We should strive to advertise real property in the most effective and efficient way possible, investing whatever funds are necessary to do so. However, many real estate auction firms strive to market their client’s property for the least amount possible, often with destructive results. Destructive in that the property either; 1. Does not sell at all or 2. It sells for such a low value that the process is stigmatizing to the consumer. Both of these circumstances are very destructive to the auction industry but the later may be more so.
I have spent quit a bit of time mentoring auctioneers on the finer points of selling real property through an auction format and what I’ve found is quite telling about our auction schools or at the very least the state of current auction training.
When an auctioneer who has primarily been selling personal property moves into the area of selling real property, the differences in marketing styles becomes readily apparent. Trying to advertise for the least amount of money while covering the market is no longer efficient and not at all effective.
Here’s why this strategy no longer works and I think it will provide some insight as to why it’s utilized by this new-to-real-estate auctioneer. 1. When selling personal property the longer you have been conducting sales the more loyal followers you have and the more the auctioneer can rely upon them to purchase his client’s property. This helps to offset a good deal of the expense associated with selling personal property and the longer the auctioneer has been in the business the greater the advantage. 2. Personal property auctioneers will likely be selling, or offering if you will, multiple lots and as such will very likely be able to rely upon the law of averages to achieve a better selling price for the sale as a whole even though some items will undoubtedly sell for lower than expected values. The law of averages helps the sale be more successful when offering multiple lots. Therefore, less money spent on marketing a multiple-lots sale will still generate a favorable outcome overall.
Real Property Auctions
When conducting a real estate auction sale the auctioneer typically only has one lot or perhaps 3-4. Thus he cannot rely upon the law of averages to lift his sale into the acceptable category for the seller.
Additionally, when selling real property the auctioneer may have some buyers who follow her auctions but I’m certain she does not want to sell any of her client’s property to this type of buyer as they are most likely “bottom feeders” looking for a great deal. Whenever one of these buyers was the high bidder at my auction I felt that my marketing campaign had failed my seller as the selling price was much lower than expected.
Real Estate Marketing
If you have primarily been selling personal property realize two things, 1. You’ve not been spending enough to market real estate and 2. I’m not necessarily criticizing you for it, I was in your shoes at one time in my career and it took some advice from a mentor of mine to see the error of my ways. After working with quite a few auctioneers a pattern emerged and this is what I found: personal property auctioneers should double the amount they invest when marketing real property. It’s interesting that these auction professionals will spend $3,000 to $5,000 to advertise a multiple-lot $50,000 to $75,000 dollar personal property sale and spend the same amount on a $1,000,000 to $2,000,000 land sale. The risk and reward is much greater in a real property sale. A personal property auctioneer willingly spends 6% of the gross sale proceeds to market the personal property but spends less than one half of one percent of the real property’s value to market it. The personal property auction will earn the auctioneer approximately $15,000 in commissions and her cost of sale will be high (as a percentage of sale). The real property auction will likely earn the auctioneer $75,000 with very little overhead, which I would hope makes my point. Personal property auctioneers need to increase their spending to market real property auctions as it’s clearly worth the risk.