A 5-day plan to sell your house
More Americans are using auctions to sell property. Is this strategy for you?
NEW YORK (CNNMoney.com) - How would you like to sell your home in just five days, at full price or near it, and pay no broker's commission?
Such is the attraction for an auction-type method (users call it a "round-robin" bidding process) of selling homes explained by the book, "How to Sell your Home in 5 Days," by Bill Effros.
Here's how it works:
The popularity of real estate auctions of all kinds is soaring. According to Dennis Cruz of the National Auctioneers Association, the number of residential auctions rose 8.4 percent in 2005, to sales worth $15 billion.
Pricing it right
Key to the book's strategy is to low-ball the starting price to get people's juices flowing. "You have to set the price low enough so that your brother-in-law will beat the door down to buy it," says Rusty Denman, who sold his house outside of Asheville, North Carolina in late 2004 using the 5-day method.
"In traditional real estate transactions, we start artificially high and work down," says George Cappony, a 5-day sale coach who runs the Web site www.5-daysale.com. "Here we start artificially low and let the market tell us what the house is worth." Cappony says business is booming -- he has doubled the number of homes he helped sell in the past year.
Joe Crump, a real estate investor, reports he's employed the method 13 times and that it failed only once, on a property in San Francisco, where he wasn't able to generate enough responses to his advertising and marketing efforts. "Otherwise, I figure I received between 93 percent and 95 percent of market value for the other 12 sales. When there's no broker's commission, that's full price," Crump says.
He reports little down side and always uses an undisclosed reserve as a hedge. "It works just like on eBay. If I don't reach that [reserve], I don't sell the property."
The method doesn't work for everyone. Stuart Carter, an Indianapolis attorney, and his wife reported receiving no responses from his attempt last year. Carter admits, however, that he was probably too nervous about pricing.
Carter put a starting price of $130,000 on what he thought was a $170,000 home, which he later sold through a broker for $154,000. In retrospect, he reports, the starting price was probably too high. "I should have realized it when no one called about the ad."
"If you don't get at least 25 responses to the ads, cancel the open house," says Bill Seavey, who was an early adopter of the strategy.
Five and out
For sellers, the great advantage is convenience and speed.
"My wife didn't want to have to keep the house in pristine condition 24/7 and be at the beck and call of everyone who wanted a peek at it on 15-minutes notice," says Denman.
Temperamentally, some people are probably better suited to the strategy than others. Denman, no shrinking violet, turned his open house into an event. "It was a lot of fun," he says. "One attendee told me 'This is the biggest party we've had in years.'"
A couple of the losing bidders became friends. And although he now lives hundreds of miles away in Charleston, South Carolina, Denman still runs into people who recognize him from the sale. ("Aren't you the guy . .. .")
Another attraction, say fans of the strategy, is that everything is above board. He had an inspection done before the sale and the results were given to all interested buyers. Everyone knows how much the bids are. The competition is between buyers.
It also eases pre-closing problems. The winning bidders know that there's other bidders waiting in the wings so there is less griping about fixing or being compensated for small problems, according to Denman.
The biggest financial advantage is that the method enables the seller to save on broker commissions and fees. And if the final sale price does not bring what the seller originally thought the house would bring, that may be due more to unrealistic expectations than a faulty method.
"The true value of the property will be discovered by the buying public," says Cappony. "If a broker says it's worth $425,000 and it comes in at $375,000, that's what it's worth."