Just a heads up that the first multi-property luxury home auction in Hermosa Beach and Manhattan Beach is coming. Premiere Estates Auction Company has co listed 5 new homes (potentially more) with several local brokers. The addresses will be released later this week. As President of Premiere Estates Auction Company, I am often asked the question- Why auction? Well, that depends on whether you are asking from a seller's perspective or a buyer's perspective. Lets start with sellers. When sellers choose to auction their property they choose to do so for several reasons. One reason is that they want their property sold by a certain date. Another reason may be that they want to know that, once it sells at auction, it will definitely close 30 days later. As with most auctions there are NO contingencies allowed thus the buyer is committed to closing the transaction otherwise they could lose up to 10% of the purchase price for not closing. Sellers want to create a buzz of activity, excite the market and tell the world they are selling the home. They want to give a reason for the buyer to ";pull the trigger";. Well, nothing does that better than an opportunity to purchase at auction. For a seller in a declining housing market, nothing can be better than getting your property sold and closed before further downside market adjustment. In an auction, there are a lot of marketing dollars invested into a very detailed marketing campaign which is designed to make sure that all potential buyers know that the property is for sale by auction. Just like buying a Monet painting, Ferrari or Chinese Objects d' Art at auction, the buyer pays an industry standard "Buyer's Premium". A Buyers Premium is a percentage of the sales price added on to the final bid "hammer price" of the home. Sellers pay NO commission, but do pay for the marketing costs associated with the promotion of their property. So, does a seller usually get less or more at auction? Our auction program achieves market value.
Ok, what about buyers? Why should they buy at auction? Well, number one is the hope of a great value. That, along with the transparency of the auction, is what drives buyers to bid. Just think about 5 or 6 years ago when buyers were trying to buy homes and they made an offer only to find out someone beat them out for a few thousand dollars. Had they known that if they stepped up on and paid few grand they would now be living in that home. However they didn't know , they weren't told, it was all one big secret. I am sorry Mr. Buyer but I can't tell you what the other buyer is offering because it is not fair to the other buyer. Well, is it fair to the seller that there is a buyer who is willing to pay more but you don't give them the opportunity? In an auction the buyers decide if they want the home and, if they do, they raise their bid. The buyers can stop bidding whenever they want. If they think a home is getting bid too high, they don't have to bid. It puts the negotiation in the hands of the buyer instead of the seller.
What about this so called "Reserve"? I can tell you, from our company's perspective, that we will not take an auction listing unless the seller's reserve in line with market values. The important thing to remember about a reserve is this: If the bidding ends up over the reserve then the seller must sell the home to that winning buyer. If the reserve is not met the seller "reserves" the right to sell it. Some real estate auction companies do not list at realistic reserves and so it is possible those homes may not sell. It's not much different than some agents or owners listing their homes at unrealistic "list prices". Why should a buyer waste their time to go to an auction if there is a possibility it won't sell? First and foremost, at a Premiere Estates Auction Company auction there is a 90% change the home WILL be sold. You go to the auction because you want to own the property. Make sure you go to the auction prepared, understand the terms and conditions and be ready to bid and win. If you do, you will have your home and nothing feels better, especially in a market like today's market. You'll know that there is a person in the market who is willing to own or buy your home for $1,000 less than you just paid. That is the beauty of an auction for the buyer. You know what every buyer in town is willing to pay for your home, no secrets, no scandals and it is an open and transparent process. So, maybe that all makes sense but a buyer might ask "why should I pay this Buyer's Premium, shouldn't the seller pay it?". All you have to remember is that you, as the buyer, are paying it. You know about the premium before the auction, you know it before you bid and raise your paddle. Just limit your bidding to a percentage below your personal maximum. As the bidder YOU have control of where you will stop, no one can make you bid. Buyer's premiums are always disclosed upfront, know exactly what they are.
OK Ed, you didn't bring up contingencies or lack thereof for buyers, what up with that? First of all, if you buy at auction, understand you may get a good deal but you can not have a finance contingency. This means that you must do your due diligence up front with your lender (and back up lender in today's market) and be sure you are qualified up to your bid price. As far as home inspection contingency, we allow you to do any inspection you need but you simply need to do it prior to the auction. Unlike bank foreclosure auctions that are sold on the court house steps you do not have to buy blind. Those types of auctions are very risky, you must buy sight unseen, you get no title insurance and you're never even sure what all the liens are on the property. At our auctions you get a new title policy, all debts on the property are paid and all taxes are prorated. It is no different than buying in a normal transaction.
This is the most exciting news to hit the South Bay and Manhattan Beach real estate in a long time. The secret will be out soon. Stay tuned.
