Auction houses Vs Estate Agencies

I found this artical on Property 24 website and thought it may be of some interest to you. Enjoy.

04 Oct 2012

In the past, a home on auction would probably have belonged to a distressed seller, someone who had fallen on hard financial times and had his or her home repossessed by the bank.

Today, however, more and more estate agencies offer auctions as an option to their sellers, as an addition to the more traditional estate agency sale. Buyers in a rush to sell their properties may find the idea of an auction more appealing, as properties move more quickly selling this way.

Heidi Franck, Group COO at One Property Holdings outlines how to decide on the best option for your property. The residential property market is slow and due to the current economic climate, there is little growth.

That said, sellers will still sell their properties, but it is taking much longer than previously, depending on its value. “Houses that are priced below R 1 million will sell more quickly, as there are more buyers in this market than for the more expensive properties,” Franck explains.

To this end, buyers in a rush to sell their properties may find the idea of an auction more appealing, as properties move more quickly selling this way. Most sales that take place on auction do not have conditions or ‘subject to’ clauses, Franck says. Buyers at auctions are required to put down a deposit and have been pre-approved for a bond by their banks prior to bidding, so the sale on auction is unlikely to fall through due to the inability of the seller to qualify for a bond.

Moreover, it frees the seller from dealing with buyers who are not serious - if they make a bid on the house, they generally have their ducks in a row and mean business. On the downside, commissions charged by auctioneers are usually higher than those of estate agents. This is due to the intensity of the specific marketing that is done around an auction, says Franck. “While an estate agent is able to place an advert in the paper, bringing in a pool of buyers that they can then refer to, as well as all the other properties on their books, an auctioneer’s marketing has to be more targeted – and this comes at a premium."

That said, the buyers that arrive at the auction have specifically chosen to bid on your house alone, says Franck, and there is a greater chance that they will commit to a sale if successful, than people who have simply popped in to see a show day and like what they see.

On the other hand, when going with an estate agent, there is the potential to get a higher price for the property, she says, which is mainly due to the fact that estate agents are usually area focused and have an intimate understanding of their specific market. "Optimal market knowledge together with the incentive of a higher commission that results from achieving a higher sales price will inevitably drive a more lucrative sale.”

According to Marc Zlotnick, Managing Director of Forsite, there are positives and negatives to both methods. “Auctions are quicker processes, but the commissions are higher and the agent area expertise may not be as good. "Traditional estate agency sales take longer, buyers are messier to qualify but the agents are more negotiable and the parties feel as if they have been more participative in the deal.” At the end, however, true market value will prevail – because property is bought and sold when a willing buyer and a willing seller agree on a price in an open market.

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Video

Hi

I found this video of a company in the USA talking about selling property through auction.

Very good, I recommend you to watch it. Most of what is said can be used in principle here in South Africa.

http://youtu.be/Md-bRhthsOg

Enjoy

Mornay

Why Auction You Property Part 3

As we continue on our journey in discovering why auctions are the best way to sell your property, I'm going talk today on a subject that I have already mentioned in previous posts.

No Suspensive Conditions

If you have been in the property market you will know what I mean by suspensive conditions.
But for those who are new to the property market I will explain what suspensive conditions are.

Suspensive conditions can be your worst enemy or your friend. Suspensive conditions are conditions that are added to a sale agreement if the purchaser has to apply for a bond or has to sell their property in order to buy your property. In other terms suspensive conditions can also be called "subject to".

Under normal selling conditions through estate agents the purchaser can have all the power and dictate to you the seller as well as the estate agent. They can insist on suspensive conditions. The reason they do this is to safe guard themselves. So if anything goes wrong they can walk away from the sale leaving the seller and the agent at a lose.

With auctioning suspensive conditions do not apply at all. So there is no waiting and worrying if the sale is going to fall through because the purchaser has not been able to sell their property or they have not been able to raise the finances. All purchasers have to either have their finances ready or be pre-approved by a financial institute. Without the suspensive conditions, puts the seller back in the driving seat.

I hope this has  helped. If you still not sure please comment and I will get back to you as soon as I can.

See you on Monday for Part 4

Why Auction Your Property Part 2

So we shall continue with the reasons why you should auction your property.

We are going to look at securing a deposit when an offer to purchase is submitted on your property.

Deposit paid on the fall of the Hammer

So what do I mean by a deposit paid on the fall of the hammer?

Many of you I'm sure have gone through or going through selling your proeprty. One of the worst fears when selling a property and signing a offer to purchase as an acceptance to a purchase price on your property is that the sale falls through.

One of the reasons for this fear is that all to often a prospective buyer never obtains a pre approved bond from a financial institute our they still have to sell their property first. What happens next is the fiancial institute rejects the bond application of the purchaser or fails to sell their property in the time limit given to them (This is known as suspoensive conditions). This then becomes a waisted execise, waisted time and money. Somthing that non of us can afford.

With auctioning there is an added safe guard when selling through auction. This safe guard is the purchaser has to pay a minimum of 10% deposit* (this varies according to the different auction houses) which is non refundable to the purchaser on the fall of the hammer.

By doing this it has a two fold effect. First it ties the purchaser into the sale of the property. The purchaser will loose the deposit should they get cold feet and want to pull out of the sale. Second, only purchasers who know they have either got the finance or have the deposit and are pre-approved will attend the auction and or make an offer on the property.

This rule applies to both pre-auction and auction offer to purchase's.

IF you want your sale to be guarenteed then you need to seriously consider property auctions.

* Applies to Dales Bros Estate Agents & Auctioneers.

See you tomorrow for part 3

Why Auction Your Property Part 1

Yes this is a very good question.....

I have decided to answer this question over a series. I'm goingto breack it down into sections and go through all the advantages of auctioning your property.

So here we go.

The biggest and most important reason to auction your property is this.

Seller Does Not Pay Commission

You're probably going yea right......
Well it is true. But I'll back to that in a minute.

When selling your property you have to make some very important decisions. Decissions like, "do I sell the property privately" or "which estate agency do I use".

For those who choose to sell their property own their own is for one reason most of the time. They don't want to pay commission. I totally agree. Who wants to give away money that can very easily be yours.

Well there is an alternitive.

When you sell your property at auction you do not pay the commission. The commission is paid by the purchaser. It is as simple as that. But please not that the property has to sell under auction conditions. Meaning, The property has to be included in on the day of the auction and Purchasers have to have a chance to bid on the property.

Now there is an alternative to this. Some auction houses such as Dales Bros Allow for what is called pre-auction offers and post auction offers.

Pre-auction offers is an offer to purchase submitted before the auction. There are certain rules that apply to this though. Rules such as the offer will be a private treaty offer to purchase (I'll explain this at a later stage). The purchaser has to have their finances ready. The sale has to be concluded before the auction and there are no suspensive conditions allowed. (I'll explain suspensive condition at a later stage). The most imprtant thing is that the seller will then pay the commission. But Dales Bros works differently with the commission situation. What they do is ensure the offer that is submitted is a strong offer. What I mean by this is that the offer has to cover the commission for the seller. By doing this, in theory, The purchaser is paying the commission.

Post auction offers really work in the same way as a re-auction offer. So I won't bore you with the same story twice.

Well that is it for now. I hope this has helped you to understand property auction a bit better.

As usual, if you have any questions or concerns please drop me a comment and i will get back to you soon.

See you tomorrow for Part 2

Regards

Mornay

Welcome

Welcome to the new blog about Property Auctions.

I have been reseaching the internet on information about selling properties through auction and I found that there is hardly any information about property auctions. Especially in South Africa.

I myself work for a Auction house here in Pinetown Kwa-Zulu Natal South Africa. I have been in the real estate business for a few years as a estate agent. Then i took the big leap and moved overt o property auctions. Since i made this move I haven't looked back.

So, you may be asking why blog on property auctions. Well let me tell you a bit about it. I will over time go through auctioning as well as keep you upto date with what is going on in the property sector.

Property auctions are well under used in South Africa. There is this mith about auctions which says "you have to be in financial trouble to use auctions". or "auctions are only for bank repossessions, liquidations, foreclosers, etc, etc". Well what I have to sayto this is BLAH, BLAH, BLAH.

As mentioned above is true and if you are into property investment going to sherrif auctions to buy repo properties is good way of saving money and making money, its not the only way to auction properties.

In Australia buying property can only be done through auction. The UK is more or less the same. South Africa was following suite until Auction Alliance and their dirty dealing put a bad name to property auctions in South Africa was becoming one of the best ways to sell your property.

Since the Auction Alliance saga, property auctions have started to gain momentum again. More and more people are starting use property auctions as a way to dispose of their properties quickly, easily and even make a profit from the sale.

My aim for this blog is to educate people on property auctions so that you can get a better understanding of the industry and ultamitly get rid of the stigma that has been attached to proeprty auction for far to long. I'll keep you upto date with news and views of the real estate market. I'll keep you posted on upcoming auctions from various auction houses and teach you why auctioning is the way to go.

You are more than welcome to leave a comment or email me with suggestions or if there is a specific topic you would like me to cover.

Come back tomorrow to find out more.

Enjoy