156: 8 Ways to Suggest Price in Auction Advertising
At a recent industry gathering, a group of experienced auction professionals joked that—no matter how much they advertise a sale as an auction—the number one question they get from interested buyers is, “How much?”
“That’s when you have to explain the whole ‘auction’ thing,” one of the auctioneers interjected.
As someone who manages Facebook posts for auction companies, I’ve had to type that explanation multiple times now, too. I was reminded of this discussion when I saw this unique real estate ad.
You’ll notice no mention of square footage, no quantities of bedrooms or baths, no list of amenities. Just the address and the price of each property. Oprah recently bought one of my clients’ auction properties for $28.5 million. Other than that, I’ve never advertised anything like the subjects of this magazine ad. That said, I’ve seen other assets—the kind auctioneers sell everyday—advertised on a smaller scale but in similar fashion.
It shouldn’t come as a surprise that the price of an item is both a selling point and a primary factor in the decision to purchase something. In this interactive Google Trends chart, you’ll notice “price” and “cost” being used more and more by online shoppers.
While some interested buyers are looking for a fixed price (that we can’t give them), many are looking for an estimated range of bidding. If we’re going to require a 10% cash or certified check deposit at real estate auctions, this shouldn’t be a question we avoid. The same holds true for large personal property items, where financing or a large stack of cash comes into play.
Technically, unless we’re offering a “Buy It Now” feature as part of our online options, we really can’t advertise a final sale price. Advertising a price can turn bargain seekers away from our auction or create a bid ceiling that conflicts with our fiduciary responsibility to our sellers.
So, how do we as auction marketers leverage price to sell our assets?
Contrast. We can advertise what is known against the unknown hammer price.
The buying public may not trust this number. So, I wouldn’t use this price alone; or I would include the appraisal in the documents section of the auction page on your website. Official timber cruise reports are really good to have, where applicable; and I’ve gotten good traction recently when advertising on Facebook to timber buyers using professionally-estimated timber values.
Educated buyers will know that this number isn’t an appraisal figure, but it will be proportional to the assessed value of other properties they are considering.
Many times, sellers choose auction because there aren’t similar assets in their geographic area. If you’ve got recent sales or area statistics you can leverage, do.
I’ve only seen this once or twice, but it’s a great idea. This could also be expressed as an “insured for” figure.
This will apply to few auction properties—either because it isn’t known or the real estate improvements were built too long ago for that figure to matter. For most of the times I’ve sold a partially-finished real estate project, though, this is a figure the buyer wanted to know.
One of my clients uses this regularly. If an asset market is accustomed to offering more than the listed price, this doesn’t impact the bid ceiling as much as it would in a distressed market. In a distressed market, educated buyers and sellers understand that the last list is higher that what will be paid for the asset.
While it might be history, history gives context. What was the sale price the last time it sold? And when was that?
If you know the reserve in advance—and it’s lower than expected market value—use it. I’ve seen auctioneers break this figure down further, showing the minimum bid in terms of cost per square foot or cost per acre. If you’re selling investment property, you can express this in terms of how many months it will take to recover the minimum bid at current lease rates.
The last of these eight price indicators is the only one that wouldn’t be applicable to no-reserve auctions. All eight are data points to discuss with your seller as to their comfort level in using them. As with all auctions, the strategy will change from one asset or geographic market to the next. The more of these you have available, though, the easier it is to explain or defer discussion of your auction day expectations.
Stock image purchased from iStockPhoto.com