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The Investor & The Auction February 12, 2007

Posted by AlynnROCK Group in Auction FAQ.

investor2.jpgI have recently had several real estate investors contact me regarding the auction process.  It caused me to think about the relationship between the investor and the real estate auctioneer.  The relationship has usually centered on the investor as a buyer through the auction process.  But what about the investor as a seller?  Does the auction process work for them? The answer to that question is a resounding YES!

I first got into the auction industry as a real estate investor.  My partner and I were reviewing a construction project.  During our due diligence, we found that not only were the construction costs going up, but so were the holding costs.  I was going to have to cut the prices of the homes we were going to build and still hold on to them for at least 6-8 months.  The cost of holding the homes made the project unfeasible.  I knew there had to be a better way for the investor.  The answer was the auction method for selling real estate.   

By using the auction method of marketing to sell real estate, the investor can define the date of sale of the property.  This allows the investor to know exactly what his or her holding costs will be.  That is a distinct advantage for the investor.   For example, if you know you can sell the home in 30 days after you purchase a property, you can make a more aggressive offer on the home; giving you a better chance of purchasing the property.  If you are the investor using the typical list to sell method for selling your property, you need to build in several months of holding costs.  The investor who uses the auction method has the advantage.  

There are many investors out there who purchase properties at a discount.  The auction method allows the investor to be assured of a profit, or at least limit the possibility of a loss on a property.  Several investors we work with have contacted us because of the difficulty they have had in selling their properties.  They bought right, but the long holding times are eating into their profits.  In some cases, the long holding times are leading to a loss. 

I think that the real estate auction process can be a real estate investor’s best friend.  Used properly a professional, trained real estate auctioneer can make the real estate investor more efficient in the purchase and sale of real property.  And the more efficient the investor is, the more profitable he or she will be.


1. Dean Guadagni - February 13, 2007


Very interesting information on “holding” costs. Is it possible to document and chart “holding” costs as a reliable statistic to predict profit margins, upon the conclusion of a sale, for investors by city?

2. Billy Bristol - May 1, 2007

Holding costs are vital to the success or failure of real estate investing, and this gives a great description.

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