Spotlight On… Bret Richards, CAI, Auctioneer and Sales Manager with Hudson & MarshallAugust 18th, 2011 by melissa
Spotlight on . . .Bret Richards
This summer we’re launching our new website feature, “Spotlight On…” We’ll be profiling a real estate auction company on our blog to showcase that organization and present an interview with a principal staff member of the selected company. Topics relevant to the current market will be explored.
To kick off this latest addition, we’re starting with nationally renowned real estate auction company Hudson & Marshall. We recently spoke with Bret Richards, CAI, Auctioneer and Sales Manager with H&M, discussing how the influx of foreclosures is affecting today’s real estate auction market.
PA: How long have you been in the auction business?
BR: Nine years, all of them with Hudson & Marshall.
PA: What’s your role with the company?
BR: I’m one of the auctioneers and one of the sales managers. When I’m here in the office I direct the auction route (online, ballroom, on-site) for whatever makes the most sense. I also work with the marketing vendors to put a marketing plan together, and I’m an auctioneer so when we’re on the road, I’m one of the guys up there selling.
PA: We’re told from our buyers that banks are holding out for top dollar on properties now that they’ve been rescued by the government. Is this what you’re seeing now or are banks becoming more flexible?
BR: It’s all relative. Obviously they don’t want to foreclose in the first place. But if you own that asset and unfortunately have to foreclose, you want a good price for the property. I think the banks are trying to take a good aggressive approach to a business decision. They certainly don’t want to give away the property, nor do we want them to – that isn’t good for the market. We want them to make sure that it’s been advertised properly, and it’s our job as auctioneers to work with real estate agents and those in the marketplace to establish what that top dollar is. It’s our goal to work with both buyer and seller to temper their expectations and go for what is true market value. I see banks doing a lot of their homework as far as working with and trusting their agents on making a good accurate estimate of value of that property in today’s market. With that being said, they’re trying to be aggressive – at the end of the day, they’re going to want to make a strong business decision and get as much return as possible, and it’s our job to find that happy medium and make that transition happen.
PA: Does it differ from state to state?
BR: Absolutely. I think when you’re dealing with a bank or seller and you have a property in an area that’s hot, it makes sense to wait a bit and see what happens. There seems to be a lot of pre-auction activity in the marketplace. The offers we’re getting are pretty competitive, so we often decide to go to auction and hash it out in an open market setting. Whereas in areas that are more depressed, sometimes due to an oversupply of property, the market gets soft and sellers have to be more aggressive on the pricing so that they don’t sit on those properties. It’s all very market- and property-driven. For example, if you’ve got a lot of condos in Florida, you may have a good shot at getting those moved. If you have them in Chicago, it may be a little tougher right now.
For whatever reason, auctions are perceived as banks using them as a last chance to get them off the books instead of doing it at the beginning of the marking period to stimulate interest. We’ll often see properties that have been sitting on the retail market and have been reduced a few times. By the time they get to auction they’re a little bit stale, so we try to create excitement there. We’re seeing a lot of auction activity in the Southeast, such as Florida and Georgia, and certainly in the Midwest, but not as many auctions on the West Coast as we were seeing before. On the flip side of that, once you do have an auction, you see a high percentage of pre-sales for the next auction because the activity is a little stronger.
PA: Do you see a majority of the properties going to owner/users who will occupy the property or investors who are looking to fix it up and flip it for a profit?
BR: About 50/50. We look at it as an overall program. With the pre-sale program and the online auction that we do in advance of the live auctions, we get a lot of the owner-type buyers that are purchasing a certain property through pre-sale because they want that one particular house. What we see at the live auction is a majority of investors. But whatever that percentage of pre-sale interest that you pre-sold before the auction, the majority was owner-occupants. It balances itself out in the end. There are a lot of owner-occupants going the auction route as a viable way to get a lot of property for a competitive true market price.
PA: Are you seeing a resurgence in flipping with all the foreclosures on the market?
BR: I think there’s quite a few out there looking into flipping, but we see a very sophisticated buyer pool for those that do take the investment route. They’re ready to do anything – if the opportunity comes up to sell immediately, they’ll do it. They’re prepared to put money into a property if they have to, or they’ll put it on the rental market. These investors today really know what they’re doing.
PA: Can you tell me more about your pre-sale program?
BR: H&M is typically a ballroom live auction company. One of the things we’ve been growing is our online piece as far as a platform for specific online auctions. A kind of a hybrid that works well with our ballroom auctions is our pre-sale program. For example, when we get a portfolio from a lending institution that says we’re going to have an auction in Atlanta in 30 days, we then put those properties online immediately because these sellers want to get the properties back into the public’s hands to get these communities building back up strong. In order to do that, we have a pre-sale program that encourages people to make an offer on a property they’re interested in. If the bank wants to make that deal happen, they will and we’ll pull it out of the actual live auction and work with you. We’ve seen that really increase over the last few years from where we were when we first started the program – from about 10 or 15 percent of the assets selling in advance in a live auction to about 40 percent sold online before we get to the live auction, depending on the market. That’s reducing the bank’s hold time and getting the properties back in the community’s hands a little bit quicker. Basically, it’s an online piece that works in conjunction with our live auctions.
PA: Overall, how do you think the auction attendance is doing?
BR: It’s doing well. Everything is so market- and property-driven. We’re getting a lot of folks that are learning about the auction business and maybe not prepared to buy today, but they see that the auction method of marketing is being widely used in the real estate market today and want to learn more about it. Today what you see at auction is a larger crowd because you’ve got those who want to buy the property, as well as a buyer pool that’s learning about the process. In the last 4 to 5 years auctions have become more prevalent, so you have a lot of first-time auction buyers who are trying to get educated. I think it’s the greatest way to sell and purchase property. On attendance day, it’s probably about a 60/40 percent ratio of serious buyers to people who are just looking or gathering information.
PA: Where do you see the market going over the next 12 months?
BR: We think there’s going to continue to be more auctions, and more opportunities. We’re not sure exactly how many properties we’re going to be looking at, but we’re ready for several large auctions over the next 12 months or even further. We haven’t heard any indication that it’s over by any means.
PA: What are your top 3 tips for auction buyers?
BR: 1) Knowledge is power – you need to know what you’re dealing with. Not just the property itself, but your own personal finances – not what you can spend, but what you can afford. A lot of people are moving from an apartment to a house, so they have to consider all the costs. Be sure to know what you can afford. 2) Know what you’re buying. Go preview the property – auctions are ‘as is, where is’. Take a professional real estate agent with you that knows foreclosures and can see what kind of repairs the house may need. Most times the bank or auction house pays for the cooperating agent, so align yourself with a real estate professional that knows the ins and outs of foreclosures and real estate contracts. 3) Know what you’re going to do with the property – Are you going to rent it out? Live in it? Resell it? All those factors weigh in to how much you’re going to bid.
PA: What are your top 3 tips for sellers?
BR: 1) Know the current market in that area on that asset. No two markets are the same. Even though you’re dealing with foreclosures, you have to know what the surrounding market is doing. 2) Trust your real estate agent. If you don’t think your agent is spot-on with their numbers, get another one. There are a lot of good professional agents out there. 3) Understand that time is money — holding costs and carrying costs add up, so know that price competitively up front or use auctions up front to reduce all those costs. That’s the goal – to get the property back in the community’s hands.
PA: What do you like best about the auction business?
BR: It’s so pure. It’s like college basketball – we play because we love the game. It’s a method of marketing that pairs a ready, willing and able buyer with a ready, willing and able seller, providing the most open and competitive price based on the market. When you’re using auctions, it is the true market value no matter what you’re selling. It works both ways. If you’ve got a room full of 200 people trying to buy 10 houses, then the market has spoken. If you’ve got a room full of 2 people trying to buy 10 houses, then the market has spoken. It’s a direct reflection of the current market in that situation because you’re putting those properties out there – you’re advertising through online, social media, billboards, newspapers, etc. You’re exposing the market and whatever happens, that’s going to be the true market value of that home. You can talk numbers to me and current market analysis and BPOS, but I’m telling you right now, the best thing about the auction method of marketing is that it’s the truest value out there.
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