The latest hot fad is the “Weekend Home Sale”. For those of you who remember, we regularly featured Bill Effros on my radio show as a guest over the years. Bill is the author of How To Sell Your Home In 5 Days.
There are a variety of systems, all employing various twists but with one comment element; a quick sale of your home. Of course, when real estate was red hot, these weekend auctions were utilized to get the highest price by getting people to bid against each other. In today’s slow market, the concept attempts to create excitement and motivate buyers to take action.
How do weekend home sales work? Basically, the house is offered for sale to the highest bidder by the end of the weekend. While systems vary, the most common (as in Effros’ book) is the idea of people writing down their bids on a bid sheet at the home. These bidders are then allowed to raise their bids in a final round robin bidding that occurs by phone on Sunday night. The highest bidder wins and must be able to close within 30 days. These weekend sales are very good at attracting large crowds. The idea of a home being sold at a bargain price will attract hundreds of people in most markets.
The reason why these weekend sales are not working out well are the very same reasons why the general real estate market is so soft. Buyers can not obtain financing. With a very limited pool of cash buyers (and those with 20 to 30% down payments), there are just not very many qualified buyers in the market. The other problem is that most sellers can not reduce their prices due to their existing mortgage balances. In many cases, people who obtained 100% financing during the last 3 years simply owe more than the house is worth.
One of the big questions that also comes up is what if you don’t get high enough bids? The weekend sales guys don’t have a very good answer for this, but typically say that you just cancel the sale. They use disclaimers in their advertising that indicates that there is a minimum undisclosed reserve price. This means, as the seller, you can set a secret price that below which you will not sell.
In recent months, CMC was invited to go on site and watch some of these weekend sales here in Florida. The results were very mixed and most of the time the house did not sell at all. The promoter charged several thousand dollars to conduct the sale, and while they did produce substantial traffic to the home sales it did not typically convert into a sale for most sellers.
I think the weekend sale concept is a good one, but in this real estate market there are too many challenges for it to work as designed. Most sellers should try and hold on to their homes and wait for the market to turn around. Another option if you must move is to rent your home. The rental market is getting very good as foreclosed homeowners become renters again.
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