, collectibles, boats, books, cars, household items, real estate; I repeat, anything and everything. That’s the excitement of the auction.

You can find auctions in your area by various ways including your local newspaper that would have a section in the classifieds for auctions that will happen in the coming week or weeks. You can search for auctions on the internet. If they have a web site, their upcoming auctions along with pictures and descriptions of items would be listed so customers know what is being offered. Usually, there are signs placed close to the auction site indicating an auction is taking place or will be soon. The ads or web site should also give directions to the location.

After you find the auction or auctions of interest, you need to check the time it starts. There should be a starting time for the auction and for viewing the items. Make sure you allow lots of time to get to the auction to check out the items. Then you will decide which items you want to bid on and how much you want to bid. Take a pad of paper and pen to make notes of the items and your top dollar you are willing to bid for the items. This will also be a good time to find the auctioneers and auction workers so you can get to know them. They have the all of the details about the items and should be happy to provide any information you require.

You will want to find out when the auction will start. Find out where the auction will start and what direction it will go. There may be more than one auction ring, if there are many items. Some auctions last for several days. Each auction ring will have an auctioneer, a recorder, and helpers. Find out how many rings and which auctioneer will be in which ring. Introduce yourself to the auctioneer and the workers so they will recognize you when you bid and be more apt to look your way for a bid. It is also an avenue for inside information to the type of auction it is, the type of items being offered, etc. Some auctions have multiple estates represented, so some sections of items may look like it doesn’t really go with the other items. The auctioneer and workers should know this and will share that information with you.

There will be a payment and registration table which are usually together. You will want to stop at the registration table before the auction starts to register. They will need your name, address, phone number, picture ID, and tax number, if you have one.

The auction can be indoors or outdoors, so dress appropriately. You might want to think about taking a snack or lunch. There might be a vendor available near the auction. Check out where you want to park to get your winning items to your vehicle easily.

Each item will have a lot number or description associated with it. This information may not be on the actual item, but the recorder will have it. It will be on the tickets for each of your winning items. Keep track of what you were the winning bidder on and what the winning bid was. This way, you can match each up to your ticket when you check out.

The items up for auction are usually kept in boxes or flats. The items may be auctioned per box or per item. You should be able to request a certain item be pulled out of a box to auction separately, if you like. A lot of times, you can get a better bargain if the item you want is together with other items that may be less in demand.

The more expensive items are kept in locked cases with an attendant close by to open the case for inspection when requested. These items have been determined by the auctioneer to be more valuable pieces and will be auctioned individually. Since you have gotten familiar with the auctioneer, you will know where the auction will start. Get yourself in a position so that you can see the items as they are auctioned and so that you will be readily seen by the auctioneer for your bids. Make sure you have your bidder number card ready to show the auctioneer when you bid and also when you win an item.

Before and during the auction, as people look at the items, some may get moved from box to box. Make sure you pay close attention to what is being auctioned, in case some things were moved. When you win, make sure to take your winnings directly to your vehicle. Once you win the bid, the item or items are you possession and you are responsible for them. Items have been known to get up and walk away while you are not looking. It is best to keep an eye on your winnings or have another person attend to them and take them to your vehicle.

Depending upon the auctioneer, bidding may start at what the auctioneer thinks the item will eventually sell for. That offer may not get any bids, so in order to get people bidding; the auctioneer will lower the starting bid. If you are really interested in an item, you may want to bid first thing. This quick bid may scare off other potential bidders and you will win the item. Toward the end of the auction, there may not be as many people at the auction so this is a good time to get in on some good deals as well.

When you are ready to leave, you will need to go to the payment or registration table to pay for your winning items. They will have a list of items or a ticket for each winning item. Make sure the item and price match what you have recorded. It will be much easier to resolve any conflicts immediately rather than later. Good luck with your bidding!

Should Realtors Become Auctioneers?

I received an interesting phone call from a realtor in California. She had read some articles I had written about using an auction as a first choice method of selling a home, rather than as a last option. Her question to me was this, "Should I become an auctioneer?"
My first tacit thought was, "Go for it!" Yes, auctioning a home is a fast way to sell it, but not all homes will qualify for an auction. But before I get into answering the question, let me discuss briefly what an auctioneer does and does not do.
Some think that an auctioneer shows up on the day of the auction, starts talking fast, sells the house, and he/she is done. Actually, the activities that take place on the auction day, represents about 5% of the total auction process.
The perception of a realtor may be closer, viz., a contract is signed, a sign is posted in the yard, information is listed in the local MLS, and the listing agent hopes and prays that it gets sold. We know that is not always true but that is how the public portrays us.
Now back to the question "should realtors become auctioneers?" My answer is, "It depends." Most auctioneers are a second, third or even fourth generation of auctioneers. They are in the business become they love it and have been around it since the beginning of time. Most auctioneers are specialist in a particular area such as farm equipment, heavy duty equipment, antiques, cars and trucks, land and yes, real estate, both residential and commercial.
I don't know what the licensing laws of California are, but here in North Carolina you must go to a state approved school for pre-licensing requirements which may involve ten days to two weeks of your time, then you must past a state administered test.
There are annual renewing requirements, professional associations to join such as your state association and/or the National Association of Auctioneers [NAA] in addition to continuing education requirements [CE] each year. Add all this up plus your NAR and state dues, MLS dues and CE requirements; you can spend several thousand dollars a year on licensing and professional dues requirements.
Then you must become a marketer, that is, know how to market and get bidders to your auction. Who coordinates the marketing process? Who makes up the25 to 100 page proposal to the client? Whose responsibility is it for placing line and display ads in which newspapers? What income range are you targeting? Who makes up the flyers and ads mats? Who checks on the cost of these things? Who sets up information on dozens of web-sites? Who draws up the Property Information Package (PIP)? Who registers the bidders and records the auction? Who keeps the client informed as to what is going on? And it goes on and on.
Rather than trying to re-invent the wheel, unless you have a real love for the auction industry, your best bet would be to partner with a local auctioneer in your area.
For more information give us a call.

Why Sell Real Estate At Auction

Sell Quickly
By selling at auction, your property is typically sold in 60 days or less. By setting the date of the sale it helps expedite the sales process by creating a sense of urgency.
When using traditional methods, the property can remain unsold for months or even years causing you to incur significant expenses such as interest, taxes, utilities, insurance and maintenance.
Close Quickly
By selling at auction, there are no contingencies to prevent a property from closing.
With traditional sales, many times there are contingencies attached to the sale such as the buyer selling their home or getting financing. This can not only hold up closing on the property but can keep it off the market and not close at all causing you to endure the entire sales process again.
Control
By selling at auction, you control when the property will be sold by setting the date of the sale as well as the terms and conditions. Potential buyers are aware of the selling date and the terms in advance avoiding the nuisance of negotiating with disingenuous buyers.
Exposure
By having a shorter sales period and marketing your property alone for the sale, we are able to give your property maximum exposure through creative marketing. We target the buyers that would be most interested in your property.
When selling in the traditional manner, a listing agent usually has several listings to market and many properties are neglected with only MLS as a marketing tool.
Fair Market ValueBy selling at auction, you don't risk asking too much or too little for a property. It can be difficult to get a true market value on some properties as there may not be any comparables to consider.
When selling in the traditional manner, sellers are often encouraged by their agent to reduce the asking price to gain interest. The seller also risks pricing the property too high sending potential buyers elsewhere or pricing the property too low and selling the property for less than it is worth.

Local Estate Auctions: for Fun and Profit

Okay, so you love …and what’s not to love? Auctions are thrilling. So, have you been to a local live auction? What’s stopping you? Here, I will give you some guidelines for attending local auctions.

FIRST, find a reputable auctioneer. This can be one of the hardest tasks involved. It will require you to go to many auctions and talk to the people that are there. Get to know the people that are regular auction-goers (they are just like you…out to make a living).
SECOND, watch the bidders. I only consider 4 types of people that attend auctions. Dealers, Collectors, Family (at estate auctions, family of the owner of personal property being auctioned), and people that just love the auction. You will fit in the category of Dealer. You will find most of the “big hitter” dealers always have large sums of money. You will get to know what types of items they bid on and how high they will go (this gives you the knowledge you’ll need “to bid” or “not to bid”). Often, when the auctioneer advertises in the local newspaper, they will list items they feel will attract people. You might notice that they over-emphasize “dolls” or “farm equipment”. You can count on doll collectors to show up at an auction that lists dolls as a key item (maybe even said “hundreds of dolls” in the ad). In that case, you will be looking for something other than dolls to bid on. You don’t want to compete with a collector!
THIRD, do your research. This is pretty time-consuming. Each day, choose a category on that you are unfamiliar with and do some random searches from highest to lowest. Check out the listings that have the highest bids. Read the descriptions to know what condition they should be in or characteristics of the items. Some items have been produced multiple times and only the earliest will get the high bids. Make sure you are knowledgeable in many areas. Think about things that people have in their homes…especially what most would consider junk (like in a “catch-all” drawer). Do searches for those items and read, read, read. There are pieces of paper, toys, game pieces, instruction manuals, greeting cards, and buttons that can fetch large bids…just be familiar with those categories & items.
FOURTH, don’t be afraid to bid. The fear most people have that if they scratch their nose, it will be considered a bid is crazy…but I have seen dealers waving at someone and it was “caught” as a bid. Just use common sense. Don’t wave your hand in the air or make contact with the auctioneer and give a nod. You’ll be fine. No matter how seasoned you are, bidding will almost always give you an adrenaline rush.
FIFTH, checking out the box lots. Okay, I will admit that this is primarily what I bid on. Before the auction starts, I will stroll among the merchandise and “dig” into the box lots. You will almost always find hidden treasures in the bottom of boxes (or inside things in the boxes). People hide things in strange places. EBay offers you the ability to target collectors of everything, so don’t overlook anything! Dig in those boxes and KNOW the contents. WATCH for bidders that are staging boxes. They will find one box that they really like all the contents, but there is a box which has only one “widget” they want. They will remove the widget from one box and place it in the box that they intend to bid on. Let the auctioneer or call-people know this is taking place (or you can move it back where it belongs). It’s really disappointing to bid on a box because you know there is a widget only to get home & realize someone took it out.
SIXTH, know your auctioneer. Some auctioneers are very clear and easy to understand when calling, some “sing”, and some muffle/slur their numbers. Listen carefully and get to know each auctioneer. Some will “speed” through an estate…and some are so slow that it takes forever to get the job done. You must be ready to bid on items you want…and to do that, you need to know what the bid amount is. Pay attention!
SEVENTH, be kind. You will find that you can make friends & win more bids if you are kind. If you make enemies or people find you are unfriendly, they will bid against you …not because they want the item you’re bidding on, but “just because” you’re not nice and/or they don’t like you. You might find that you make some friends and enjoy seeing them at the next auction.
8th & last, separation phase. You must allow time at the end of the auction to separate things. I get home and have four areas set up.
1. Keep: these are items that I can use in my home (or I just like them and want to keep them)
2. Sell on EBay: these are items that I have to research on or I already know I will be listing
3. Trash: you will always have some of this. Broken things that cannot be used in any way. Be sure you research everything though. Sometimes you will have something you think is trash, only to find out that you can sell “parts” from the item if you take the time to dismantle.
4. Recycle (give away): these are items that could be useful to someone, but you don’t want them. I go to recycle dot org and list them locally so people can take & use them.
During the week auctions are much better than weekend. On weekends, there are more people (more bidders). If you have the luxury of being able to attend weekday auctions, do it. Attend a couple on weekends just to see for yourself that what I am telling you is true (which is why most auctioneers have them on Saturdays).
Get to know your auctioneer. Watch the paper for Saturday auctions. If you have time, cruise to several before they start to get an idea of what kinds of items are there and what type of people you think will attend. Choose one to attend.
Have Fun! Plan to spend the entire day at the auction.

ESTATE SALE OR AUCTION?

WHAT EVERY SELLER MUST KNOW BEFORE LIQUIDATING THEIR ESTATE!


Each year we receive hundreds of phone calls from regular folks that find themselves in the demanding position as an estate representative for a family member or friend.

Assuming such a role is always a thankless and very demanding on your time and nerves. In most cases, it becomes apparent that the person named as an estate representative (executor) lacks the necessary business experience and knows how to adequately perform the necessary tasks when settling an estate.

When the time comes to properly liquidate the assets of an estate, it seems that 9 out of 10 times, estate representatives improperly select the wrong type of liquidation service which ultimately costs the benefactors of the estate thousands of dollars and added frustrations.

We have found that the majority of estate representatives and executors whom we speak to simply do not understand what the difference is between an Estate (Tag) Sale versus an Auction.

The fact is, the difference between an estate sale versus an auction is mammoth and under no circumstances are the two services synonymous with one another.

ESTATE SALE vs. PUBLIC AUCTION

From Wikipedia, the free encyclopedia (Take note of the underlined)

An estate sale is a type of garage sale, or yard sale to dispose of the majority of the materials owned by a person who is deceased or will be moving. Estate sales are usually conducted by a professional, for a percentage of the revenues. This is because the scope of the process is usually overwhelming to the survivors, and for the specialist's experience with pricing antique items, his or her following of customers, and the specialist's experience in disposing of unsold goods in an unsentimental manner after the run of the sale. Antique and collectible dealers use estate sales as one of their more important wholesale sources. Estate sales are typically 1 to 3 days long, often with a price reduction toward the end.

ESTATE SALE: NO INDUSTRY STANDARD

Starting an estate sale company requires no professional standards of any kind. More specifically, there are no professional organizations, education, and training, designations, continuing education or even a Code of Ethics for the estate sale company to abide by. By and far, it’s the wild, wild west of all businesses.

ESTATE SALE: CONFLICT OF INTEREST

This is the number one red flag that should be at the top of your radar screen. You will find that a large majority of estate sale companies are operated by an antique, Internet auction seller or second hand goods dealer which is clearly a major conflict of interest to say the least. Problems that may arise out of a situation like this is the estate sale company may strategically position and price valuable merchandise which is quietly sold to the estate sale company so they can reap the true value of the merchandise elsewhere. Many estate sale companies reserve the right to retain any remaining inventory at the end of the sale which again, raises eyebrows and is a major conflict of interest.


ESTATE SALE: THE EARLY BIRD GETS THE WORM

The only form of competitiveness involved with buying your merchandise is folks arriving the earliest on the morning of your sale in hopes of being one of the first in the door to find ‘the good stuff’. Some estate sale companies use a number system where random numbers are pulled out of a hat which determines WHO gets inside the home first while the rest of the buyers stand in line who wait to gain entry and hope that all the ‘good stuff’ was not bought up by the first group that was in.

ESTATE SALE: THE JUDGE. JURY AND EXECUTIONER

Nobody can possibly be an expert on all collectibles, jewelry, antiques, automotive, tools and even household furnishings. However, the vast majority if not all estate sale companies play the role of the Judge, Jury and the Executioner. In other words, pricing of your valuable assets comes down to one person establishing such values which are often erratic. It’s a well known fact in the antique and resale business that dealers prefer ‘professionally’ operated estate sales as they can capitalize on improperly marked goods - that is, if they are one of the first ones in the doors.


ESTATE SALE: MARKETING IS LITERALLY NON EXISTENT

The majority of estate sale companies that we have observed over the years have zero concepts on the art of marketing. Essentially, there is no marketing campaign whatsoever with the exception of a classified ad in the local newspaper, a sign on the corner and perhaps the utilization of the Internet in some capacity. Instead of laying out a detailed marketing plan, they cut this corner right out of the equation and brag up and count on their local following. Let’s put it this way, when was the last time you read an article in the local newspaper or a story on the evening news that talked up an estate sale? It does not happen because they are low publicized and non-newsworthy events.

ESTATE SALE: NEGATIVE HAGGLING

For the most part, there isn’t any negotiations whatsoever at an estate sale. The exception is, if an item isn’t priced then the estate sale company will name a price from off the cuff. The other exception is, typically estate sales a two and three day events where prices are slashed up to 75% off from the original marked price. When prices are negotiated on your merchandise, negative haggling is the automatic process.

ESTATE SALE: SHOTTY CONTRACTS AND AGREEMENTS
Obviously, this isn’t the case with every company that provides estate sale services but there does seem to be a trend with poor contracts in this field. Those that I’ve seen are simply cut-and-dry one page wonders that are full of legal loopholes and leave the owner practically defenseless - well, at least according to the contact. First and foremost, a good contract should never be written by anyone other than an attorney and never in a fashion to gain leverage over the other party. Common language in an estate sale contract is the estate sale company reserves the right to retain any unsold merchandise. The owner is not allowed on the premises during the sale and the estate sale company isn’t responsible for theft which is ironic considering that you’ll have a dozen or so vastly unsupervised strangers rummaging through all rooms in your home on sale day. In addition, you’ll see that most estate sale companies have very little mention on how they are going to promote your sale. They often pay for all advertising right out of their own commission which they can afford to do because there isn’t much of an advertising campaign whatsoever. Be careful with what you agree to. Read the contract in its entirety and always have your attorney review the contract for legalities.


ESTATE SALE: A MOUNTAIN OF LEFTOVERS

Leftovers are fine at Thanksgiving and Christmas but not when your ultimate goal is to sell and clear out the residence of personal property. Unlike an auction, the likelihood that you are going to have a mountain full of leftovers and a big mess on your hands is pretty likely. Some estate sale companies will address this concern and make ‘clean up’ arrangements at your expense.


ESTATE SALE: YOU CAN’T WATCH!

Despite the fact this point was mentioned in the ‘contracts’ section of this article, it deserves its own section. Many estate sale companies have a provision in their contact that no member of the family is allowed on the premises while the sale is under way. Regardless of the reasons given, if this isn’t a red flag to you then nothing is. The fact is, most estate sale companies do not want you around during YOUR sale. Like I said earlier, it’s the wild, Wild West of all businesses where there is typically no accountability whatsoever from a licensing, registration, educational or even the owners of the property being present.


ESTATE SALES ARE A POOR BUSINESS MODEL

At the end of the day, an estate and tag sale is simply a glorified garage sale which is typically operated by one or two semi or retired part-time ‘weekend warrior’ type of small business owners. None have any professional training, or education in the ‘estate sale’ field whatsoever. There are no ‘industry standards’ starting with a strict code of ethics because there isn’t any trade organizations or associations. Many are current or former antique shop or reseller dealers who bring a level of expertise in specific areas but nevertheless, when they are dealing such goods along with representing an estate, it’s clearly a conflict of interest to say the least.

Despite all of this, the actual estate sale process is poor and rarely advantageous to the seller. Assuming that everything an estate sale company is above par, the process alone nullifies the effectiveness of the ultimate goal - receiving the optimal value on the goods through a complete liquidation effort. Their liquidation is never complete without the use of a garbage dumpster, goodwill and a guarantee in writing that the estate sale company will ensure that the property is clutter-free and clean at the end of the sale.

There is NO salesmanship whatsoever when it comes to selling your valuable assets at an estate sale. None. The handlers of the estate use the ‘silent salesmanship’ approach to selling your goods which equates to a price tag and willingness and hope that a buyer will purchase the item.

Estate sales are simply not the best choice when liquidating an estate.




WHEN ESTATE AND TAG SALES ARE EFFECTIVE

Choosing the right type of service to liquidate an estate is subject to the type of merchandise that needs to be sold.

An estate sale (tag sale), garage sale is effective if the estate simply contains general household merchandise and modern day furnishings and foreign imported goods. However, if there is a selection of fine antiques, collectibles, memorabilia and certain types of collections, then an estate sale is absolutely a poor choice.

Keep in mind that our firm offers estate sale services but there is a reason why we have conducted just ONE estate sale in the past decade - because we strongly advise our clients against choosing this method of selling their assets.

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THE DEFINITION OF AN AUCTION:

An auction is an event in which goods or property is sold to the highest bidder.
By being open to the public, an auction ensures a wide range of bids, and
sometimes items at auction can fetch surprisingly high prices. The bidders, in turn, create their own market, determining on an individual basis how much they want to pay for an item, rather than having prices dictated by the seller.

WHY SHOULD YOU SELL YOUR ASSETS AT AUCTION?

The auction method of marketing is one of the world’s earliest professions. In fact, this unique method of selling literally dates back to thousands of years and the reason for this is quite simple. Auctions are the quickest and most efficient method of selling goods at market value.

Truly professional auctioneers are full-time professionals that typically have years of experience and an extensive educational background in the auction industry.


OVERVIEW

• Creates Competition: When Bidders Compete, Sellers Win.
• Establishes a floor and eliminates the ceiling on pricing
• Seller has full control (when, where, how much, terms, conditions, etc).
• Fully transparent and recognized as being fair to all parties in the marketplace
• Only method that truly reveals the Current Fair Market Value
• Satisfies Governmental and Judicial requirements
• Creates excitement within the marketplace
• Creates a sense of urgency that cannot be duplicated by any other method of marketing
• Converts all your items into cash. Not just your best items
• Buyers come prepared to buy
• Auctions expose your assets to a larger pool of qualified buyers
• Fully transparent! Sellers are welcome and encouraged to attend THEIR auction.

AUCTION: THERE IS AN INDUSTRY STANDARD

There is a well defined industry standard in the auction industry through the National Auctioneers Association, the North Carolina Auctioneers Association and the State of North Carolina.
Regardless of which auction company you are considering to do business with, it’s important that they are members of their state and national auctioneers association as they are required to follow a strict code of ethics with these organizations.

Furthermore, the auction industry provides extensive educational resources with the most distinguished is the Certified Auctioneers Institute which is a three year designation program held at Indiana University in Bloomington, Indiana. The CAI designation is equivalent to a PhD in the auction industry and roughly 1,100 auctioneers worldwide maintain this important auction designation.

In addition, the Universal Commercial Code specifically outlines important protocol that professional auction firms are to adhere to.

AUCTION: 100% TRANSPARENT!

Carolina Auction & Realty, Inc. not only welcomes but we encourage our sellers to attend their auction! There is nothing more satisfying than seeing the owners of the property smiling while witnessing the success of their auction event. At a public auction, each item sold is completed in open view which leaves nothing to the imagination.

AUCTION: THE AUCTION METHOD OF MARKETING

Generally speaking, professional auctioneers are specifically trained and experienced in the ART of marketing. In fact, this is the most important aspect of the entire auction process. On a regular basis, auctions make the headlines with local and national news agencies because auctions create and demand attention!
Professional auction firms go to great lengths to market your assets to the right target market audience as opposed to limiting their advertising by placing generic classified ads in the local newspaper and a cardboard sign on the street corner.
In terms of marketing alone, the auction method of marketing in a league of its own.


AUCTIONS DELIVER FAIR MARKET VALUE!

Auctions are the only method of selling where prices are negotiated upwards through the momentum of competitive bidding. Can you think of a better way to determine fair market value than an auction with an object offered by a willing seller and a crowd of willing buyers?

Without question, dealing with an experienced auction firm, a well prepared and marketed auction will result in the highest possible fair market value on that particular day in a timely and efficient method.

Before you make the decision on liquidating your estate, be sure to consult with your local auctioneer and discover how the auction method of marketing will work for you.

Only at auction!

Auctions Cause Bidders to Compete

The auction method brings true market value for your property by causing bidders to compete against each other in one place at one time, with one chance to buy. Optimizing these conditions – maximizing the number of qualified bidders at auction – is our business.
A successful auction is the result of:
• Targeting motivated, qualified prospective purchasers.
• Establishing bidder confidence in the property value and the auction process.
• Reaching buyers with quality advertising and other communications.
Targeting: Planning begins with identification of those prospective purchasers who will be most interested in a particular property and will pay the highest price. Immediately upon receiving the assignment to auction your property, we will assemble lists of prospects to target with our custom brochures, e-mail and other communications.
Confidence: To bid with confidence, prospects must feel that they know what they are bidding on. Our marketing department will provide all relevant research, materials and information that participants require, as well as coordinate property inspection.
Advertising: Quality advertising not only maximizes awareness, but also the perceived value of your property. Our beautifully produced full color brochures, our industry leading web site and other materials make a statement about what is being sold.
Our aggressive marketing campaigns are highly concentrated under the compressed time frame of the auction method. So each marketing dollar delivers greater impact. And while all of our marketing plans are customized for specific properties and market segments, all utilize multiple channels, which include:
• Local, regional and national news publications
• Traditional direct mail and e-mail
• Detailed exposure on our web site (24-hour, international access)
• Industry-specific trade publications
• Radio promotions
• Outdoor signage
• Aerial photos and surveys
• Custom brochures

Two Types of Auctions
There are two methods of selling at auction.
• In an absolute auction, the property is sold to the highest bidder, with no set minimum price. The absolute method maximizes all the benefits of auctioning: potential buyers will not miss the opportunity to attend, and competition is at its most intense.
• In a reserve auction, the Seller establishes a confidential minimum price, and has the right to decline the highest bid if that price is not reached. Reserve auctions can and do work, but it is imperative that the reserve price be realistic.
Terms of Sale & Accountability
In most auctions, the auctioneer's fee is covered by the “buyer's premium,” usually 10% of the selling price, paid by the bidder. On the day of the auction, the successful bidder signs a non-contingent purchase contract. The property is sold “as is” and the down payment is due at the conclusion of the auction, with the balance due and payable at closing. Closing occurs 30 days or less from the date of auction, or on another agreed upon timetable. Sellers may receive, at the time of settlement, a complete accounting of all income and expenses related to the auction.

The Two-Thirds Rule on Real Estate Auctions

Not all properties should be sold at auction, but certain properties and situations will benefit greatly. A dependable way to determine weather a property lends itself to auction is this: If two of the three main components of a transaction (market, the seller and the property) lean favorably toward auction, then auction is the way to go.

MARKET
Do these characteristics describe the market?
· a changing market
· a dull market -- too much product but with buyer interest
· not enough of the particular property type (unique, lake front, etc.)
· an emerging market -- for example, a new development whose sales could take off once some properties are auctioned
. a seller’s market with high demand and high competition

SELLER
Do these characteristics describe the seller?
· needs immediate cash· going through a partnership or marriage break-up
· is moving out of state· wants to liquidate an estate
· is retiring
· is an auction-minded seller· has a listing that is about to expire
· has already purchased another house· knows auction will bring a fair market price
· has financial problems
· has high carrying costs on the property

PROPERTY
Do these characteristics describe the property?
· carries a lot of equity (25% or more)
· unique -- enough market interest to encourage competition
· burdening the owner with high carrying costs
· vacant -- vacant properties may encourage vandalism
· difficult to appraise -- unique properties are difficult to appraise