The Role of the Minimum Bid in the Auction Marketing Process
A critical component of LFC’s Internet based, Freedom Realty Exchange auction marketing program for residential property, is the minimum bid. Rather than react after the fact in a downward trending market with evermore incentives and lower and lower pricing, a low minimum bid creates a sense of buyer urgency to become emotionally involved in the property and entices potential buyers to bid the pricing upward to the property’s current market value from an artificially low starting point. In effect, the minimum bid allows the seller to submarine under the market chaos to capture the sale at current market value. (The seller is protected from selling the property too cheaply by an unpublished reserve price.) To illustrate this very important aspect of the Freedom Realty Exchange auction marketing process the following article appeared in the Los Angeles Times on August 12.
“……GMAC took over ownership after the foreclosure. The lender asked Leo Nordine, a veteran foreclosure agent based in Hermosa Beach, to clean up the house and evaluate it for resale.
On March 15, Nordine filled out his first report on the property, a lengthy form requiring him to give GMAC comparable sales in the neighborhood and his recommendation for a suggested price. Under the entry “property values,” he checked the box for “declining.” Next to “number of competing listings in subject’s neighborhood,” he wrote: “Tons.” He recommended a low price to get out in front of the market. His suggestion: $425,000 for the house as it was. He emailed the report to the GMAC offices in Shelton, CT. The lender stuck a price of $445,000 on the house. No one wanted it.
On May 30, Nordine filed an updated report. Nordine advised reducing the price to $409,000. GMAC agreed to drop the price, but only to $419,500. Six weeks earlier, that might have done the trick. Not anymore.
A week later, Nordine filed another evaluation: “No problems, other than the cataclysmic market.” He recommended $399,000. The lender didn’t respond. On June 27, he suggested $390,000. Lower the price, he urged yet again: There are three times as many lender-owned homes on the market now as there were a few months ago.
On July 31: This is the worst market I’ve ever seen.” He proposed $385,000. There was no answer. To sell the house now, Nordine said late last week, would require a price of $379,000. Last Friday, the lender sent Nordine an e-mail authorizing him to drop the price to $395,000.
If this property would have been auction marketed in March utilizing the competitive process of the Freedom Realty Exchange program and a minimum bid of $295,000, it would have been sold and closed by June at its absolute highest value which most likely would have been something north of $410,000 assuming that Nordine’s May valuation was accurate. The Freedom Realty Exchange program doesn’t create a market but rather it focuses the attention of the existing market, whatever it may be, on our client’s property at the expense of its competition. Call (949-706-6121) or email (info@lfc.com) us today to find our more about the Freedom Realty Exchange auction marketing program for residential property. You will be impressed….I promise.
William Lange, President of LFC Group of Companies
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Laughlin Ranch is along the Colorado River just across from the lights of Laughlin, Nevada. This is the perfect opportunity to purchase a home in a new growing community or that second vacation home close to the river, golfing, and the entertainment of Laughlin.
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