In the first part of our series on Choosing an Auctioneer, we talked about setting goals. If you have not read this post, you can read it here: LINK
Once a definable goal has been determined, the next step that we take is the Property Evaluation. There are several parts to this evaluation, which help us decide whether your property is suitable for auction.
This process includes evaluating these 3 key components:
1) the Property
2) the Seller
3) the Market
The Property
A good auction property is one that:
• has some equity. If you owe more than the property is valued, it will be difficult to sell no matter the method you choose.
• is vacant. Vacant homes deteriorate over time and are subject to vandalism and theft.
• has high carrying costs. These costs rapidly deplete any equity in the property.
• requires significant deferred maintenance. Usually the costs will take too long to recover if the repairs are made.
• is difficult to appraise. A properly promoted and conducted auction will realize the property’s true market value.
• is in high demand. Competition will drive the price.
The Seller
A good auction situation is when the seller has a defined goal and:
• needs immediate cash.
• is relocating to another city or state.
• has vacant property (or properties) that has high carrying costs consuming equity.
• needs assistance settling an estate.
• understands that a property is only worth what someone will pay for it.
The Market
An auction can take advantage of any type of market.
• In a seller’s market when property is scarce and demand is high, competition for the property will be significant.
• In a buyer’s market when the market is flooded with property, an auction can help your property stand out from the crowd.
• In a changing market, an auction can help you take advantage of trends quickly, instead of reacting too late.
By evaluating these 3 components, we can determine whether your property is suitable for auction. If it is determined your property is suitable, then the next step is to determine a Target Market for the property and put together a Written Plan for success. We will talk about these in Part 3.