Wednesday, December 19, 2007

The new Short Sale trend: round-robin auctions

There's a new trend starting to develop, and I expect it to pick up steam in the coming weeks – Short-Sellers are using auctions as a way to generate more interest in their properties. Here's how it works:

Short Sale Auctions

part 1

  1. Let's assume a home has a market value of about $300,000. Since it's being advertised as a short sale, we can also assume it will probably generate an offer somewhere in the $250,000 range, depending on how much work it needs.

  2. The listing agent advertises the property for $175,000 in the MLS. This draws a lot of attention, as buyers will get very excited about getting into a $300k home for $175k. They have dreamed about being able to live in that particular neighborhood, or in that large of a home, but they could never afford it...

  3. Each time an offer is received, the seller (through his agent) raises the price in the MLS, and calls back all the other agents who have submitted offers, telling them what the new "price to beat" is. The buyers can then decide it they want to bid higher than the current price.

  4. Once buyers stop bidding against each other, we can assume the agent has found a true market value, and he can then submit this true market value offer to the banks for approval.

Can this process really work? I think it can, but there are also some potential pitfalls to watch out for. Tomorrow I'm going to outline the benefits and drawbacks of using this approach.

Your finding new trends Realtor,

Chris Butterworth

[tags] short sale, auction, round robin auction, Fletcher Heights [/tags]