Real Estate: Prepare for Auction and Complete Sales

  • Category:
    Management
  • Document type:
    Assignment
  • Level:
    High School
  • Page:
    4
  • Words:
    2904

Question 1

(a) What legislation is relevant to the auction process in your state and where within this legislation (which sections) would you locate information regarding the legislative requirements for an agent auctioning property?

  1. An auctioneer is not allowed to accept a bid from a non-registered bidder.

  2. According to the Sale
    and Conveyancing Act of 1994, dummy bidding where agents planted friends or employees to bid so as to create a notion of competition. This was prohibited to allow for greater transparency. A bid made by a bidder is binding and may not be withdrawn

(b) Prepare a list of the Conditions of Sale by Auction that are applicable to your state.

  1. The bidder must have attained legal age of at least eighteen years of age.

  2. The purchaser is required to pay the deposit on the agreed upon date and sign the contract.

  3. The contract may be nullified and the property re-auctioned if the purchaser fails to pay the deposit.

(c) When implementing the auction marketing plan, including inspections, open houses and relevant security, an agent needs to ensure that they do this in line with agency practice, as well as legislative and ethical requirements. Name three (3) such requirements that you would need to consider when implementing your auction marketing campaign.

  1. All promotional activities with regards to the auction must be activated and availed as promised and as soon as possible to the seller. This may include all frames to be erected at their respective posts and the ones on the internet are up and running.

  2. The agent is supposed to secure the safety of all the parties that will be present at the auction especially where large crowds are involved.

  1. When deciding on how to conduct the auction, the agent needs to liaise with the owners on the times of inspection such that interference is minimal.

Question 2

For agents, there is a great deal of documentation involved in auctions. Answer the following questions:

(a) List three (3) documents involved in an auction sale and how you would explain the purpose and content of this auction documentation to the seller.

Hint: Auction documentation may include: agency authorities/agreement, sale contract, rules and conditions of auction, bidder registration documents (where applicable), any statutory documentation required by law when an agent auctions a property or agency documentation required for an auction.

Auction documentation

Purpose and content of this documentation as explained to seller

Sale contract

This document contains conditions of sale that are legally binding once the seller signs it.

Bidders registration

This is a document that all potential buyers are required to register their details such as full names and their addresses in before bidding for auction contract purposes.

Agency agreement

This is a document that entails the services the chosen agent shall provide to the seller of the property, amounts in commission and warnings among others. Its purpose is to have a legally binding contract between the seller and agent on the sale of the property.

(b) When preparing auction documentation you may need to call upon professionals to assist you, they may need to be followed up in a timely manner to ensure that auction documentation is completed prior to auction date. Provide two (2) examples of professionals you may use to assist you with preparing documentation and why it’s important to follow them up in a timely manner.

Clerk who records all information on what is sold, to whom and at what price that will be used when signing the sale contract.

Lawyers who will ensure that the process follows all the legal requirements.

Question 3

(a) Why is it important that the auctioneer inspects the property prior to auction and how would you ensure you facilitated this prior to commencement of auction?

Prior inspection assists in ensuring that there is enough space, chairs, auctioneer’s microphone and podium. This is done a few hours before the auction to allow for any adjustments that may arise. It also allows for a final look by potential buyers.

(b) Explain auction day procedures with regards to confirming reserve price with seller prior to auction.

The reserve price must be given to the auctioneer before the auction begins in writing. It is normally set 24 hours before the auction day. The reserve price must not be made public as it is confidential information.

(c) Explain any auction rules with regards to displaying auction documentation on the day.

It is illegal to bid on behalf of someone else and if so, authority must be given which must be backed up by proof such as a letter from the attorney.

The potential buyers must register as bidders for easy identification and follow up.

On the actual day of the auction, the agent should go around to nearby streets and place sign boards or frames so as to publicize the auction and attract a crowd.

(d) Can the reserve price be changed during the auction? Explain your response.

The reserve price can be changed during the auction because the information is not made public. This is in regard to how the auction is progressing through. If there is a low number of bidders the reserve price can be lowered and vice versa. This is all done with the consent of the seller.

Question 4

(a) Explain what it means when a property is ‘passed in’ at auction.

In the event that the bidding does not meet the reserve price, the property is passed in.

(b) What follow up procedures would an agent need to follow if the property they are auctioning is passed in at auction?

The agent is not supposed to quote the amount ‘passed in’ when marketing the property. It is a requirement by law to engage in negotiations with the highest bidder which must then be stated in the auction report on the type of bid.

Part B: Case study

Mr and Mrs Thurtell are an elderly couple who have asked you to conduct a listing presentation for them. Mrs Thurtell grew up in the property and has lived there all her life. The Thurtells have been married for 55 years and their children have now moved away from the area.

The house is on an attractive large block of land (2000 m2) and has some river front access with an established old jetty. You believe there will be high interest in the property from developers. Your estimated price range for the property is $680,000–$700,000.

The home was originally a small cottage which has had two noticeable extensions over the years. The property appears to be structurally sound and has been kept in very good condition. Mr Thurtell’s pride and joy is his established vegetable garden located at the end of the yard near the river.

The house has great sentimental value to the couple. However, Mrs Thurtell’s health is now failing and the couple has reluctantly decided to sell and move into a retirement community. Their unit will be ready in approximately nine weeks. The Thurtell’s daughter is staying with the couple until the home is sold and will be assisting them through the sale and with moving.

The Thurtells are concerned about a number of matters:

• How long it will take to sell the property as they do not want to miss out on their unit at the retirement village

• How much money it will cost to sell the property, as they are on restricted pensions

• About people walking over the vegetable garden

• The general disruption to their lifestyle with lots of inspections. In particular, Mrs Thurtell needs plenty of rest and is unsettled about lots of inspections with short notice.

Question 1

(a) Explain whether you would recommend the use of the auction method of sale to the Thurtells and why or why not.

I would recommend auctioning as it is a quick way to sell at a high price given that it creates a sense of competition for the potential buyers. In addition the location of the property is great for developers which will make them bid against each other to gathere momentum for bidding to achieve the highest price for the Thurtells.

(b) Once the Thurtells agree to auction their property, what documentation would you require from them prior to starting work on marketing the property? Hint: Consider agency authority, verification of ownership, material facts etc

Their documents that prove they are the real owners must be provided for verification purposes. They also need to sign an agent agreement where they authorize the sale of their property to be conducted by an agent with all the terms in place.

Disclosing any and all material facts on the property that could be important to avoid major loopholes once the property has been bought.

(c) How would you ensure that you created an accurate description of the Thurtell’s property for use before and during auction?

A pre-inspection to discover all material facts, location and surroundings and have them available to the public and have brochures for them during the auction.

(d) What special issues will you need to check with regards to the Thurtell’s property? You should be able to comment on at least two matters.

  1. Inquire on whether they would like to have an in-room or out room auction

  2. Inquire whether the Thurtell’s would like to bid

Question 2

You’ve successfully listed the Thurtell’s property for sale by auction. The auction will be an in room auction.

(a) You are now required to prepare a 30 day auction marketing timeline for the Thurtells.

Your timeline should highlight points in the auction campaign where you would:

  • book the auctioneer

  • erect signage

  • book and place pictorial advertising

  • open for inspections

  • the pre-auction meeting with the clients

  • culminating in the day of auction

Please ensure that you allow for a lead-up time of at least five days to the launch of your campaign.

  1. The auctioneer who will be in charge of the auctioneer should be sort and confirm availability.

  2. A sign that informs potential buyers to bid shall be erected in areas close to the property and places deemed necessary by the agent.

  3. Spots in local dailies for advertisements shall be booked to run on specific days.

  4. Make days that will be available for inspection.

  5. Meet with the clients and agree on the requirements on the auction day.

(b) Explain how you would confirm your auction marketing plan with the seller in line with agency practice, ethical standards and legislative requirements.

The marketing plan is tailored to the seller’s expectations. It must also be detailed enough relaying all relevant information including all fees that will be charged.

(c) Describe how you would ensure that your auction marketing campaign is monitored on a regular basis to establish effectiveness of marketing plan. Ensure you cover a process for regular reporting on auction marketing communicated to the Thurtells.

The use of the internet will be a great marketing platform in the campaign as it has instant feedback which can ensure a regular report to the Thurtells.

Question 3

Describe how you would handle the following aspects of the upcoming Thurtell property auction:

  1. Handling enquiries from prospective buyers and other interested parties.

Given the market research and price advice which will have been contained in your Comparative Market Analysis for the seller, and the prescribed legal requirements for quoting potential selling price to prospective buyers, describe exactly what you would say to a prospective buyer enquiring about the potential selling price of the Thurtells property. Explain your reasoning. Also ensure you cover in your response agency requirements with regards to record keeping of these enquires and when copies of relevant documentation are required to be provided.

A potential buyer will have to do their own research and come up with a suitable price to bid at. As an agent, I am legally bound not to reveal the price of the property whatsoever. I would explain the legal repercussions to the buyer and encourage them to bid a bit higher than their researched market price if they want to secure the property.

(b) Explain how you would handle any offers from prospective purchasers prior to auction

Encourage them to bid as the reserve price is not disclosed until 24 hours to the auction. By conducting research of the market price, they should make a high offer if they want to secure the property.

(c) What special instructions may you need to note in your documentation (Hint: relate this to the Thurtell’s property and the issue of the vegetable garden).

Keep the visitors off the garden.

Question 4

(a) You have a number of interested buyers who have indicated that they will be attending the auction. Please explain what required legislative processes you must follow with these buyers to ensure that they can bid on the day of auction.

The prospective buyers should register themselves as bidders and given their respective identification numbers.

(b) One of the prospective buyers interested in the property cannot attend the auction. Explain under what circumstances an absentee bidder can authorise another party to bid on their behalf and what would the written authorisation from an absentee bidder need to include?

An absentee bidder can have someone bid on their behalf but with the necessary documents like a letter of authorization or power of attorney that should be presented on the day of the auction.

Question 5

(a) Describe how you would prepare for this in-room auction day. Outline a step by step list of procedures that you will need to work through on the day of the Thurtell’s auction. Please include in your answer a checklist you could use for the list of resources you will need on the day including a list of the staff, equipment promotional materials and any other resources or requirements you will need on auction day- such as what handouts will be required, and what documents must be displayed for public perusal during the auction sale.

A prior inspection will be required to make sure the venue is in great condition. Catalogues and brochures which advertise as well as give information describing the property. They will include photographs, descriptions and terms and conditions that apply for the sale. A memorandum will also be in place that shall be signed by all parties occupying the auction floor. Terms and conditions shall also be pinned which are the rules of the auction.

(b) Prepare a list of all the matters that you will discuss with the auctioneer in the strategy meetings you will have before the auction.

The venue of the auction, discussion of the reserve price in regard to the market price. Ensure that all the necessary documentation is in place.

(c) Explain how you would ensure that questions from interested parties are answered on auction day including during the auction.

Have assistants of the agent answer all queries from prospective buyers and also allow room for questions before bidding.

Question 6

The Thurtells have some last minute questions for you regarding the procedures at the auction. You are keen to settle their nerves by showing you are on top of everything, so prepare a response to the following questions:

(a) ‘We’ve heard auctions don’t always run smoothly. What happens in the event of a disputed bid at an auction?’

In such a case, it is only the auctioneer’s decision that will be final and he will be the sole arbitrator.

(b) ‘What conditions apply if the seller wants to bid on their own property at auction?’

  1. This information must be disclosed to other bidders.

  2. The seller can only bid in an auction with a reserve price.

(c) We have heard about arguments following auctions about who pays for GST. Describe what the options are with regards to ascertaining whether or not the seller is registered for GST.

If the seller is not registered with GST, they will be required to pay GST for sales they made since the time that they were supposed to register. If one is registered, 10% is charged as part of GST.

Question 7

Congratulations the property has successfully sold on the auction day! Please make a list of all the activities and matters you need to attend to at the fall of the hammer both on the auction day and afterwards in the days/weeks immediately post auction. In your answer ensure you cover:

  • follow up procedures

  • completing sales documentation

  • compiling accurate sales data regarding auction outcome

  • -publication of your auction data

  • records made and stored

Once the reserve price has been met, the auctioneer will declare the property to be in the market and no more bids will be accepted. The purchaser will be invited by the auctioneer to sign the contract of sale and deliver the deposit. The information is then published for the public and data on the auction clearance rates revealed which should be free from bias and transparent.

Question 8

While you are signing up the successful buyers on contract, your associates and assistants should also be actively marketing to the unsuccessful bidders. Discuss at least three activities that they should be undertaking to build your client base?

  1. Advertising other available property

  2. Giving the prospective buyers contact information

  3. Invite them for future auctions

References

Gray, D. (2013). Auction Clearance Rates in Sydney, Melbourne Based on Incomplete Data. ABC News.

Real Estate View. (2016). The ins and outs of Setting a Reserve Price.

SA. GOV. AU. (2016). Real Estate Agents and Auctioneers.