The rise in popularity of REO auctions in the last few years has left many agents scratching their heads, trying to figure out how they fit into the equation. Today’s savviest real estate pros have found that auction companies do not have to be viewed as the competition, but as one more way to expand their business outreach. This does not mean that working with auction companies is a seamless transition however. Auction listings present challenges that traditional REO listings do not, such as a different commission structure and less control over the outcome. Learn how FORCE agents are working in this new realm to grow their businesses and remain competitive.
Managing New Expectations
To better move “difficult” properties, many banks are turning to auction companies. This decision can be made after the property has already been listed by an REO agent (and experienced no movement) or at the start of the process. For agents and brokers already familiar with REO properties, listing properties for an auction company is a fairly straightforward process. Debi Jensen of Century 21 All Profession has the following advice for agents who are uncertain about working with auction companies: “It is always best to keep on open mind to things that are new. And keep the lines of communication open and continuous to closing.”
When it comes to listing, she explains that, “Each auction company has their way of doing things. As the listing agent we work with them and list the property in MLS with auction site, viewing instructions, and submitting offer instructions. The auction company keeps in touch with us letting us know who has the winning bid and we take it to closing.”
Jinny Heisler of J.E. Heisler Real Estate Group, LLC advises that when working with auctions company, the listing agent must prioritize: “knowing the ins/and outs of the auction process to educate the selling agent and/or the buyer, visiting property at least once a week, having enough reserves for paying utilities or repairs, holding a minimum of three open houses, and making yourself available to agents or to buyers for calls or showings.”
While the workload is lessened with an auction property, the commission often is as well. “The downfall of the auction model in our area [western Pennsylvania] is that we have very low property values and the current trend of auction companies is either paying no commission to the buyer agent or only paying 1 percent to the buyer agent,” explains Michael Kusenko, Jr., of ERA Meridian Real Estate Group. “These low property values also mean that we’ll be paid a $600 fee to do all the work we do and then see the auction company get paid a $2,500 fee or more. Couple that with referral fees that the seller pays out of sometimes another $2,000 and the disparity in what we are paid is oftentimes a difficult pill to swallow,” he continued.
Loosening the Reins
While working with an auction company lifts a lot of responsibility off the listing agent’s shoulders, as Kusenko touched on, it also comes with a loss of control over the listing. For Lisa Lopez of Home Alliance Realty, this lack of involvement has been accompanied by a dearth communication on the auction company end.
Lopez recounted how the auction company who was processing her most recent deal did not know some basic information about the sale, which was problematic to say the least. “As a broker, and also speaking on behalf of my sales agents, when we aren’t handling the sale, we lose control of certain processes which can make or break how smoothly a sale proceeds. We are used to checking in weekly with the other side for updates. That was not happening on the sales in which we dealt with auction companies,” explained Lopez.
Kusenko has found that even gaining access to the property can be a challenge when they are listed via auction. “There is a trend to market occupied properties via auction. However, without access to the interior of the properties, we cannot get the municipal testing requirements completed to close. In those situations the auction company will get the property under agreement but it will never close without the tests being able to be completed,” says Kusenko.
Gateway to Greater Opportunities
A lower commission and less control over the property are understandably two significant stumbling blocks for many agents when it comes to working with auction companies. However, Cynthia Daves of Coldwell Banker High Country Realty advises other agents to keep their eye on longer-term gains. Yes, individual sales when done through an auction company may not net the listing agent as much as a traditional listing, but working with auction companies come with their own rewards. Increased exposure to investors is one such reward, according to Daves.
“During a recent, one-day online auction I spent the better part of a day fielding questions from potential bidders. Once those bidders “won” their respective properties they called me back and asked me if I was interested in listing them when they were ready to go back to market. Oddly enough, several were properties were ones I didn’t have listed but that I had enough knowledge about to answer their questions. More importantly, I earned their trust,” revealed Daves.