Transcript Module 3 Slides

3. Proposal to Closing
• Understanding components of
auction proposal and listing
agreement
• Differentiating between types of
auction
• Discussing tasks involved in
marketing and conducting property
inspection
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Proposal Components
• Auction schedule
• Recommended type of auction
• Advertising and marketing budget
(paid by seller upfront)
• Agreed-upon terms by seller and
broker
• Name of recipient of earnest money
• Length of listing agreement
• Broker/auction firm commission
information
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The Listing Agreement
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Terms of sale
Broker commission
Date/ time of auction
Earnest money/recipient
Names of listing broker
Advertising/marketing expenses
Auction location (not mandatory)
Proof of a good and marketable title
Length of listing (60-90 days)
Escrow fees and payer of those
expenses
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Three Types of Auctions
1. Absolute auction
2. Minimum bid auction
3. Reserve auction
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Absolute Auction
• Also known as auction without
reserve
• No minimum bid
• Property sold to highest bidder,
regardless of price
• Advantage: More buyers, more
participation and excitement
• Disadvantage: No safety net for
seller
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Minimum Bid Auction
• Also known as minimum published bid
• Minimum bid pre-determined by
auction firm and seller
• When bidding reaches minimum
amount, property sold “absolute”
• Advantage: Safety net for seller
• Disadvantage: Limits number of
interested buyers
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Reserve Auction
• Seller reserves right to accept or reject
highest bid within a specified time
period.
• Time period may be immediately after
auction to 72 hours after close.
• Advantage: Seller not obligated to
accept bid
• Disadvantage: No guarantee to buyers
that seller will accept bid
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Other Types of Auctions
• Sealed bid
• Dutch/high-low
• Multi-par, which allows bidding on
one parcel or combination of parcels
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Online Bidding
• Continues to grow
• Today’s buyers more experienced
with electronic bidding
• Online bidding will become more
prominent in real estate auction
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Online Bidding
Falls into two categories:
1. Static―Sale happens at one point
with one reporting medium
2. Dynamic―Bids simultaneously
reported to all bidding locations
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Problems of Online Bidding
• Deposit requirements
• Registration procedures
• Disclosure items
• Purchase contract execution
• Licensing requirements
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Purchase and Sale Agreement
• No contingencies
• Agreement made available at
auction
• Major terms read on auction day
• "As is, where is"
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Progress Reports
• Put system in place for
monitoring marketing
• Communicate to seller
• Frequency determined by two
parties
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Bidder’s Packet
• Auction firm packages all property
information in bidder's packet and
distributes to interested buyers
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Marketing Costs
• Most cases, seller is responsible
upfront
• Cover concentrated
promotional/advertising effort
• Illustrate seller’s commitment
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Marketing Budget
Varies between 1%–10% of sale price.
Budget based on:
1. Quantity and type of property sold
2. Number of staff required
3. Local, regional, or national
marketing needs
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Marketing Tasks
• Promotion
• Brochures and property information
packets
• TV, radio, and newspaper ads
• Media planning and public relations
• Preparing signs
• Scheduling
• Direct mailings/e-mail campaigns
• Property inspections and pre-auction
seminars
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Property Inspection
Auction staff:
• Registers all attendees
• Presents brochures
• Provides bidder packets
• Answers questions
• Monitors interest and preparedness
of buyers
• Communicates buyers’ interest to
seller
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Buyer’s Financial
Requirements
• Earnest money, usually a nonrefundable deposit
• Lender commitment and/or prequalification to register
• Buyer’s premium is amount paid by
buyer to cover seller’s marketing
expenses or auctioneer’s fee
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Auction Strategy
• Based on results of marketing plan
• Response from market
• Firm plans needed adjustments
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Closing
• Similar to closing in negotiated
sale
• Documents vary from state to state
• Attorney or title company
representative usually attends
closing
• Earnest money can be held in
escrow account until transaction
closed
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Split Commission
• Common for brokers and auction
firms
• Must be included in listing
agreement
• Licensed broker, not agent, accepts
a split commission from auction
firm
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Auction Process in Review
1. Analyze property, seller and
market
2. Obtain property information and
complete due diligence
3. Develop marketing strategy
4. List property for auction
5. Set sale terms and conditions
6. Prepare sales contract with terms
and conditions
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Auction Process in Review
7. Monitor marketing results and
communicate to seller
8. Compile and package property
information
9. Prepare real estate broker
agreements
10. Begin marketing property
11. Hold property inspections and
pre-auction seminar(s), if
necessary
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Auction Process in Review
12. Pre-qualify buyers
13. Develop auction day strategy
14. Sell property on auction day
15. Close sale
16. Pay commissions
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