Using Credit Cards at an Auction

Ron, I recently attended an auction in another state while on vacation. There were some nice pieces of furniture that were being auctioned. The auctioneer stated before the auction that they would accept credit cards for payment but they would charge a 3% processing fee along with the buyer’s premium.
The buyer’s premium was 10%. When you add the credit card fee of 3% plus state sales tax of 7%, it doesn’t seems to be that great of a deal.

There’s not a whole lot you can do about the sales tax but pay it, whether at an auction or at the local grocery store. At an auction, the best way to pay is cash, but I realized that is not always an option for everyone.

The credit card company charges the auctioneer or any merchant, a processing fee. This varies from vendor to vendor. If there was a 10% buyer’s premium, and if someone used a credit card with a 3% processing fee charge to the vendor, the gross to the auctioneer is 7% and then his expenses (labor, utilities, liability insurance, facility charge if he is renting, etc., has to come out of the 7%, thus reducing his margin of profit.

My suggestion is that if you are going to use a credit card at an auction for your purchase, bid accordingly, viz., does the price I pay for the merchandize, plus the processing fee, make me feel I made a good decision with regards to price versus value?

Keep, in mind, if you don’t pay that card off within the next billing cycle, you paid more for that item than what you bid, particularly if you have one of those 18 to 24% credit cards.

For more information on auctions, go to my website at www.canSellnow.com.

AUCTION VALUE vs. MARKET VALUE

The differences between auction value and market value stems from the auction process itself. By this, I refer to several characteristics which are more dominant in the auction process than in the list and sale technique. They are:
1. The necessity to make a decision as to buy or sell at that moment. There is not time in which to deliberate. There is a sense of urgency.
2. The auction process creates an atmosphere of competition among the bidders which could result in at least one or more bidders to offer more for the property than they would have under different circumstances.
3. Buyers are not competing against sellers, but instead are competing against other buyers. Therefore, the activities are not those of negotiation between a high and low price but instead it is a contest of how high one bidder is willing to go above another.
Logically, it would appear that if all of the bidders present at an auction were all well informed as to the market price of a property, then the market price would tend to represent the ceiling of the selling price.
However, an auction many times acts on the emotional side of a buyer’s personality. And when a person starts to add emotion into value judgments, then those judgments may lose some objectivity and, in the buyer’s eyes, more value may be given to the property than is shown by market comparisons.
On the other hand, there is a possibility that the auction price may fall short of the market value. For example, the time allotted to expose the property to the public may be in reality not long enough to attract that buyer who is willing to pay the highest price for the property. Then, the seller who is emotionally prepared to sell the property may accept a lower price rather than wait any longer. Also, if all of the buyers are able to remain objective and the auctioneer has failed to inject emotionalism into the bidding process, then the auction price may also fall short of the market value.

What is an “owner confirmation” auction?

Ron, I recently attended a real estate auction whereas the auctioneer stated that the winning bid would be “subject to the owner’s confirmation.” Was this really a “reserve” auction?

There is really no difference between selling real estate at an auction with a reserve or selling real estate at an auction “subject to owner’s confirmation.” In essence, both of these auctions are “reserve auctions.”

Unless a property is advertised as an “absolute”, meaning the property is sold to the highest bidder with no limiting conditions or amount, it is a reserve auction.

In the reserve or subject to owner confirmation auction, the seller may not personally bid or use an agent to bid for him or her.

For more information on real estate auctions, go to my website at http://www.cansellnow.com/.

How is the True Market Value of a Home Determined?

[I know that we real estate agents get all kinds of offers throughout the listing period but what it comes down to is the RIGHT buyer for that house. How many times have I worked with a buyer and heard, "I would like this house at the right price" and that "right price" might be thousands off of true market value. I would think that AUCTIONS would mean that if that right buyer were not in the auction that day, your home could potentially sell for a lot less than otherwise. ]

I get many questions about the true "market value" of real estate sold at auctions. The big concern is that it will not sell for its' true value, such as was implied above. Well, how is the true value of real estate determined?

Have you ever had two or three appraisals done on the same property and got three different values that were not even close to each other? Let's go back for a moment to real estate school and remember what we were taught about valuing a home, viz., by pulling comps, i.e., similar square footage, style, same sub-div., home sold in last 3 to 6 months, etc. You understand what I am saying.

Now, with home prices dropping across the country due to the sub-prime lending problem and other problems the lenders are having, would you use a sale or appraisal that was done six months to a year ago in an area where values have decreased, say 15 to 20%, in the last two to three months? I believe homes in some parts of California have dropped much further.

Or let's use another example. I know an individual that paid 15% over listed price because he lived in the home as a youth and it had sentimental value to him. Would this extra value, show up on an a comp?

I know my real estate friends will probably disagree with me, but a comp, current MLS listing, or an appraisal, or what the seller wants, does not determine the value of a property. The market does. What a willing buyer(s) is/are willing to pay for that property.

In most real estate transaction, the price goes from high to low. Meaning, you list it for a certain price, if no immediate sell in a month or so, you drop the price because the market will not support the price. When you get a contract, it is usually lower than the list price, full of contingencies, thus reducing the net even further to the seller. With an auction the price (bid) starts low , then goes higher.

If I have 10 to 12 bidders in a room that have deposited a certain amount of money in certified funds in order to bid, and have been approved for a loan, not pre-qualified, as they must close in 30 days, bidding on a home, the bidding stops when other bidders do not see value above the last bid. In this case, market value is established. The home is sold as is with no contingencies.

What are your thought and comments?

For more information on real estate auctions, go to my web-site at http://www.cansellnow.com/.