The Arizona Republic had a long article starting on the front page today on one Arizona home auction being planned for March 24 at the Phoenix Civic Plaza.
So far it’s much ado about nothing.
As of midweek, McCann had seven or eight homes consisting of resales and builder specs signed for his Phoenix auction.
Seven or eight. Hummm. Katie bar the door.
And, of course, a seller probably has a reserve price so he doesn’t have to sell his home if he doesn’t get his price.
The auction company, however, gets its price from the seller upfront. The sidebar to the article says sellers have to pay the auction company a non-refundable fee of about $2,000 to $10,000 to get in the auction.
I can see sellers after the auction thinking, “I didn’t get my reserve price but if I don’t accept this low ball offer my $5,000 auction fee will be wasted.”
When a seller uses a Realtor, the seller usually pays no upfront costs. It’s the Realtor who pays for all the marketing costs upfront. And the Realtor doesn’t get any of that money back unless he sells the home.
Boy, that would sure change the dynamics of the relationship between the seller and agent if the seller had to pay the agent a non-refundable deposit of a few thousand dollars just to get the Realtor to start marketing the property.
And there are more auction fees. The auction company also charges the winning bidder a 10% charge. Holy mackerel! 10%.
Add the auction fee from the seller to the auction fee from the buyer and, economically speaking, auctions are much less efficient than using Realtors.
The main reason you don’t see many non-government Arizona real estate auctions is that previous Arizona home auctions have not been successful.
This won’t be the only auction the area has seen. One that collected a handful of condos at the Optima Biltmore Towers last year drew only lowball bidders, and none of the properties sold.
Like car auctions (I’m not thinking Barrett-Jackson here), I suspect home auctions will tend to attract wholesalers… but will a wholesaler want to pay a 10% fee to the auction company? And oh yeah, wholesalers like to pay wholesale price.
Home auctions have been around in Florida for a little. Let’s search the internet and see where they are today.
Here’s a line from the promoter of a “Super Bowl Real Estate Auction” at an Indian casino in Florida.
“We have some very motivated sellers, some are in the pre-foreclosure stages,” Hollander said. “People can get some really good buys here.”
Would you want that person selling your house?
But if things don’t work out for you at the auction, don’t worry. You can always kick back and listen to some old guys in a one-hit wonder band from the 1970’s playing on stage at the casino.