SELLING AT AUCTION – AN EFFECTIVE AND INCREASINGLY POPULAR METHOD OF MARKETING REAL ESTATE & PERSONAL PROPERTY
Auction Savvy Checklist - Is an auction the right choice for you?
Written by Hagedorn Auction, a leading Montana Auction Service
Auctions are an ever increasingly popular method of marketing everything from personal property, antiques and estates to business liquidations and especially in this economy, real estate and homes. From Florida to Montana real estate auctions are becoming the norm and a quick alternative to traditional real estate brokerages. With auction popularity on the rise there are several things to consider when deciding whether an auction is the right decision for you as a seller of merchandise or real estate. We have listed just a few of the main things you should consider when making your decision.
1) Do you have enough merchandise to have your own auction or would participation in a “combined estate” auction or consignment auction be a better choice?
Auctions are an amazingly quick way to market large quantities of merchandise for the quickest dollar! However private auctions are not cost effective if you only have a small amount of merchandise to sell. For example it costs just about as much to properly advertise and conduct a $5000 auction as it does a $50,000 auction. So obviously your rate of return will be higher the more merchandise you have to offer. In addition, larger auctions naturally draw larger buying crowds for maximum bid prices. Not to fear though, if you only have a small estate of high quality items you wish to sell you may want to consider including your items in a "combined estate" or “consignment” auction. This is where a group of estates or sellers combine their merchandise together in one auction because they do not have enough merchandise to warrant or afford an exclusive or private auction. With several estates/sellers splitting the expenses the individual costs are lower while still providing maximum quality advertising and auctioneering services. For more information you can go to Hagedorn Auction Service’s Montana Auctioneers site and contact them for a free no obligation professional opinion on what type of auction would best suit your needs.
2) Are you really committed to selling your merchandise? What is your motivation for wanting an auction?
Some very good reasons for choosing the auction method of selling your items would be:
1) If you are moving and need to liquidate quickly or just don't want the hassle and expense of advertising each item in the paper,
2) If you have an entire estate that needs to be liquidated fairly quickly for dispersal to heirs and/or creditors,
3) If you unfortunately find yourself in a financial tight spot and need liquid funds quickly or,
4) If the items you wish to sell are too high in quality for a garage sale*.
(*You will most generally get quite a bit more on average per quality item at an auction than you will at a garage or estate sale. The reason for this is that you are offering your items at auction to MANY different interested buyers ALL AT ONE TIME. The auction method of marketing forces buyers to compete ‘bid’ against each other in order to purchase the items that they want. This competitive bidding drives the prices of most quality items to the maximum dollar and oftentimes to higher than retail prices.)
These are just a few good reasons for choosing an auction. In any case choosing an experienced and reputable auction company to market your quality estates/merchandise will net you the highest overall return for your money. Visit Hagedorn Auction Service’s website for a link to the Montana Auctioneers Association or for links to local Auctioneers in other states. You can also view auction flyers for upcoming Montana Auctions and other auctions they have conducted over the past two years as reference for the types of merchandise that can be successfully sold at auction.
3) What are your expectations?
You need to enter into an auction contract with realistic expectations. If you or a loved one paid $1000 for a brand new couch a year or even 6 months ago, chances are it may have already depreciated up to 50% or more. Or suppose you saw an antique pin just like your grandmother's at an antique store for $200. Please remember 1) the pin is "for sale" at that price and not yet "sold", 2) you don't know how long that pin has been “for sale” at that price, and 3) the overhead to run an antique store (advertising, rent, personnel, taxes, etc.) or even just the rent for a booth in a consignment store by the month is quite substantial. The owners/renters of these stores can wait quite a while for just the right buyer to come along and buy each item at top appraised dollar. Even then they still may not sell the item in question at that asking price. However, on the upside when selling through an experienced auction service or auctioneer with a top marketing campaign, MANY times merchandise will actually sell higher at auction than what it could have been purchased for in a retail store for the reasons outlined in #2 above. In any event you need to be mentally prepared for the fact that not every item will bring what you expect or hope for. On the “flipside” though, please also remember that many other items will most likely bring more than expected, ultimately balancing everything out in the end.
4) Most importantly, what auction company should you choose?
While there are many auction companies to choose from, not all auction services orauctioneers are created equal. The auction company, and ultimately the auctioneer, you choose can "make or break" your auction. A few things to consider when choosing an auction company are; advertising methods and quality, efficiency and expertise of auction personnel and methods, the auctioneer’s experience conducting successful auctions, average number of buyers the auction company draws to each sale, the extent and quality of their buyer mailing lists, satisfaction of an auction company’s previous clients (both buyers and sellers), the integrity and work ethic of auction company, and of substantial importance is the auctioneer's skill at "working" the crowd and receiving the highest bid possible on each item. Reputable auction services and auctioneers such as the Montana Auction Company, Hagedorn Auction, will be happy to provide a list of references to anyone who is seriously considering having a quality auction.
Another important aspect you will want to consider when choosing an auction company is the commission rate. Different auction companies charge different rates for their services. Beware though, when comparing auction services according to their commission rates alone. The biggest mistake a seller can make is to hire an auctioneer based solely on how low their commission rate is. Just because an auction company may charge you less commission to conduct your auction, that doesn’t mean they are the “best deal”. The ultimate difference between a good auction company or auctioneer and a mediocre or bad one can be THOUSANDS of dollars on your bottom line. A good auction company may charge a few percentage points more (or even double what a “beginner” auctioneer may charge) in commission and/or more for advertising or other services but when everything is said and done 99% of the time the best auctioneers will net you many times more the difference in price on your bottom line. Where a mediocre auction service may get 75 to 100 buyers at an auction with 30 to 40% of the buyers leaving before the auction is over, a good auction service can bring in an average of 200 to 400 or more buyers to each auction and keep upwards of 85% of these buyers for most of the auction. A mediocre auctioneer may spend all day begging for $2 bids whereas a good auctioneer will zip off bids of 5, 10, 20, 50, 100 and 250 or more dollars at a time! A good auctioneer knows how to not only market an auction to its highest potential, they also know how to set the auction up for maximum impact and interest. These differences are what makes or breaks your bottom line & NOT the rate of commission charged.
One last thing to consider is the number of auctions an auctioneer or service is having each month. We have found that by limiting the number of MT auctions, because of Montana’s sparse population, that we conduct per month to two or three at the most, we can provide the best service and highest quality auction possible for our clients. From experience we don't believe it is possible to draw a maximum number of buyers to each auction if an Auction Service in Montana or other sparsely populated area is conducting more than 3 auctions per month. By limiting the number of auctions an auction service accepts in a given month they are able to give each client a more personalized service and can better personally monitor the quality of each auction they conduct.
We at Hagedorn Auction Service, as should any reputable auctioneer, would be happy to provide a free professional evaluation of your situation, discuss your options and answer any questions you may have.