It doesn't take a mathematician to come to the conclusion that there are plenty of homes for sale on Grosse Ile. Just drive down any street and you're bound to come across a "for sale" sign.
Despite freezing conditions over 300 anxious bidders attended the American Eagle Auction Company auction in Grosse Ile, Michigan
As of last week there 234 homes, condos and vacant property for sale on the island. Some of the homes have been on the market for months, even years, without a single offer.
Grosse Ile residents got an up-close look at an auction earlier this month when the Potrykus house on Meridian was sold for $410,000. Is putting a house on the auction block a better deal than listing it with a real estate agent?
That's the thousand dollar question. On Grosse Ile, it could even be the million dollar question.
"The only real difference between selling conventionally versus at auction is at auction, you have a definite time and date when you'll receive an offer from perspective bidders," said Ken Lindsay, president and chief executive officer of American Eagle Auction and Appraisal Co. in Livonia. "Secondly, an auction spotlights your particular property with an aggressive marketing campaign unlike listing conventionally with a real estate company."
Lindsay said that the marketing and advertising campaign for the Potrykus house was "extensive."
"It was advertised on WJR, Crains Business Journal, 15,000 full color glossy brochures complete with photographs, signage, Internet campaigns, countless newspaper ads, auction industry ads and the list goes on and on and on," he said. "We also hit our extensive mailing lists and pay for mailing addresses. The effort that goes behind an auction like this is pretty amazing, but it's well worth it in the end."
Lindsay said there are two different types of auctions, including one that allows the seller to veto the final offer on the house if it doesn't meet their approval.
"This way if there is a horrible storm and only person shows up and bids $1, you are protected," he said.
Barbara Potrykus was pleased with not only the results but the way the auction was conducted.
"It was very professional and everyone worked well together," she said. "I was very satisfied, especially with the way real estate is these days. I would highly recommend people going this route."
Some real estate agents would disagree.
Ann Redfield, owner of Century 21 Riverpointe on Grosse Ile, doesn't see the need for auctions when it comes to selling a home.
"It all depends on everyone's motivation," she said. "Each house is different. Each homeowner's situation is different.
"But I don't see the need for auctions. They really don't offer anything that a Realtor can't. The Realtor can adjust the price of a home for a quick sale. It all depends on the seller's motivation."
Redfield said not everyone on the island is in the kind of situation where they can put their property up for auction and hope they get what they need out of it.
"People have mortgages they have to pay off and what happens if the house sells for far less," she said.
As for the Potrykus house, Redfield said it might have been for the best because the seller wanted to get rid of everything at once. But the final price for the house and more than seven acres of land was "a little low."
"People love deals and I think (the buyer) got one, especially if you look at the history of how this house was priced," she said.
"I think a real estate agent can do a lot more for the seller."
The traditional fee for a real estate agent to list a home is 6 percent. Although in these tough times, that is even negotiable.
What percentage does the auctioneer receive?
"Legally, I cannot comment on commission structures, but what I can tell you is it's very close, if not the same commission, you would expect to pay listing with a Realtor," Lindsay said. "The added expense involves marketing fees which are quoted up front and vary from one auction to another."
Susie Harrison of Prudential Landmark Properties on Grosse Ile was once the listing agent for the Potrykus house. She doesn't see auctions as a threat to her livelihood.
"Realtors can bring clients to an auction," she said. "I believe auctions are something that should be considered. Look at all the options and make the best decision based on your needs."
Lindsay said some Realtors will list the home for an inflated price just to get the listing and once the listing is had, and no offers are made, "then the Realtor will go to the seller and suggest reducing the price."
"This can be a long and drawn-out process that delays or even prevents the sale of the home," he said. "At auction, you don't get any of that. It's a cut-and-dry operation. Promote the auction. Bring potential buyers to the table. Call bids. Consult with seller. Sell the house."
According to Lindsay, over-pricing or under-pricing property costs the seller money, but an auction allows the market to set the price.
"The market will pay exactly the value of the property at that particular time and place," he said. "You can choose to have your property sold with a reserve price, a figure known only to you and the auction company. There is no limit as to how high the price can go from there."
"An auction creates that 'auction frenzy' with qualified buyers who want to buy your property that day."
According to Ken Lindsay, president and chief executive officer of American Eagle Auction and Appraisal Co., there are many advantages to putting your home up for auction compared to listing the property with a real estate agent. Here are a few:
- Buyers come prepared to buy.
- Quick disposal reduces long-term carrying costs, including taxes and maintenance.
- Assurance that property will be sold at true market value.
- Exposes the property to a large number of pre-qualified prospects.
- Creates competition among buyers - auction price can exceed the price of a negotiated sale.
- Requires potential buyers to pre-qualify for financing.
- The seller knows exactly when the property will sell.
- Eliminates numerous and unscheduled showings.
- Takes the seller out of the negotiation process.