8DollarFarming blog

I received a call this week from the folks over at National Real Estate Auction Corp., and I have to say I was intrigued.  They thought one of my listings was a great candidate for their next auction.  They brought up some very interesting points about how successful auctions can be and why my seller would want to take advantage of this opportunity.

I’d love to hear from anyone out there who has experienced this service firsthand!

I did what I always do when I need to analyze a new opportunity.  I started asking lots of questions in an attempt to answer my "3 Questions for a Telemarketer."  Here’s my scorecard:

1. What would happen if all my competitors bought this service? 

If every listing in the MLS participated in the auction system, you would be left with an exact replica of the MLS, but with all sales happening on a specific date.  The current MLS system is basically an open-ended, non-time-specific auction already.  Anybody is free to bid on any property at anytime.  And we do get the occasional bidding war when multiple buyers really want the same property.

In the short-term, this auction might make a listing stand out a little bit from its competition.  But in the long run I don’t think it’s scaleable.

2. If this company’s product is so great, why haven’t I heard about it before?

I’ve seen & heard their ads for upcoming auctions, but I haven’t ever heard another Realtor (or read anybody’s blog) who talks about how great the auction was for his/her clients.

If the auction was ultra-successful, there would be Realtors lining up out the door to get their listings included in the next auction!  They wouldn’t need to pay a telemarketer to call & try to convince me.

3. Does it really make sense, from a gut-level feeling?  (are we building a win-win relationship?)

No, and no.  For a few reasons.

A. If a buyer is going to bid on our house, they will need to inspect the heck out of it before the auction.  That means they should be already interested in homes in this neighborhood, size, and price range.  If they are, they should have already seen it (since it’s in the MLS), and if they like it they should have already made an offer.  (no auction needed.)

B. The pricing structure is set up like this:  Seller pays a fee to Auction Company to be included in the auction.  Buyer pays a fee to Auction Company upon successful winning bid.  Auction Company pays Listing Agent’s commission upon successful winning bid.  This means that if we have a successful auction with a reserve-meeting bid, everybody wins.  But if no Buyer bids higher than the Seller’s minimum reserve, the only money changing hands is the Seller’s fee paid to the Auction Company.  The Seller pays a fee in the hopes that, maybe, they can sell their house at the auction.  This sounds to me like a win-maybe relationship.

C. Upon a successful auction, the Auction Company will pay the Listing Agent a 3.5% commission (higher than the industry average around here).  That tells me they’re trying to give Realtors an extra incentive to encourage their Sellers to participate.

I may be overly cynical at times, but time after time these telemarketers’ products fail to inspire me past my 3 simple questions.  If your company’s product/service doesn’t scale to size, and if others in the field aren’t talking it up, and if it’s not building an obvious win-win relationship…?  I don’t think the National Real Estate Auction Corp passes the test.

Do you have a different opinion?  I’d love to hear about it.