From art and jewelry to cars and collectibles, some of the finest assets in the world are sold at auction. Now Compass Auctions & Real Estate in Chattanooga wants to add houses to the list of items commonly placed on the block.
However, convincing homeowners to sell their property via auction is not always easy, says Paige Holt, president of Compass.
Most sellers are worried their home will sell for less than it’s worth, she notes, while others are leery of stepping away from the tried-and-true methods of traditional real estate.
“We laugh when people say they don’t want to sell their house for a dollar,” Holt says. “We always say, ‘Take what you think you know about the auction process and throw it out the window.’”
This window would need to be large and flung wide-open to accommodate the disposal of all the misperceptions about the auction process for houses, judging by the pile of seller concerns Holt addresses.
Chief among these are fears about price. But rather than being a last resort for dilapidated homes that are sold for nickels on the dollar, housing auctions embrace the full spectrum of properties and have safeguards in place that protect the seller’s equity, Holt says.
“We do competitive market analysis, just like we would for a traditional listing, and can establish a reserve. If you want $250,000 for your house, we won’t sell it for less,” Holt explains.
If the bidding fails to reach the reserve, she adds, Compass can convert the property to a traditional listing and reach out to its database of clients.
“There’s no risk,” Holt claims. “In fact, you can save money because our seller’s commission is about half of what it would be if you listed your house traditionally.”
Buyers also can sell “absolute,” Holt continues, meaning the highest bidder secures the property.
“Absolute auctions bring out people in droves,” she asserts. “It’s risky, but a properly marketed campaign will hit the mark.”
Conversely, Brandi Pearl Thompson, a Realtor with Keller Williams in Chattanooga, says houses priced below $350,000 could actually limit the buyer pool in an auction.
“Auctions cater to experienced buyers, while houses at that price point appeal to first-time homebuyers, which is the largest pool in the market,” Thompson says. “Those buyers typically want a Realtor to walk them through the process, so why would you auction one of those houses?”
Holt says absolute auctions typically work well for people who are selling luxury homes and estates, but insists they can be an asset for any seller because of the way they spark competitive bidding.
“We exceed expectations most of the time,” Holt maintains. “We sold Heritage Farm in Bledsoe County for over $9,000 an acre, which made it one of the highest-selling properties per acre in the valley. We were expecting up to $300,000 and we brought in $340,000.”
Homesellers also voice concerns about the auction process offering fewer safeguards compared to a traditional listing, Holt says.
“In traditional real estate, you enter into a contract. You have to take the same steps to navigate the auction process,” Holt assures. “Buyers also have to have their financing in place beforehand, meaning they need to submit either a bank statement as proof of funds or a loan approval letter.”
Also, buyers who fail to close on a purchase would forfeit their earnest money, just like in a traditional real estate transaction, she says.
That said, a buyer who has purchased a house through a Compass auction has never failed to close, Holt reports.
Once Holt has disabused home sellers of their misunderstandings, she trumpets the benefits of house auctions, some of which she argues eclipse the advantages of a traditional listing.
Chief among these is live competitive bidding, she says.
“The housing market is hot, so there’s a lot competitive bidding,” she admits. “But unlike a traditional listing, auctions allow buyers to counter bids in real time. They can immediately see when someone has outbid them and up their bid.”
Here again, Thompson voices a reservation.
“I don’t see auctions as being as viable in the current market for the majority of properties,” she says. “Supply is so low and demand is so high that there are multiple buyers on pretty much every property.”
As an example, Thompson submits a recent listing, which she says received four offers in four days after she placed it on the market on a Sunday. By Thursday, her buyer had accepted an offer that would put $10,000 more in her pocket than the list price.
Holt argues homesellers in the current market could actually be leaving money on the table due to the lack of advance marketing.
“It’s a feeding frenzy out there, and your house could sell in a day, but imagine if you put two weeks worth of our marketing behind it and all of those buyers were competing for your house,” she posits.
“If you sell your house in 24 hours, you might receive top of the market, but if more people bid against each other live, you might fetch a higher price for your home.”
Compass markets its auctions through Goggle and social media. The company also reaches out to an internal database of over 50,000 clients and can access a national audience of 400,000, says Scott Steele, marketing director for the company.
In addition, events posted on Compass’ website at www.soldoncompass.com draw an average of 25,000 views.
“Auctions put marketing behind the listing, which forces people to come to the table,” Steele says. “If they want that piece of property, they have to compete to get it.”
In addition, Holt says, houses sold through an auction are offered as-is, which eliminates haggling on repairs.
“You’re not going to have to jump through any hoops after the sale,” Holt adds. “There won’t be inspections or any of the other things that can come up after a purchase agreement is signed.”
While Thompson agrees that a lack of inspections and back-and-forth bargaining is a nice perk when selling a house, she says it’s not exclusive to the auction process.
“You can tell your Realtor you want to sell your house as-is,” she informs. “In fact, I don’t advise my sellers to do any repairs. I prefer a price reduction or paying closing costs or offer money paid directly to a contractor.
“The seller is already directing their love in a new direction, and their idea of a repair might not be the buyer’s idea of a repair. I’ve seen deals fall apart because the seller was unhappy with the repairs they wanted.”
Selling a house as-is also mitigates the seller’s liability, Thompson adds.
Ultimately, Holt stands her ground. As a Realtor, an auctioneer and an business owner, she’s seen the results Compass’ auctions have delivered for its sellers and says she believes the company can achieve the same outcome for home sellers.
She does, however, suggest a homeowner who has negative equity should avoid the auction block. “If you owe $525,000 on your property and it’s worth $500,000, an auction would not be appropriate.”
Thompson, however, says a skillful Realtor can help a seller span the equity gap in the current market, in which many buyers are paying more for a house than it’s worth.
Holt says this is good news for Compass, which recently expanded its real estate services to include traditional sales.
Compass is no stranger to real estate auctions. The company’s portfolio includes luxury houses seized from a Ponzi scheme, plots of land across Tennessee and beyond, as well as large commercial buildings. Counted among the latter is a structure alongside James Robertson Parkway in Nashville the company sold for $8.6 million in 2017.
Moreover, Compass’ clients have included the U.S. Marshal’s Service, the FDIC and the State of Tennessee.
After the company closed its $30 million file with the U.S. Marshal’s Service, its leaders took a moment to catch their breath and gather their thoughts. Upon recuperating, they decided to refocus Compass’ efforts on the Chattanooga market, Holt says.
“We were like, ‘Phew, that was stressful.’ We’d been working nationally and dealing with a lot of moving parts and logistics, and we felt like we needed to come full circle and concentrate on home.”
Realtors on staff at Compass also include Elizabeth Rogers, a Nashville native who moved to Chattanooga in October to serve as the company’s executive director of real estate.
“We’ve always offered auctions; traditional sales were not our preferred method,” Holt recalls. “So, we made our auctions more agent- and broker-friendly.”
Compass’ model includes paying agents who bring a seller to the auction block the same commission they would receive if they sold a house in the traditional manner.
“You’re going to make your normal commission, so if you have clients who would be ideal for an auction, let’s work together,” Holt offers.
Just like Compass must often re-educate home sellers on the benefits of auctions, the company realizes auctions might present a paradigm shift for some Realtors, so Holt and Rogers are embarking on a campaign to inform agents as well.
The two women have already scheduled presentations at a number of large brokerages in Chattanooga and say they are available to meet with more firms large and small.
“We now offer auctions and traditional sales under one roof, which gives your sellers options,” Holt concludes. “Think of Compass as another tool for your tool box.”