WHY SHOULD I CONSIDER AUCTION?

Auction frequently produces a sale for an amount higher (and in some instances, significantly higher) than utilizing the traditional method.  Many times, there simply is no substitute for forced competition in the form of open-call bidding.

Even in instances in which the sales price may turn out to be lower via auction, however, have you considered how much more valuable that IMMEDIATE offer (with no contingencies) may be worth compared with an UNKNOWN offer that will HOPEFULLY be larger down the road?  Specifically, what's it costing NOT to deploy auction?  Let's look at that a little more carefully.

Extended marketing periods often generate a mentality that a property is "tainted," that the asking price is way too high, and/or that some unknown factor is inhibiting a sale.  Also, the seller incurs significant costs while this mentality gains momentum.     

Auction, especially when deployed EARLY in the marketing process, results in BOTH the buyer AND the seller benefiting.  How?

The seller stops the carrying costs and realizes more by investing the proceeds.

The buyer obtains a lower price via a SERIOUS, UNCONDITIONAL, IMMEDIATE, ALL-CASH offer.

Consider a typical $400,000-appraised home in an upper-scale subdivision.  John Q. Seller, who built a new home, owes $250,000 on it.  The table below outlines John's carrying costs: 

 

Cost Category of Owning Property	Monthly Cash Flow
Homeowners' Association Fee	( $  120)
Property Taxes	( $  289)
Homeowners' Insurance	( $  210)
Water, Sewer, and Solid Waste Monthly Charge	( $    60)
Electricity Costs (Thermostat kept at 75 in summer and 65 in winter)	( $  145)
Grass Cutting Costs (spread out evenly over the year)	( $    30)
Interest Charge (after taxes, rate assumed to be 6.5% with 30% tax rate)	( $  943)
Household Maintenance Costs (Wall St. Journal says average is 1.25% of house's value)	( $   417)
Total Monthly Costs of Continuing to Own Property	($2,214)

Carrying costs add up fast ($27,000 a year above).  Even if nothing is owed, interest is foregone on the property's value.  At a tax-free, AAA, insured LA municipal rate of 4.9%, the foregone interest is $1,429 A MONTH at a sales price of $350,000 ($486 MORE than incurred by the homeowner with debt). 

That's why sellers should weigh carefully what an offer TODAY is worth against what an offer has to be worth later to break even.  Above, a seller rejecting a $350,000 offer must receive a $363,300 offer six months later to come out ahead.  Auction specializes in producing IMMEDIATE OFFERS (with NO contingencies)!!!