Auctioning a House (OT)

Richard · #1 08-24-2007, 10:36 AM

Sorry for the second OT in as many days, but I am a bit torn. My mother passed away a short time ago, and I have to dispose of her house. An estate auctioneer who was looking at the contents suggested that his firm would also auction the entire house for a very reasonable fee. They are experienced and honest. A local realtor stated that estate auctions do not work well as home buyers are not prone to seeing a house, then waiting a month for the auction, then being at risk on the bidding process.

So...my questions -- anyone have any experience in the auction process? Any thoughts on the veracity of the realtor's statements (they seem self serving, but they may be true)? Other notions?

Thanks.

#2 08-24-2007, 10:45 AM

How much difference between the expected auction price and the realtor price?
How much do you need, or want, that extra income?
How badly do you just want to be done with it?
How many siblings are pressuring you to just get it over with?
How soft is the local market?

Me personally, I'd rather get 90% now and get it over with rather than trying to get every last penny out of it but having it take several more months...

Kevan · #3 08-24-2007, 10:49 AM

I haven't been involved with an auction such as this but I'd agree with the real estate broker that in all likelyhood the attempted sell of the house won't get the same level of market exposure as it would in a open real estate listing where most folk do their shopping.

Birddog · #4 08-24-2007, 11:08 AM

I've seen some auctions go for well over what I thought a place was worth. Just put a reserve on it for what you want.

Birddog

Ken Robb · #5 08-24-2007, 01:09 PM

my guess/supposition is that most auction attendees are looking for a steal and may not be buying a "home" but an investment.

As stated above most people seeking their "dream" home want to get it under contract ASAP once they find it as it has a strong emotional attraction for them. They are not keen to wait several weeks for the auction date when they don't even know what the price will be. How will theb auction company ensure that only buyers with cash or firm loan commitments are allowed to bid? These commitments would be subject to the property appraising for at least the final bid price. You could wait several weeks to a couple of months to allow the property to be advertised, hold the auction and still end up with a failed transaction.

There is always risk of a problem right up to the closing but an auction compounds the the problem. I just retired after 35 years as a real estate broker so I've seen more strange sale scenarios than you can imagine.

Richard · #6 08-24-2007, 01:41 PM

Thanks, all.

This is a tough question. John S., good questions, all. To me, the most important issue is to move it now vs. later; the last thing I want to do is have this linger through a winter with a vacant house 3 hours away. That said, the tough call is what will result in the fastest sale. It takes time to get to the auction itself, and that brings me closer to the winter if it fails. On the otherhand, putting in a realtors hands forecloses on the auction and can take quite a while too.

FWIW, this would be an AS IS sale, because the house needs updating and work, but is a good structure with a nice floorplan. The intended price is about $100,000 below renovated market price considering rough estimates of $75,000 to renovate. Does this influence anyones opinion?

93legendti · #7 08-24-2007, 02:04 PM

Quote:

Originally Posted by Richard

Sorry for the second OT in as many days, but I am a bit torn. My mother passed away a short time ago, and I have to dispose of her house. An estate auctioneer who was looking at the contents suggested that his firm would also auction the entire house for a very reasonable fee. They are experienced and honest. A local realtor stated that estate auctions do not work well as home buyers are not prone to seeing a house, then waiting a month for the auction, then being at risk on the bidding process.

So...my questions -- anyone have any experience in the auction process? Any thoughts on the veracity of the realtor's statements (they seem self serving, but they may be true)? Other notions?

Thanks.

How much equity is in the house?

Richard · #8 08-24-2007, 02:09 PM

No mortgage, all equity. Your thinking?

93legendti · #9 08-24-2007, 02:39 PM

If there was a mtg co. involved you had more options. I'd mortgage it, rent it and wait to sell in a better climate. Find a real estate agent that has a good rental business. There are also companies that rent houses out for people...our neighbors did that when they moved to Japan for 2 years.

An auction might be giving up a lot of equity..depending upon total value of the home.

I do not have any experience with auctioning, so I guess I would need to see the auction house's record vis a vis house sales and what kind of starting price they would recommend. You also have estate taxes to consider...

Richard · #10 08-24-2007, 02:45 PM

I see what you are saying, but I have little appetite for being a landlord. Also, there are siblings involved, and the one thing that can easily be agreed upon is to liquidate. Track record is certainly a consideration.

rdparadise · #11 08-24-2007, 02:59 PM

Richard:

Sorry for the loss of your mother. I'm sure her passing and now having to deal with the estate assets can be trying at times. Particularly in your case where distance is a factor.

Auctioning houses has become a better idea and more popular with the stagnant housing market. While I've never had any personal experiences going this route I believe it can work for you.

Find out what kind of marketing the auctioneer is going to do for the property. I personally would split the the estate auction/sale from the property auction so people don't get confused. Depending on how the house shows furnished, I may hold the house auction pre-estate auction. If it doesn't show well furnished get rid of everything first and then auction the house. It will look bigger and give people an opportunity to dream/imagine what each room would look like furnished.

I don't know squat about the upstate NY market but I would lean towards the auction route.

Lincoln · #12 08-24-2007, 03:24 PM

Richard,

If you go the auction route, make sure that they are screening the bidders. Lots of deals are falling apart these days over financing issues.

93legendti · #13 08-24-2007, 03:40 PM

Quote:

Originally Posted by Richard

I see what you are saying, but I have little appetite for being a landlord. Also, there are siblings involved, and the one thing that can easily be agreed upon is to liquidate. Track record is certainly a consideration.

Siblings...well that is a whole another thing...

My experience is the rental agency does all the landlord stuff--that's how my neighbors in Japan handles it with their house. But 3 hours away is a pain and there are probably no great/easy solutions...unless one of your Mother's neighbors calls you up and wants to double their lot size...

Good luck and sorry for your loss.

Richard · #14 08-24-2007, 05:34 PM

Paradise, FWIW, the house is in a Philly suburb. As far as I can tell, the market has had steady, not spectacular, growth over the past few years and has held its own through the current downturn. Of course that could change tomorrow.

93Legend - Yeah siblings are certainly a different story. The neighbors have actually put two potential buyers in front of me, but they are looking for a way below market transaction.

A cursory review of the auction rules has prescreening and a minimum of 10% on the day of the auction. Should help. Of course, any transaction can collapse up until the minute it is done.

And thanks to all for expressing your sympathy, she lived a very long life and went on her own terms in her home. It would be hard to ask for more for her or if it were me.

BumbleBeeDave · #15 08-24-2007, 06:01 PM

. . . after both my parents passed away this past spring. But the house is halfway across the country from me. We are in the process of cleaning it out and probably won't get it sold until this next spring.

The realtor we have talked to in KC where the house is suggested it might be a good property for a flipper--someone who buys the house as is, fixes it up, then sells at a profit. This is particularly good for situations like mine where the house needs some lots of detail work but is structurally sound and the owner just wants to get rid of it and move on and is willing to get a few thousand less in order to do that. They had lived there for 35 years and nothing had been done much maintenance-wise for quite some time. Needs new rugs, wallpaper, appliances, etc.

Such an arrangement gets rid of it quickly for you and puts the sale off until the flipper is done rehabbing it, when the market may have recovered. Even if the market doesn't recover very well, it probably puts off the final sale until the spring ,when home sales traditionally pick up again after slumping in the winter months. Many buyers don't want to buy in the winter--I guess because it's harder to inspect with snow on the ground?

It all depends on just how much you want to get rid of it and move on. Good luck! . . .

BBD