How Are Homes Sold Today?
Current real estate trends are in serious flux. The Internet age has brought more information, services, and selling options than ever. Simultaneously, recent wild ups and downs of real estate markets around the world have made most buyers, sellers and lenders more cautious than ever. And even the old hands at real estate game who have bought and sold more than once before may not know about current selling methods.
Let’s take a look at the most important methods used today to sell homes in the United States. Keep in mind that each has advantages and each has limitations and costs. Every seller must decide which is right for their property, their market, and their financial considerations.
Traditional sales offline
The most familiar method of selling real estate in the past is your least likely option today: with or without the help of a broker, you estimate the value of your house to calculate an asking price, put out a “For Sale” sign, list the property in the real estate section of the local paper, hold open houses, and hold your breath for an offer in the ballpark of your expected price.
Traditional sales online
Anyone who uses a broker or auction service will automatically be listing their property on one or, more likely, many online sources. If you prefer the “For Sale By Owner” approach without a selling agent or broker, a quick online search will provide dozens of services that are happy to list your property. Some, like the site Oresy.com can list your home for free.
Others provide very basic listings for free (and you should take advantage of as many of these as possible) with more comprehensive listings and promotional extras available for a fee. Be aware that some of these services exist only to collect your contact information so that a broker can then offer you his services.
Auction-based sales offline
Want to sell your house in a shorter, more predictable timeframe? Want to let the marketplace value your home instead of playing the guessing game of putting a price tag on your home? Want to avoid haggling with an interested buyer? Consider the auction-based alternatives. There are basically two varieties of auction-based sales offline for homes. Just about all auction methods allow you to select a few different kinds of auction. The most common type is the standard auction: the “outcry” model seen commonly in movies where bids begins very low and each successive bidder cries out a higher bid. When no other bids are heard, the last bid takes the item at that price. Dutch auctions begin with an astronomical price, which is dropped when no bidder is found. Eventually, a bidder likes a price and buys the item. The auction then often continues because other, similar items are still available. The auction continues with the price dropping until all items have been purchased. (Traditional real estate sales are essentially this method: a broker prices a home high when it debuts on the market, then typically drops it after a few months on the market. So patient, experienced buyers will wait until an attractive property drops and then drops again. If another buyer snaps up the property, the buyer simply waits for another attractive property to begin the process over again.)
One method employs a professional auction service. In exchange for marketing and auctioning the property, such services typically charge up to a whopping 10% of the final price. In exchange, the auction service not only conducts the auction; it also provides marketing services to attract a field of bidders. This method is analogous to using a broker to sell your home traditionally in that you are giving up a substantial chunk of your property’s value in exchange for professional help in the sale.
The other method resembles the “For Sale By Owners” approach in that you market the home yourself and conduct an auction yourself. This method, sometimes called the “5 Day” sale because the house can theoretically be placed on the market, marketed, shown, and auctioned in less than a week. The idea is to generate interest in the property by starting the bidding at about half the estimated value of the property, then showing the house for only one weekend so that potential buyers see each other at the Open House and competitive bidding is thereby encouraged.
If no competitive field of bidders emerges, the auction is cancelled and the process begins again a few weeks later. How can you hold an auction yourself? You don’t. Instead, you would use a conversational round-robin approach where buyers are not necessarily pre-approved and bids are not binding contracts. You simply talk to each bidder about their offer, then compare offers and find the highest. You return to the potential buyers and ask them to beat that offer. This continues until you have your highest bid. The seller can fall back on the second- or third-highest bids if the highest bidder is unable to secure financing or for any other reason backs out.
Auction-based sales online
The term “online auction” might suggest to you the sale of autographed baseballs, electronic gadgets, and maybe even automobiles at sites like eBay.com. But houses? How can anyone sell something as valuable, complicated, and life-changing as a home from a website?
As you’ve probably guessed, online auctions for homes resemble offline auctions and traditional real estate selling more than they do an eBay bidding war over rare LPs. You will need to market, inspect, and otherwise show and prepare your home for sale just as you would otherwise. The key difference with online auctions is the potential to eliminate some of the biggest selling expenses (the fee normally paid to brokers or conventional auction services) while harnessing the Internet to advance your marketing and to conduct the auction itself.
The advantages to online auctions are several: minimal expenses, broad marketing, and a variety of auction types so that you can choose the process that suits your needs. We’ll look more closely at these options in the Oresy.com section at the end of this book.
Broker/Owner
Continental Realty Inc.
DRE# 01422589
925-548-5461
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