Robert Liparulo is a novelist and former journalist who lives with his family in Colorado.
Long & Foster’s Auction Department Sets Record Pace
October 1, 1997
FAIRFAX, Va.--Almost lost in a sea of 119 offices and 6,000 salespeople is the six-person Auction Departmentat Long & Foster Real Estate Inc. Nonetheless, it’s making a big splash--to the tune of 340 auctions in 1996 and a projected 1,000 this year (196 in May 1997 alone).
“Auction is action!” quips Gloria Lynn Gardner, the department’s vice president, and revoltingly cute as the phrase is, it accurately describes the company’s experience since the auction team started pushing the benefits of auctions on nondistressed--and sometimes even new--listings.
The key to success was educating consumers and salespeople, shattering the negative myths with positive facts.
Myth: Auctions squeeze commissions away from listing salespeople.
Fact: Buyers at Long & Foster auctions pay a 10 percent commission--4 percent to the Auction Department and 3 percent each to the listing salesperson and the selling salesperson. In addition, the listing salesperson makes the sale on 65 percent of auctioned properties, compared with 3 percent of nonauction transactions.
Myth: Auction sales prices are so low you might as well give the properties away.
Fact: In most cases at Long & Foster, properties sell for roughly 10 percent to 13 percent under asking price. “Sometimes it goes the other way, too,” says Gardner, citing a nine-month-old listing that sold at auction for $2,000 more than the last asking price.
Myth: When the auction machinery kicks in, the listing salesperson loses marketing visibility and the relationship with the sellers.
Fact: At Long & Foster, all material promoting the auction includes information about the listing salesperson, who represents the sellers through closing.
Gardner and her crew don’t wait for salespeople to identify homes with auction potential.When a listing hits the 90-day mark, their department delivers an information package designed to encourage the salesperson to consider auction as an alternative to traditional sales. The package includes a full-color auction primer, a history of successful auctions, and happy testimonials. If the salesperson wants to run the idea by the sellers, an Auction Departmentstaffer will make the presentation.
The department’s campaign has increased awareness enough that some salespeople no longer wait the 90 days to pitch auctions. About 10 percent of the homes the department handles are new listings. The average auction sales price is $220,000.
If you’re interested in starting your own auction action, first check with your state’s auction commission about licensing requirements. As for drumming up business, Gardner, not surprisingly, recommends you take the educational approach that worked for her.
Then step back as your listings start going . . . going . . .
Different Auctions, Different Cautions
FAIRFAX, Va.--Sellers can choose from three types of real estate auctions:
- Absolute—The seller must accept the highest bid, regardless of how low it is. According to Gloria Lynn Gardner, vice president of Long & Foster Real Estate Inc.’s Auction Department, absolute auctions draw the largest crowds and result in the highest bids. The risk of a rock-bottom high bid, however, keeps all but 16 percent of those who auction their properties through Long & Foster from choosing this method.
- Minimum bid—The seller establishes the starting bid, preferably no higher than 80 percent of the desired sales price. These auctions don’t generate quite as much interest as absolute auctions, but 70 percent of sellers opt to auction their property this way. Thirty percent of minimum bid properties never make it to auction; the marketing activity leading to the auction prompts a buyer to make a preemptive bid. The buyer must still pay the 10 percent commission.
- Reserve—The seller reserves the right to reject the high bid. The reserve isn’t popular among auction goers, but Long & Foster auctions this way 14 percent of the time.
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