1 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

2 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

3 The Listing Agreement 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

4 Three Types of Auctions 1.Absolute auction 2.Minimum bid auction 3.Reserve auction

5 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

6 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

7 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

8 Other Types of Auctions Sealed bid Dutch/high-low Multi-par, which allows bidding on one parcel or combination of parcels

9 Online Bidding Continues to grow Today’s buyers more experienced with electronic bidding Online bidding will become more prominent in real estate auction

10 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

11 Problems of Online Bidding Deposit requirements Registration procedures Disclosure items Purchase contract execution Licensing requirements

12 Purchase and Sale Agreement No contingencies Agreement made available at auction Major terms read on auction day "As is, where is"

13 Progress Reports Put system in place for monitoring marketing Communicate to seller Frequency determined by two parties

14 Bidder’s Packet Auction firm packages all property information in bidder's packet and distributes to interested buyers

15 Marketing Costs Most cases, seller is responsible upfront Cover concentrated promotional/advertising effort Illustrate seller’s commitment

16 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

17 Marketing Tasks Promotion Brochures and property information packets TV, radio, and newspaper ads Media planning and public relations Preparing signs Scheduling Direct mailings/ campaigns Property inspections and pre-auction seminars

18 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

19 Buyer’s Financial Requirements Earnest money, usually a non- refundable deposit Lender commitment and/or pre- qualification to register Buyer’s premium is amount paid by buyer to cover seller’s marketing expenses or auctioneer’s fee

20 Auction Strategy Based on results of marketing plan Response from market Firm plans needed adjustments

21 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

22 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

23 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

24 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

25 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