When Auctioning Land is Best (CFFL 355)
When Auctioning Land is Best
Jack Butala: When Auctioning Land is Best. Leave us your feedback for this podcast on iTunes and get the free ebook at landacademy.com, you don’t even have to read it. Thanks for listening.
Jack Butala: Butala with Jill DeWit.
Jill DeWit: Hi, happy Friday.
Jack Butala: Yeah, happy Friday. Welcome to our show. In this episode Jill and I talk about when auctioning land is the best way to sell it. One of my absolute favorite ways to sell real estate is at auction. Why? Because you buy it so cheap. Awesome show Jill. First, before we get into it though, let’s take a question posted by one our our members on the landacademy.com online community. It’s free.
Jill DeWit: Okay. Steven asked, “I’m having issues locating vesting deeds for a few properties. They aren’t on Title Pro 24/7. Is there anything else I can do?”
Jack Butala: This is all you, Jill.
Jill DeWit: It’s so funny, I’m a little surprised if they’re not on Title Pro, so I have three places that I go. First is I go looking for it for myself, because I have Title Pro and I have Real Quest, Core Logic. Real Quest Pro or Core Logic …
Jack Butala: Do does Steven.
Jill DeWit: Right, so I do my homework, exactly, and I check both those places first. If I haven’t found it there, number two, I’m going to ask the seller, because there’s a real good chance, it’s like the pink slip for your car. You should have these important documents tucked away somewhere. My seller probably has it. If for some reason so much time has passed they’ve lost it, they don’t know where the file is, whatever, then I’m going to go to the county and I can call the county. I don’t even necessarily need the vesting deed, by the way.
The reason I want the vesting deed is to confirm ownership. I can call the county and either A, just confirm the ownership. “Hi, I want to double check this property, how is it worded?” They can tell you over the phone, “Oh, it’s the Smith Family Trust.” “Okay, thank you,” because that’s really all I need as I’m creating my new deed. If I want to I could say, “By the way, can I request a copy of that deed for [court a deed 00:02:03]?” They say, “Sure, send me a check, here’s the address and it costs you $4,” or whatever it is. You can do that and the county will mail you back a copy if you really want it.
Jack Butala: Exactly. My first gut instinct on this is that something’s wrong, because … Have you ever been stumped?
Jill DeWit: No.
Jack Butala: Neither have I. Title Pro’s got … Between Real Quest and Title Pro they’re in like, what? 99.5% of the counties in the country?
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: It’s fine. It has to do either with an education thing or just a basic misunderstanding. Another thing I want to mention, too is that we talk a lot, especially on this show about deed questions and conveyance and things like that. Here’s the thing, if a property that we’re purchasing costs more, our cost, our purchase price is more than $5,000 we send it to title, almost always, almost without exception. On all of the house deals we do we send it to title. What we’re talking about and what a lot of these questions are, are based on low acquisition price rural land deals.
If it’s a piece of property in this case, I don’t know, let’s say it’s a 10 or 15 or 20 acre property west of the Mississippi that we’re purchasing for less than $4,000 or $5,000 we don’t get title insurance on it. It’s too slow. It’s too slow, it’s too time consuming. Quite honestly, if something go wrong, and it hasn’t in the 15,000 deals we’ve done, what did you lose? Two or three grand? It’s not that big of a deal. We get a lot of questions about deeds and conveyance and things like that. If you’re of the mindset, listener, that you’d never want to do your own deed, then that’s fine. Or if you just do house deals or SFR house flips or wholesaling, this has nothing to do with any of that. This is for small, lower-priced land flips where we try to make two or three times over pay, and we do it often. Go to landstay.com and check that out. There’s people in there doing it all the time in real time.
If you have any questions or you’d like to be on the show, reach out to either one of us on landacademy.com. Today’s topic, and this is the meat of the show, when auctioning land is the best way to sell it, or get rid of it I should say. I know you love this as much as I do, Jill. To bring the week into a full circle here, auctioning property is awesome, but there’s the good and the bad and the ugly, like all of it. For years we made a career out of only selling property on eBay. For years and years and years, up until about, I guess 2009 or ’10, Jill? It doesn’t matter.
Somewhere around there where it just didn’t become as profitable or viable as it once was. It’s still very, very profitable and we sell properties on there all the time. I have specifically come to my senses and learned that it’s not a one size fits all scenario. Some properties better off, you have an A list of buyers, you generated, the rules of internet commerce really, really apply to this business, the same way they do to buying and selling shoes. What do you think, Jill? What do you think? When is it really better to sell property via auction? $1, no reserve, highest bidder wins.
Jill DeWit: You know, it’s usually you need the cash. I see this more when you got to quickly generate some cash. You’re still going to make some money on the properties, but there’s some other acquisition that you’re building up for that you need it. That’s my example. You’re not going to maximize the price, and you can set the time limit. You can make it a 10 day auction, 30 day auction, whichever you prefer, and get in, get out. Just rake up that cash.
Jack Butala: Exactly. Back in the day they even had live auctions, not just so much eBay or bid for assets, but live auctions in an auditorium with a gavel and the whole thing. You’d bid on a price and it still happens. Not as much as it used to, but it still happens, because it’s so much more efficient on the internet. Yeah, as a seller, generating cash, it’s a real consistent way to know when you’re going to get cash. You’re just not going to get really … It’s not even maximizing price. You’re really not even going to get, in a lot of cases, wholesale. Buyers love it. They get some cheap property that way. They also know when it’s going to end. If you post a property properly, they know the whole procedure after the auction ends, they can see examples of documents and the whole thing.
It can be a great thing, but it hinges on one imperative scenario. You have to buy it cheap, and I mean crazy cheap, like 20% of retail value. That’s even scraping the lower end we go. Is it possible? Heck, yes. We have tons of members that do it. That’s all they do. They only auction property off. They do it online, sometimes in different venues. It all hinges on the fact that they’re really good at or have developed the skills to buy property crazy, crazy cheap. I personally would rather do a lot more deals in wholesale to people I know, which takes a ton of the sales time and effort out of it and make less money on the sell side and just do more deals for less net, less gross … Less spread, let’s say, between the purchase price and sale price on every deal, but just do a lot more deals.
Jill DeWit: I know that we have some members that, as they’re getting started they’ve done it in pieces where they thought they’d work on learning how to sell property and then go back and, kind of working it backwards and acquire property either through us or something like this. We all know, those folks are not going to maximize their price, so you could be brand new at this, pick up some cheap properties on eBay, learn to market them, dress them up and as you’re getting your website going make some money off those. Then go back and go, “All right, now I’m going to do my own mailer and I’m going to get it even cheaper than that.”
Jack Butala: Yeah.
Jill DeWit: I know we’ve had some people that do it that way. If you’re looking at building up your inventory and you want to grab a few pieces or property that you’re watching, maybe on eBay that you know what it’s worth but that that person needs the cash for some reason, they’re going to let it go. I know I could pick it up and dress this thing up and make it look fantastic and make more money off it on my website, then great. There’s nothing wrong with that.
Jack Butala: Here’s the other thing about online auctions. What we usually do is we have … Here’s the anatomy of our auction. We do a $1 no reserve for 30 days and we make sure it ends on Sunday at about 6:00pm when people are just about done with dinner or it’s dinnertime, and there’s differences in the time zone changes. During the course of those 30 days you get tons and tons of questions, and ultimately somebody bids the thing up. It usually happens right in the last two hours where you get most of the juice price-wise. What you end up with if not anything else, is 25 or so unique email addresses for people who are interested in buying real estate.
It does not take long to accumulate a massive list. What you also get if you run tons of auctions like we have in the past, and sometimes we do now, let’s say 10 properties on any given Sunday. 10 properties close; now you have 150 unique email addresses. You have 10 buyers; they don’t usually buy more than one. You have 10 unique buyers, and if you start to see a pattern with these buyers over months of selling properties you have an A list. Most of the people on our A list come from that era where they just bought tons and tons of property from us.
Then, if you stick with it like we have, you’ve taken properties in and you start to see huge predictable patterns like, “This property will be perfect for Jack over here. This property will be perfect for Jill over here. They bought 16 of these last year when we had that whole slew of them in that area.” It gets you into business really fast, the profit margins are way better than, let’s say anything else you could ever sell online, but they’re not doubling or tripling your money like we’re used to doing with a little bit of more patience. There’s not that much bad about it. You have to deal with customer service issues, right Jill, like anything else. Do you think online auctions are better or worse than selling property on Zillow or Truila or on our own website?
Jill DeWit: No. I don’t see it any different. You’re going to have those people, always, that are going to ask some of the same questions that are in the posting, and that’s okay. Or, if they’re not in the posting you’ll know to put it in the posting so they won’t have to call you. But, no. Do you think so?
Jack Butala: No, I think it’s about the same. I think that you need to … I see people sometimes getting disappointed because buyers don’t pay. You have to look, a predictable percentage of that is about 75%, maybe 60 to 75% pay immediately and it all works out great. There’s always people that just say, “My six year old son got control of my account and was buying 40 acres in Texas.” Really?
Jill DeWit: Isn’t that the funniest thing? I love it. “Yeah, he accidentally put that in his cart with his Xbox game.” What?
Jack Butala: Yeah, and talking Elmo.
Jill DeWit: Exactly.
Jack Butala: He wants 40 acres in Texas then, okay, and he was up at 3:00 in the morning when the auction closed?
Jill DeWit: Exactly.
Jack Butala: You got a genius on your hands.
Jill DeWit: So funny, you’re right.
Jack Butala: Stuff like that happens, but it’s pretty predictable.
Jill DeWit: Yeah. You know, and the thing too, you got to budget for it because it is not cheap. It’s about $85 a posting to do it for properties on eBay, for the open and the closing cost. You got to budget for that. I tell you, it’s still a great way to drive traffic to your website.
Jack Butala: Oh, yeah.
Jill DeWit: That’s one thing that I tell people, it’s not crazy. If you just budget $85 a month, have one 30 day auction going all the time, because once someone sees … You get a lot of activity on these. You put something in there, “Go to my website for more properties,” they will and that’s the best thing. It’s advertising.
Jack Butala: Then make sure on your website you have a respectful request for, “If you are a serious land buyer, just get on our list,” because we have what’s called a Weekly Platinum Buyers Club. Those people receive notices weekly of all the properties. How many properties are in our listing? It’s a lot.
Jill DeWit: We’ve had weeks with over 1,000 available properties, and our buyers love that. It’s the greatest thing.
Jack Butala: Everybody wins. The benefits of running a consistent … If you look at it like marketing and you make a little bit of money while it’s happening. It’s profitable, actual cross-marketing profitability. I don’t think there’s anything bad about it.
Jill DeWit: Not at all.
Jack Butala: Join us in another episode where Jack and Jill discuss how to use information, that’s me.
Jill DeWit: And inspiration, that’s me.
Jack Butala: Just about anything you want.
Jill DeWit: We use it every day to buy property for half of what it’s worth and sell it online immediately.
Jack Butala: You are not alone in your real estate ambition. Jill, it’s been like a month. It feels like a month.
Jill DeWit: Since we’ve been in the same state?
Jack Butala: Yes. It’s Friday, and I can’t wait to see you. I mean it.
Jill DeWit: Thanks, I know, thank you.
Jack Butala: I miss you.
Jill DeWit: Me also, I miss you, too. Our Platinum Buyers Club you were just talking about, I’m just kind of peeking to see how much it’s grown. It’s staggering to me the people that we have here that have opted in, and they just love it. I love that you brought that up, another benefit of having an online auction as a way of gathering buyers, and how you explained that. That was just so, so good. That’s something that we should … That might be a whole another show is talking about the value of an email list and your buyers and how to use them, and build your business.
Jack Butala: Yeah, exactly. Because we’re so used to doing it, it falls into one of those things that we’ve been doing for so long it might get overlooked, and we should talk about it a little bit more.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: I did the math on it, not recently, but I have done the math on one good 30 day auction on eBay will generate up to 20 unique email addresses with questions and everything else. Then the traffic, you can just watch your traffic go up. I haven’t in a detailed fashioned tracked whether or not they go on the site and buy something else and all that, but I’m sure all that happens. Right? That’s how the internet works, the more traffic, the better.
Jill DeWit: Exactly.
Jack Butala: It’s unique traffic. They found you. It’s not like we’re reaching out to people on a general thing. You’re special [list 00:16:02].
Jill DeWit: Yeah, you’re right. That’s the thing. You know how it is, I’m on 18 email lists and I’m like, “I know I didn’t opt in for that one. Who are you?” Kind of thing. If it’s real estate related I kind of want to see what you’re doing so I leave it there, I watch those. There’s plenty of other groups, and that’s not how we operate at all. Our list is a real, true, sincere, “I want to be in your world and see what you got going on when you have a new property list,” and it’s so valuable.
Jack Butala: Yeah, I mean I remember not too long ago you and I had a conference call with our email collector mechanism, I think we use AWeber still. Right?
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: We were all worried like, “Oh my gosh, we have an opt out percentage of .3.” The guy was laughing like, “No, most people have an opt out percentage of 28% and you guys are at .03,” or something. Remember that?
Jill DeWit: Exactly, exactly. I’m like, “Oh, no,” and he’s like, “Oh my gosh.”
Jack Butala: My gut on that is like, “Man, maybe we’re not trying hard enough. I want more people to not like us at home.” It’s an east coast west coast thing, maybe. I don’t know. Anyway, it’s really going to be nice to see you this weekend.
Jill DeWit: Yep.
Jack Butala: You sound real excited about it.
Jill DeWit: No, I am, I am. I promise I am, silly.
Jack Butala: Information and inspiration to buy undervalued property.
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