What makes any auction work? We’ve held well over our entire career that a successful auction must have the “prospect of a deal” along with appropriate marketing. What’s the prospect of a deal?
We’ve explained the prospect of a deal numerous times including here: https://mikebrandlyauctioneer.wordpress.com/2018/03/12/what-drives-bidders-to-an-auction/ where considerable research suggests sellers can’t “start where they want to finish.”
In brief, an absolute (without reserve) auction maximizes the prospect of a deal, whereas a low published minimum bid can also have a very similar effect. High minimum bids, seller confirmation, and secret reserves often have the opposite effect.
Here are three such recent examples of this fairly simple concept (Pictures left-to-right #1, #2, #3, click to enlarge):
- 29 registered bidders. Over 75 calls. 50 at an open house plus 39 private showings. Sunny cold day. Appraised for $279,000. Absolute to the highest bidder. Sold for $471,800.
- 35 registered bidders. 72 calls. 52 at an open house plus 47 private showings. Sunny cold day. Appraised for $29,000. The minimum bid was $19,333. Sold for $176,200.
- 34 registered bidders. Over 100 calls. 75 at two open houses plus 56 private showings. Sunny and somewhat cold day. The minimum bid was $157,440. Sold for $431,250.
Certainly, not every seller is a good auction candidate. Quite frankly, it’s probably better if auctioneers are discerning when they take on clients. Selling results in more selling, and not-selling often results in more not-selling. What do you want to be known for?
Our marketing for these above auctions involved extensive Internet advertising, Facebook marketing, full-color oversized direct mail, large sign, and as much opportunity to preview as possible. We also had sellers with equity, urgency, and reasonable expectations … who trusted the process.
Yet, without the prospect of a deal, no amount of marketing will work. For instance, you can advertise $100 bills for sale to the entire world of potential buyers with a secret reserve or a minimum bid of $96 and have -0- interest. On the other hand, the prospect of a deal [only] works when it’s marketed.
But what about the property? It really doesn’t matter what the property is — residential, commercial, industrial, retail, farm, or bare land. Any property can successfully be sold at auction with the right seller, the right marketing, and the right auction format to attract a maximum number of bidders.
Or, maybe it’s the weather? What day of the week? What time of year? Which auctioneer? Live or online? It’s none of that. It’s as simple as this: with the prospect of a deal (and appropriate marketing,) bidders will respond. Lacking it, they usually won’t.
Mike Brandly, Auctioneer, CAI, CAS, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at Mike Brandly, Auctioneer, Brandly Real Estate & Auction, and Goodwill Columbus Car Auction. He serves as Distinguished Faculty at Hondros College, Executive Director of The Ohio Auction School, and an Instructor at the National Auctioneers Association’s Designation Academy and Western College of Auctioneering. He has served as faculty at the Certified Auctioneers Institute held at Indiana University and is approved by The Supreme Court of Ohio for attorney education.