Have you been involved in HUD sealed bid auctions?

Last month, I sold my first house as buyer agent for a buyer of a HUD property in my area of St. Louis, MO

HUD homes in St. Louis are sold through an online "sealed bid" process and in case you're not familiar with it or it's different in your area, I thought I'd share some observations of the process.

1. There are no pre-qualifications for bidding, but only HUD registered agents can place bids for their buyers. Before you place a bid, you need to make sure your buyer can close.

2. Owner-Occupants have the first opportunity to buy these homes and if not sold within 30 days they open it up to investors. I primarily work with investors and seeing the condition of some of these homes, I don't understand why they make the "Owner-Occupant" period so long. Many of these can only be purchased with cash and even if they have the cash very few "Owner-Occupants" want to take on such a huge project.

3. Once the initial bidding period is over (usually 10 days) bids are reviewed daily. However, there is very little feedback, you simply get an email that it was rejected or accepted.

4. Sometimes, several days (or weeks) after a bid has been placed HUD sends an email to let you know their "minimum bid" that they will accept. This is the only part of the process I thought was helpful, and it doesn't happen for every property. It seems they only use this when they start getting motivated.

5. If your bid is accepted, you have 2 business days to sign all the paperwork (lots of it) and get it to the out of state office handling the closing. If you don't get the paperwork on time or you don't fill it out correctly, they cancel the bid and it goes back on the market. We had this happen and it's not fun. We had to submit the bid again, fill out all the paperwork again and pay to FED-EX again (won't make this mistake twice). HUD is not at all flexible with their process, make sure you read everything at least twice and review all the places needed for signature several times so you don't miss anything.

6. It took the entire 45 days that they gave us to close. My buyer was a cash buyer and could have closed in a week or less. I'm use to working on regular REO's and we've closed them in as little as 10 days after having an accepted contract. This was frustrating to have to wait until the very last day to close it. And, oh yeah, it takes a week to get your commission check after it closes.

After going through this process, I still prefer the "open bid" process where everyone knows the current high bid. However, we did build the "sealed bid" functionality into the online real estate auction system we designed so our customers have that option. We only have a couple customers using it and so it will be a while before I can determine the difference in success rates, but I'll be watching.

If you're interested in seeing how real estate agents & auctioneers are using online bidding for their own listings, join our next webinar on October 20th at 2 pm EST

Do buyers overpay at auctions?

Last week, I took a buyer to a local "Williams & Williams" auction where they were selling 4 properties. The auction was done live on the front lawn of one of the properties and buyers could also participate online.

If you haven't seen Williams & Williams auctions, check out their Auction Network site which shows all the current auctions they are running. I think they do a nice job.

We were both surprised at the prices each of these properties received. My buyer is a well seasoned investor and we did our research to know the right price to pay and still be able to make a profit in this market.

In every case, the property went for at least $10,000 more than we thought it should. One of them went for close to the list price in the MLS (crazy when you consider the buyer could have bought the property months ago before it was taken to auction).

This was the 4th Williams & Williams auction I've attended locally and once again it proved to me that when the auction is marketed correctly and done right, there isn't a better way to sell.

I hope you're seeing the same success in your market.

Are the banks getting more motivated?

Last week, I took a buyer into a couple of bank owned "REO" properties that just came on the market. In the past, these type of properties were initially listed too high so we would wait until a property sat a while and had several price reductions.

Now it seems, that some banks have changed their strategy and are being much more aggressive with their initial listing price.

In the couple we looked at, they were priced very fair and close to "wholesale/investor" pricing. I wasn't surprised to find out they received multiple offers and I'm sure they will get over list price.

As a real estate broker/auctioneer, I have to ask why the banks are not turning more to online auctions to sell these? Why deal with multiple offers when there is an easy and efficient way to have the buyers bid it out online? The banks already have very specific terms and contract addendum they force buyers to use, making their listings ideal for the auction process.

At some point, the asset managers need to take advantage of the best and most efficient process to sell these assets? But, when?

Are you getting the best price for your REO listings?

At the end of January, I attended a Hudson & Marshall "live" auction in St. Louis with a buyer client of mine.

In case you haven't seen a Hudson & Marshall auction, they do a very nice job. You can check out their upcoming auctions at their website Hudson and Marshall

The auction was for 57 homes around the St. Louis area. The 2 properties he was interested in were at the end of the list so we observed for about an hour before he got to bid.

It started out with about 125 people but when we got to his 2 properties only about 30 people were left. As a result, he ended up getting an 8-year old home in a very nice area at an amazing price. He'll easily make $40K+ when he resells it in 3 months (required holding time by Fannie Mae).

During the auction, I kept track of the winning bid amounts and after it ended I went to Hudson & Marshall's site to see which properties actually sold (Bank has to agree to winning bid). As it turned out, only 20 of the 57 sold (35%).

In reflecting on this experience and the process, I thought I'd share some ideas that would have made this auction more successful.

1. Get the local listing agent involved - For whatever reason, the local listing agents in my area don't update the MLS listing with the auction information. Typically the REO agents have lots of properties so someone (i.e. Hudson & Marshall in this case) should be contacting them and making sure they update the MLS listing with the auction location, date & time.
2. Incorporate online bidding - The technology exists to allow online bidding during these "live" events. There is no reason they couldn't have reached at least 100+ more people online in addition to the 125 in the room. That creates more competition and will end in higher winning bids.
3. Reach out to buyers agents - Hudson & Marshall could put a marketing campaign together aimed at buyers' agents to bring their buyers. They are a fun way to buy and although the agent only gets a 2% commission, it's one of the easiest transactions I've ever done. Hudson & Marshall collected earnest money did all the contract work etc. I showed the house to my buyer, came to the auction and collected my check at closing. That's it!
4. Local advertising - I don't know where Hudson & Marshall advertised for this event, I never saw it. I found out because I frequent their site looking for deals for my buyers. However, there are great inexpensive venues such as local real estate investor meetings. They could have easily doubled their on site attendance with an email to these groups in my area.

These are just a few ideas, but the bottom line is that there is a "HUGE" pool of buyers looking for these bank deals and there is big missed opportunity by not marketing them properly.

Last month, I shared how I've found some "hidden" deals for buyers in my St. Louis market on Auction.com (REDC auction company)

I'm still finding them, and the reason they are "hidden" is because of the lack of coordination and communication between the local listing agent and REDC. A big opportunity for the local listing agent who takes ownership of the process and does the online auction themselves.

In addition, I've been contacted by at least 2 buyers a week wanting to know where to find the "deals". I think it's because the word is starting to get out in the media that the real estate market has hit the bottom and on it's way back up.

Many of these buyers are intimidated by online auctions because they are still "new", so I started to give some thought to what can be done to help buyers be more comfortable with the process.

Here are some initial ideas (some obvious, but surprisingly often not done)...

1. Clearly communicate the dates and times of the open house previews
2. Create short video that answers FAQ's and invites them to contact you with additional questions
3. Make it easy for buyers to ask questions (email, phone, online chat, text, etc.)
4. Give the winning bidder 5 days to do inspections after the auction (not done with traditional auctions)
5. Don't use a buyer premium, collect your commission from the seller

Do you have any additional ideas? I'd love to hear them.

Interested in our next online real estate auction training session? Register Here

Auction.com - Are you watching?

A couple of weeks ago I noticed a new sign in the front yard of an REO property I was showing from real estate auction company REDC - website Auction.com

I called the listing agent and found out that the bank that owned the property had turned it over to REDC to sell through their online auction process.

Whether on purpose or just too much going on, the listing agent never updated the MLS information and since this property was at the end of a cul-du-sac I think very few people knew about the auction.

In addition, the payout from REDC to a buyer's agent is 1%, so I imagine very few buyer's agents working with buyers even let their buyers know about these.

It was last listed in the MLS at $194,900 and the opening bid was $69,000.

This property was not like many of the REO's I've looked at. The bank had actually spent money replacing all the carpeting, painting and putting in new vanities and toilets in all 3 bathrooms. It was a very nice 4 bedroom home in a great area of west county St. Louis.

My buyer won the bid at a great price and now we are just waiting on confirmation from the seller (bank).

But, what's the opportunity?

REDC is a huge auction company selling tens of thousands of homes across the US through their auction process, but what seems to be missing is the local marketing for these properties.

This is a great time for the local broker to get up to speed on using an online auctions to market their listings and provided that needed local customer service that is missing from the REDC auctions. Join us to learn how

Online Auctions - Not for the lazy Realtor

This past week I was teaching a class of auctioneers & real estate agents how online auctions work, some advantages & disadvantages, etc.

While there are a lot of efficiencies gained by using an online auction vs. a live "on-site" auction, the class observed that an online auction still requires more effort than most Realtors give when marketing one of their listings.

I agree, there is more effort involved, but not much more, which leaves a HUGE opportunity for progressive agents willing to put in that effort.

Interestingly enough, all the agents I'm currently working with have sellers so excited about the concept that the sellers are giving them upfront fees to do an online auction for them. This is more evidence of the demand in the market for this service.

If you don't understand the online auction process or even where to start, I can help you too. We hold a webinar each month that explains everything. I hope you can join us. Register Here

An online auction gives you 3 ways to sell

One of the many benefits of using an online real estate auction to market a property is that it gives you 3 ways to sell the property during the process.

1st way (Pre-bidding): Instead of letting people bid on the property as soon as it goes online, you can advertise it in a "preview" mode before bidding opens. By having it in "preview" mode for 7-10 days before opening the bidding, you create the urgency for buyers to submit a written offer and get it under contract so they don't have to compete. The seller can accept a pre-bidding offer and cancel the auction before online bidding opens.

2nd way (Online bidding): This is the most obvious. At the end of the online auction, the high bidder puts the property under contract as expected by the terms.

3rd way (Post auction): If for some reason, the bidding doesn't meet the reserve price, the auction process will have produced a list of buyer leads interested in the property. You can contact all of them, let them know the seller is interested in the highest and best offer they are willing to submit.

If you'd like to learn more about this process join our next online real estate auction training session.

Why use an Online Auction?

Do you consider yourself a progressive real estate agent who keeps up with technology? Are you using online auctions yet?

Here are some of the advantages/reasons to look at adding online auctions to your services.

Reason #1: It's a Quick Sale
An online auction gives the owner an opportunity to sell at today's prices and not wait for a buyer to bring an offer.

Reason #2: High Carrying Costs are Avoided
All property incurs costs during it's marketing period. By accelerating the sale the owner will substantially reduce the holding costs such as debt service, taxes, HOA fees, insurance, maintenance, etc.

Reason #3: Property Market Value can be Demonstrated
Instead of relying on the appraiser to assign an asking price, the auction process demonstrates the value of the property to the sellers and potential buyers. Selling a property using the traditional method, you may wonder whether you could have bargained higher. If a property is sold at auction, the proof of the market value is in the process itself, the selling price is truly market-driven.

Reason #4: Auctions Receive Maximum Marketplace Exposure
The marketing time frame for an online auction is more condensed than in traditional methods. Additionally, buyers are naturally attracted to auctions because they are different. They stand out and buyers become curious. Buyers don't want to miss out on a great deal so they visit the property.

Reason #5: An Urgency to Buy is Created
An online auction has a specific ending date/time. A sense of urgency is created: "buy this property today, it won't be here or available when the bidding ends". It forces hesitant buyers to act.

Those are some of the main reasons, to learn more about using online real estate auctions join us on our next training session.

Do you hold open houses to sell land?

I was recently coaching a RE/MAX agent who was using our online bidding system to market a 4 acre piece of land in the St. Louis area (St. Charles).

Most of our customers are selling homes so it was a little different but not unique.

When selling a home I teach that you need to schedule at least 2 open house "previews". By having an open house "preview", you get all the interested buyers in at the same time which creates competition, nothing new there.

So, this RE/MAX agent decided he would try an open house for his land. Honestly, I thought it was a waste of time, but I was also curious so I didn't try to talk him out of it.

The second thing he decided, was that he would do it on a Wednesday from 11am - 1 pm. I also didn't think that was ideal, but I still didn't try to talk him out of it.

The results... 5 interested buyers came out during that Wednesday to walk the property with him and ask questions. This a property that had been in the MLS for 8 months with very little interest. And 5 may not seem like a lot, but he and I both thought it was amazing to get that type of response under the circumstances.

Once again I learned something, which I do every time I help someone use the online bidding process.

And the final results... It received 16 bids with the high bid being $105,000 and it actually just closed escrow last week.

If you're interested in learning more about how this online bidding process works, join our next Real Estate Online Auction Webinar

Short sales: I need the highest offer quickly!

Short sales are a lot of work and if want nothing to do with them, I don't blame you.

However, for the listing agents actively involved with them, I discovered a better way to get the highest offer for the lender quickly.

I've seen lots of different strategies, but an open/online bidding process seems to be one of the best options out there today. The process puts a deadline on submitting offers (like HUD homes) but it keeps a fair playing field for all buyers by letting them know the current bid price. This can actually drive up the price and create a heated bidding war as it ends. At completion, the high bid also comes with all the bid history to help substantiate a "fair market value" for the lender.

Here is a simple overview of the process...

1. The property is marketed using an online bidding platform (in coordination with the MLS) for as little as 1 week. It includes holding at least 1 open house preview, preferably 2. In the auction terms it MUST be clear that the high bid is subject to lenders approval. The online auction makes it simple for buyers and their agents to submit offers and it's all automated (No more juggling multiple offers and all the paperwork involved).
   
   
2. When it ends, the high bid is written up as an offer and presented to the lender. In addition, the agent also explains to the lender how the property was marketed through an online bidding process, and they provide stats such as number of people who visited the property, number of bids, number of people bidding, etc. This will help the lender realize the highest bid is "fair market value".
   
   
3. The short sale process is managed as normal, but the agent can also follow-up with the non-winning bidders and sell them other properties.

A real example...

I recently worked with a RE/MAX agent to use this process in St. Louis. The property being sold was not a short sale situation when he took the listing, but after several months of not being able to sell it, the sellers situation changed.

He was able to use the process to get several buyers interested in it by starting low and having them bid online. When it was over he brought the highest offer to the lender (a local lender) and they felt the process got them a fair price so they approved the short sale and it closed in about 6 weeks.

The agent, seller, lender and buyer were all happy with the results. A win-win-win-win.

Upcoming Webinar Demonstrates the Latest Advances in Online Real Estate Auctions

Upcoming Webinar Demonstrates the Latest Advances in Online Real Estate Auctions

Let the bidding begin!

When it comes to selling real estate, there isn't anything more exciting than watching a bidding war take place over your listing. The seller is excited, you as the listing agent are excited and the buyers are excited to participate.

The above condo listing in Las Vegas is a great recent example. The seller had newly rehabbed this property and the winning bid well exceeded their "bottom line" price. At the same time the winning bidder got a good deal compared to other sales in the complex.

The important thing to remember when selling using an online auction is that you need to have scheduled open house "preview times" as well as good signage and marketing to let buyers know about it. Buyers in today's market are looking for deals and the "auction" activity draws them in.

If you're interested in seeing more details about this auction Click Here

I'm not selling to the highest bidder!

When it comes to online real estate auctions, there is still a lot of confusion among real estate agents on how they work. Here is another myth...

Myth: If I use an online auction, I MUST sell to the highest bidder.

Truth: Most online and even "live" auctions are done using a hidden reserve or “Subject To Confirmation”. In either case, the seller and agent are protected and not forced to sell if the bidding doesn’t get high enough. An "absolute" auction is the only auction type that requires the seller to sell at the high bid. So, unless, you see the word "Absolute" in the marketing of an auction, there is a reserve.

When an auction is marketed correctly, the process brings true market value for a property. Even in the case where that price isn't as high as the seller had hoped, you can use the online bidding process to help the seller see what buyers are willing to pay.

Right now, I'm seeing more and more online auctions used for short-sale situations because it's a quick way to get the highest and best offer to present to the lender. The competitive bidding also presents a good case that the highest bid is "true market value".

Online Real Estate Auctions in Texas

Real Estate Disposition Corp (REDC/Auction.com) held an online only real estate auction in Texas this past weekend featuring 120 properties.

They reported yesterday that 95 percent of the properties sold for a total of $10.3 million in sales. Not too bad for one weekend and this was just part of their $47.4 million in total sales that includes their other auctions.

The great news for real estate agents in Texas and around the country is that those sales were all done online. No hotel ballroom to pay for and coordinate, no bid calling, just point buyers to the website and let them bid away.

The same technology to use online bidding is available to real estate agents today and it's a great time to take advantage of it.

Short sales: Getting creative

It's no secret that short sales are a lot of work and the reason why many real estate agents don't bother with them.

However, for the ones that do, it's frequently a challenge to get a reasonable offer to start the process with the lender.

One Solution : Some agents are turning to technology, by marketing a short sale through an online auction so they can get the highest & best offer within 2 weeks or less. This approach leverages the auction process to drive the demand and price up while also providing an offer that can be easier to justify because it was determined in an competitive bid situation.

Here is a simple overview of the process...

1. The property is marketed using an online auction platform (in coordination with the MLS) for as little as 1 week. It includes holding at least 1 open house preview, preferably 2. In the auction terms it MUST be clear that the high bid is subject to lenders approval. The online auction makes it simple for buyers and their agents to submit offers and it's all automated (No more juggling multiple offers and all the paperwork involved).
   
   
2. When it ends, the high bid is written up as an offer and presented to the lender. In addition, the agent also explains to the lender how the property was marketed through an online auction, and they provide stats such as number of people who visited the property, number of bids, number of people bidding, etc.
   
   
3. The short sale process is managed as normal, but the agent can also follow-up with the non-winning bidders and sell them other properties.

This is a very simple overview as there are a several other details that make an online auction successful.

If you are involved in short sales, you're welcome to come learn more about this progressive sales strategy. Real Estate Auction Webinar - Click Here

Are You Willing to be a Leader?

Online bidding will become the preferred method for selling real estate in the coming years. Here are some early indicators…

• REDC (Real Estate Disposition Corporation), the largest real estate auction company in the country, now sells more real estate through their "online only" auctions than their live ballroom events. As an example, for the week ending March 6th, 2010 they set a record sales volume of $71M sold and $43.2M of it (over 60%) was sold online.
  
  
• County courthouses around the country are beginning to sell their foreclosures through online bidding. In Dade County Miami they have sold 2,800 properties since they started in mid-January. Broward & Palm County have just announced they are implementing it as well.
  
  
• REDC has partnered with a company in the UK for “online only” auctions. They sold 57 properties at their first event in February.
  
  
• Tulare County – (Near Fresno CA) has just announced their Tax lien sales will now be done through online bidding.
  
  
• RE/MAX International is holding their first “live/online” hotel auction event with 150 homes on April 10th in Denver.
  

Be a Leader & join our next webinar to see how you and your team can use online bidding with your listings in your market today.

Real Estate Online Auction Webinar

Real Estate Auctions Today - What's going on?

Most people are not aware of what's going on with real estate auctions today, so I'd thought I'd share some highlights…

• Celebrity Cher sold a Hawaii property through an auction in January for $8.7 Million

• Ballroom & studio auctions where 100's of REO properties are being sold are becoming more common and frequent in the larger cities.

• The largest real estate auction company right now is Real Estate Disposition Corporation (REDC/auction.com). For just the first 9 weeks of 2010 they have already sold 7,488 properties for a total of $403 Million.

• REDC is now selling more real estate through their online auctions than their live ballroom events. As an example, for the week ending of March 6^th 2010 they set a record sales volume of $71M sold and $43.2M of it (more than half) was sold online.

• REDC just partnered with a company in the United Kingdom to use online bidding only. In their first event this past February they sold 57 properties.

• County courthouses around the country are beginning to move their foreclosure auctions online. The most recent example is Dade County in Miami.
  

• Real estate brokers & agents who recognize the opportunity are going to auction school or partnering with experienced auctions.

• RE/MAX International in Denver has partnered with a local auction company and is holding their first “live” hotel auction event with 200 homes on April 10^th.

If you're interested in learning more about online real estate auctions,join our next webinar

Short sales: Perfect for an online real estate auction

Now, more than ever, lenders are willing to consider short sales when the borrower is in financial trouble and there is no equity in the home. They really don't want to take properties back in foreclosure.

The Opportunity : You can now use an online auction as the perfect tool to get the highest and best offer for the lender quickly.

Here is a simple overview of the process...

1. You market the property through an online auction (in coordination with the MLS) for as little as 1 week. In your auction terms it MUST be clear that the high bid is subject to lenders approval. The online auction makes it simple for buyers and their agents to submit offers and it's all automated (No more juggling multiple offers and all the paperwork involved).
   
   
2. Then, you can take the high bid, write it up as an offer and present it to the lender. In addition, you also explain how the property was marketed through an online auction, and you provide stats such as number of people who visited the property, number of bids, number of people bidding, etc.
   
   
3. Manage the short sale process as normal, follow-up with the non-winning bidders and sell them other properties.

This is a very simple overview as there are a lot of strategies and techniques that make an online auction successful. You're welcome to join our next webinar to learn more. Real Estate Auction Webinar - Click Here

Do online real estate auctions work?

“Do online real estate auctions really work?” is a common question from anyone new to using online auctions to sell real estate.

The answer: Yes, absolutely they work! That's why were seeing a huge shift of auctioneers and real estate agents to adjust their selling strategies and start using them. That's why REDC (auction.com) has added "online only" auctions in addition to their ballroom-style auctions. In fact, REDC's "online only" auctions are regularly bringing in higher sales numbers than their ballroom-style events. A recent press reported that for the first weekend in December, REDC's online sales were $37.8 million and their sales at their ballroom-style events were $31 million.

The Internet has made the auction process available to real estate agents and is changing the real estate auction industry. The success is still related to how well it is advertised and whether the pricing is right, but an online auction is an easier alternative than it use to be.

Another reason that online real estate auctions are becoming popular is because buyers are more comfortable bidding online. It's easier to bid online than to write up a sales contract, and negotiation between multiple buyers is all automated.

If you aren't familiar with online real estate auctions, it's a great time to do some research and find out more.

We'll also share what we've learned on on next webinar - Real Estate Online Auctions