Helpful Information

Attending Your First Auction

In our area auctions have been commonplace for many years so most people have at least some idea what attending one entails. For those who are from areas where public auctions aren’t a regular occurrence, the event can seem a bit intimidating. I hope to provide some insight into what to expect and hopefully provide some helpful tips that even folks who have been to auctions before can find useful.

If you are interested in bidding on the real estate being offered at the auction, most companies will allow you to look at it before the auction date and conduct any inspections you may want to do. It’s not uncommon for a person who is very interested in a home to have a home inspection or appraisal prior to the auction, since the purchase agreement will not be contingent on either of those. Personal property is generally not available for preview prior to auction day. There are several reasons for this, but the most practical one is that most items are boxed for carryout weeks beforehand and won’t be unboxed until the morning of the auction when they are placed on display to be sold.

If you aren’t exactly sure where the auction site is, it doesn’t hurt to drive by the site a few days beforehand to make sure you know where you’re going and how long it will take to get there. It’s also a good opportunity to scout out the parking situation. If you plan on bringing a trailer (for furniture or other large items), you will definitely want to make sure don’t hem yourself in on auction day by pulling into an area that will be difficult to get out of when you’re ready to leave.

Try to arrive at least 30 minutes early if possible. Many people will show up about 20 minutes or less before the auction begins, which can lead to delays in both parking and getting registered. Companies vary in efficiency, but if they have only one person registering bidders then you may be standing in line for several minutes. You will probably need a photo ID or driver’s license in order to register, so have your ID ready to hand to the person registering. They will scan your license and ask for your phone number, then hand you back your ID and a bid card with a bid number on it. At that point you are ready to bid. Valuables such as guns, jewelry, coins, or other small items that cannot be left unattended by auction staff are often sold first. If these are the items you’re coming to bid on, you’ll want to make sure you give yourself enough of a time buffer for any unexpected delays to arrive on time. Another advantage of arriving early is that you will have more time to examine the items being sold and decide if it’s what you’re looking for instead of being forced to make a snap decision when the bidding is under way.

If you are there for a specific item, try to post up in front of or as near as possible to it so the Auctioneer or a member of the crew catching bids can clearly see you. When you want to bid, hold your number up in front of you until the person(s) catching bids sees you and acknowledges it. If you aren’t sure if you have the high bid, ask. If it’s a large crowd or 2 bidders are right next to each other there can be confusion over who has the bid, so if you aren’t sure you should verify before the Auctioneer declares the item sold and moves on.

When the Auctioneer declares the item sold and you are the winning bidder, you are responsible for the well being of that item from then on. If it is fragile or too valuable to leave laying around, either hang on to it or put it somewhere safe. For a large item, you will probably be able to pick it up at your convenience later in the day but be mindful of the fact that leaving it unattended for a length of time may result in someone else thinking it was abandoned. One regular attendee to our auctions has small stickers with his name on them that he places on items when he’s the winning bidder. As a casual attendee, you likely won’t need to go to that much trouble, but if you are purchase numerous items you may want to keep them bunched together off to the side or mark them in some way until you can get them loaded up.

Payment is generally by cash or check, but with the improvement of cellular networks in rural areas the acceptance of credit cards is becoming more common. For personal property the full purchase price is usually due on auction day. Any exceptions to this will be specified to the crowd either in the auction terms or during opening announcements. If you purchase a tract of real estate, you will be required to make a deposit on the day of the auction and will be responsible for paying the balance within the time period specified in the purchase contract.

Auctions provide many different things to many different people. You can furnish your home, add to or round out a collection, buy boxes of stuff that may or may not every be looked through, or just spend a day outdoors enjoying the comradery of fellow attendees.

The News Enterprise 04/07/2019 FOCUS ON FINANCE: Know What You Own

By Philip Tabb

Selling a large parcel of land can require some important groundwork beforehand in order to obtain the highest dollar amount possible. Often, the first thing a person needs to do is determine the exact amount of acreage that they own. That may sound silly, but it’s not uncommon for properties haven’t that changed hands in a while or haven’t warranted the marking of property boundaries to have less than stellar descriptions of what is there. First, look at the legal description of the property, which will be shown on the deed. The legal description is what describes the boundaries and states the amount of land contained within. An older metes and bounds legal description may go as follows:

Starting at a large black oak tree, then along the old Jones property to a rock on the side of a hill, then along the edge of Ed Crowley’s tobacco patch, then across the creek to a 16” stump near Joe Harrison’s corn crib, and then back to the beginning, containing 50 acres more or less.

Now, knowing that this description was written decades ago, what are the chances of you setting off into the woods and finding that rock on the hillside or the stump that used to be near a corn crib that may or may not still be there? This is where a surveyor comes in. A surveyor will take your deed and deeds of the surrounding properties and use them like pieces in a jigsaw puzzle to determine just where the property lines are supposed to be. If one or more neighboring parcels have been surveyed, the survey will work from those established points and fill in the blanks on the points still needing to be staked. If the surveyor finds that neighboring deeds contradict one another or are just too vague to figure out, then the neighboring property owners may need to sign a boundary line agreement to establish the line once and for all. The sample legal description that I provided above was one I made up to illustrate a point, but it’s by no means ridiculous. Several years ago, I asked a surveyor we were working with on a particularly messy survey what was the worst legal description he’d ever seen. He laughed and immediately recalled a deed that had “the time it takes to smoke a cigarette on horseback” as a unit of distance for one of the property lines. Stories like this are humorous, but they help to emphasize what needs to be the starting point for selling your land: Make sure you know exactly what you own. Land is often sold “by the acre” meaning that the price per acre is agreed upon and then multiplied by the acreage amount to establish the purchase price. By not knowing exactly what you have, you run a very real risk of leaving money on the table or being accused of misleading the buyer if the acreage were to come up short when they later have it surveyed.

Another benefit is that once the boundary survey is complete, you will be able to determine whether the property could potentially be divided and offered in smaller tracts. As a seller, the primary motivation for dividing the property typically will be to drive the per acre average higher. Smaller tracts are more affordable to more people, thus expanding your pool of potential buyers and ideally driving the price up. If you decide to divide your property into tracts, you will likely be required by your local planning entity to make a record plat. The record plat is a drawing of the property illustrating the boundary lines, division lines, easements (such as water or electric lines), location of structures, setbacks, road access, neighboring property owners, and a good deal of other information that cannot properly be described with a metes and bounds description. Dividing the property will be subject to the rules and regulation of your local planning entity and the final plat will generally require approval prior to being recorded. In addition to planning guidance, the local health department may have to approve each tract’s suitability for a septic system, the state or county road department will need to tentatively approve entrances, and local utility companies will review and sign the plat verifying that the property is serviceable in its proposed configuration. You as the owner will also sign the plat and your signature will have to be notarized. After all of this is completed and reviewed, planning will grant final approval and the plat is ready to be recorded by the County Clerk. From that point on, the property won’t be described by metes and bounds. The deed will instead have “Lot 4 of Sunny Day Subdivision, Plat Cabinet 4, Sheet 35, as recorded in the office of the Reader County Clerk.” I’ve seen this cause concern with a buyer, since the deed doesn’t specifically state the acreage amount of the parcel. There is nothing to worry about, however, since the deed’s legal description now references the recorded plat, which contains much more detailed information about the property than the deed is capable of.

I’ve encountered more sellers than I can count who were hesitant to get a survey, put off by the cost and possibly feeling that it wasn’t necessary. However, the money spent establishing a clear, concise, and accurate legal description will not only save you headaches later but can pay for itself several times over by allowing you to offer a large parcel in smaller tracts which will average a higher overall per acre price.

The News Enterprise 10/20/2019 FOCUS ON FINANCE: Hills and Valleys

By Philip Tabb

Real estate, like other assets, has ups and downs based on a wide variety of factors. Buy low sell high is an investor’s rule, but in practice it’s not so straightforward.

The housing market is tied to several factors but ultimately it boils down to the basics of supply and demand. If an area is growing, the housing market is likely strong due to the influx of people needing a place to live. The amount and types of jobs will contribute to prices as well, with average wages affecting what prices the market will bear. In a perfect world, growth would be stable and predictable and deciding whether or not to purchase a home would be extremely straightforward since you would know that not only are you getting a good buy, but your home would steadily gain value as continued growth occurs. Unfortunately, that isn’t generally the case. A property’s value is often subject to factors that are well beyond the owner’s control.

One example that is still very much fresh on people’s minds was the financial crisis of ’07-’08. Compared to other places nationally, Hardin and surrounding counties came through the mortgage crisis reasonably well. For the most part we managed to skid sideways for a few years, as opposed to some areas which saw property values plummet by 30 and even 50%. That’s not to say we didn’t have price drops, but overall, we came through reasonably well.

The financial crisis struck on a national level, but there was another factor before then that affected our area specifically: the hype surrounding the 2005 round of BRAC (Base Realignment and Closure aka changes coming to Ft. Knox). I distinctly remember attending a meeting held primarily for Realtors, builders, and real estate investors where we were told flat out that people from Maryland, Virginia, and other areas would be coming here in droves; cash in hand from the $400-500k homes they’d just sold. We were on the verge of a boom and we had better be ready for it. Builders naturally scrambled to fill this soon-to-be housing shortage, building multiple high-priced spec homes (speculative, meaning it doesn’t have a predetermined buyer during construction). We were braced for the influx, however, the flood turned out to be more of a gradual trickle and some builders found themselves paying interest on construction loans for multiple properties that pushed the upper price points of our local housing market. On top of this, within a couple of years the subprime lending house of cards came crashing down, shocking the country’s financial system and driving our already faltering housing market down with it.

Coupling those two factors back to back sounds like a doomsday scenario for us locally and, for some, it was. Subdivision development all but stopped and people who made their living in the housing market held on for dear life. Overall, however, our area managed to hunker down and weather the storm better than many other areas nationally. According to data from the Heart of Kentucky Association of Realtors’ Multiple Listing Service, in 2007 the average home price was $142k, which dipped to $132k by the end of 2009 which seemed to mark our housing price bottom. Since 2012 the average residential sale price our area has risen from $138k to $173k.

So, with that said, is now the time to sell while the market is seemingly high? Or is now the time to buy and ride the swing higher? Honestly, who knows. It ultimately boils down to what you expect to gain from owning property. If you are flipping houses, then the price is one of, if not THE top consideration for turning a profit ASAP. If you’re looking to invest on a longer term for rental or other income, price is certainly a factor, but you have a broader window of time to work with. If you are looking for a place to live, raise your family, and call home, then the only right time to buy is when you find the right place. A home should be your safe place, your refuge, the place where you make memories that will be looked back on fondly for years to come. When you find a property that provides that sense of security, gauging where the overall housing market is may not necessarily be a primary concern.

The News Enterprise 11/04/2018 FOCUS ON FINANCE: Selling Real Estate at Auction vs. Listing with a Realtor

By Philip Tabb

To say that there are a lot of moving parts to a real estate transaction would be an understatement. Selling your home or other property can be a daunting task and one not to be taken lightly. The help of a professional who deals solely in these types of transactions is often the best route. Realtors and Auctioneers both provide a level of expertise that can help to make the transaction faster, smoother, and most importantly more profitable. But which one is best suited for you? I’ll give a few (of the many) pros and cons for both and try to lean towards neither, since every person’s situation is unique and there is no cookie cutter approach when it comes to real estate.

Listing with a Realtor Pros - You pick your price (well, kind of). A licensed Realtor can help you determine a fair asking price based on the current market conditions and how motivated you are. - Most things are negotiable. This could also be a con for some, I suppose, but if you enjoy the back and forth of wheeling and dealing then you may find the process rather exciting. - The time given to vacate the property can usually be tailored to fit your needs. - Potential buyers are generally screened prior to looking which cuts down on tire kickers wasting your time with pointless showings. - It only takes one buyer to come along and fall in love with your property. Cons - You won’t necessarily know when, or if your property will sell. - Unless the market is red hot, the sense of urgency for potential buyers to purchase quickly isn’t as great, especially if there are other comparable properties on the market. - The purchase contract will likely have several contingencies that must be satisfied for the transaction to be completed. These may include financing, appraisal, inspections, or any number of other items that a buyer decides to request as part of the deal. Home inspections are now commonplace and may or may not result in a laundry list of repairs that you must either fix, compensate the buyer for, or simply say no and risk the buyer walking away. It should also be noted that failure to meet a contingency will generally result in the buyer getting their good faith deposit back and you being right back where you were before the purchase contract, except now you’ve wasted several weeks of potential marketing time. - The time to closing can be somewhat fluid, depending on financing and other factors such as the ones listed above. A cash buyer may close in 2 weeks while a government backed loan could take up to 60 days. Repairs required by appraisal or other inspections must be complete prior to closing, which may mean adding a contractor’s ability to get the work done into the equation.

Selling at Auction Pros: - The auction sets a specific date and time that the property will sell (or possibly not sell if there is a reserve price). If the auction is absolute, meaning that it will sell regardless of price, then you know on that day your property will be under contract and can plan accordingly. - Due to the date and time being specifically stated, there is a sense of urgency for potential bidders. A person may drive past a real estate sign day after day and never act, but an auction sign acts as a timer and tells them to move it or lose it. - Generally, the only contingency in an auction purchase contract is that the buyer will be given a clear and marketable title to the property. Any title issues must be settled within a specified time or the buyer gets their deposit back. Everything else, such as the condition of the property makes no difference. Inspections and appraisals are generally allowed but have no bearing on the purchase contract. - The closing deadline is usually 30 days after the auction date and is only extended in the event of a title issue which needs additional time to be corrected. If for any reason other than a cloud on the title the buyer needed additional time, then it is solely at the discretion of the seller whether to grant the request. Cons: - The price will be what the market determines on auction day. You have the option of a reserve, or minimum price, but an auction with reserve may result in potential bidders not taking the seller’s resolve to sell seriously and not participating in the auction. - There is very little negotiation in an auction purchase contract. The purchase terms are static and stated ahead of time. A potential buyer either agrees to them or doesn’t bid. The price is determined by competition among the interested parties, but all other terms are set before the auction even begins. - Closing within 30 days of the auction date is a pro for many but can also be a con if you haven’t already moved or made other arrangements beforehand. If you are still occupying the property, you can also expect to have more people viewing it leading up the auction date. The goal of an auction marketing campaign is to generate a high volume of interested traffic in the limited amount of time leading up to the auction; meaning you may have company on an almost daily basis with people trying to check out the property before the auction date arrives. - It takes two to tango. For the auction to be successful you need at least two people who are equally interested in the property to square off and go at it. Ideally there will be more, but the very nature of an auction relies on spirited competition among interested parties.

The lists could go on and on but hopefully these points have at least given you a base from which to form your own set of questions to determine which method is best suited for you. Every single situation is unique, and it is important to consider the various factors that could potentially affect the sale of your property prior to going forward.

The News Enterprise 05/19/2019 FOCUS ON FINANCE: Home Ownership

By Philip Tabb

Home ownership has numerous benefits, both financially and emotionally. Having a place to call home (and call the shots) provides peace of mind while also being an investment vessel. There are also drawbacks, but many of them can be avoided (or at least anticipated) with some careful planning and guidance. For most people, purchasing a home will be the largest financial decision they will ever make and is not something to rush into. It’s important to understand that the purchase price is by no means the last money you’ll be spending, in fact, it’s just the beginning. In addition to the purchase price and its subsequent mortgage payments, you need to consider the yearly property taxes, casualty insurance, monthly utility costs, and how you intend to maintain or possibly improve the home’s condition. As an example, the current tax rate for real estate in Hardin County is 91.117 per thousand, so for every $1,000 your property is assessed at you’ll pay about $91 in property taxes each year. A $100,000 tax assessment will result in a $911 property tax bill in your mailbox come November.

Routine property maintenance is something many enjoy and is a seemingly minor task, but it’s also a very important aspect of keeping a home in good shape and avoiding costly catching up later. Mowing the yard, trimming bushes, raking leaves, cleaning/checking gutters and other activities are viewed by some as a good excuse to be outside and by others as a hassle. Minor maintenance can become a major repair when it’s ignored and end up costing you more than if you had just kept up with it in the first place. The nearly constant need for maintenance is one of if not THE most common reasons I hear from folks who are getting older and have decided they are ready to sell. The idea of owning a few acres can be appealing, but if you can’t keep up with it then you are setting yourself up for a headache. Your level of physical ability isn’t the only factor, either. If you work long hours or have other time-intensive commitments, the amount of routine maintenance a property will require should be one of your primary factors when shopping.

A new home will generally be move in ready, with very little work needed other than cosmetic personalization. An older home, whether 10 years or 100 years old, is going to require you to do some careful examination prior to locking yourself into the purchase. Depending on the overall real estate market, you may or may not be able to find a “deal” depending on how much work you can stomach. You’ll want to consider the potential cost of getting the home up to your satisfaction and make sure you can still justify the price. Purchasing a home at or near its current market value and then sinking thousands of dollars into a remodel generally isn’t a sound plan unless you intend to stay in the home for a long time. Even then, the best laid plans have a pesky tendency of changing, so it’s not advisable to go upside down in a property thinking you’ll be there for the rest of your life. The age of the roof, HVAC, windows, and other house systems need to be considered. Items such as these will eventually require replacement and you can’t expect to get a dollar-for-dollar return on the money spent. Updating or upgrading house systems improve efficiency and certainly make it more appealing from a buyer’s perspective, but you won’t see a dollar for dollar increase in the value since these types of items are essentially expected to be in good working condition in order for the home to be functional.

Ultimately, home ownership is a sound goal and one of the most rewarding life experiences a person can have. As a real estate professional, I certainly don’t want to discourage anyone from purchasing a home, but I also don’t want anyone to walk into it without understanding the responsibility it entails.

The News Enterprise 12/02/2018 FOCUS ON FINANCE: Is Listing with a Realtor Right for You?

By Philip Tabb

Last month’s article touched on the differences between listing your property for sale with a Realtor and selling it at auction. The next two articles will talk about the process of getting started with each one. This month’s topic will be listing with a Realtor and next month we’ll talk auction.

So, you’ve decided sell and have decided that listing with a licensed Realtor is right for you. Now what? The first thing is to find your agent. If you wife’s second cousin’s friend has a niece that is a licensed real estate agent, then your decision may be cut and dry. However, if you don’t have a personal or family relation with someone in the real estate business, then you’ll want to take a more analytical approach. Look for yard signs and other types of advertising and see who seems to be the movers and shakers in your area. From there do some research online and get a feel for their marketing. Is it easy to find info about their listings? Are they full time or is real estate a hobby for them? Is the property description well done? Do the photos look professional or do they look they were taken with a flip phone during an earthquake? These and other questions specific to your needs should be explored. Try to talk to others who have worked with the Realtor you are considering or ask someone you know who they would recommend. Social media provides a good way to learn about a person. There’s no shame in doing a little Facebook research. After all, the person you choose is going to be responsible for guiding strangers through your home while you aren’t there. Trust is a major factor, so do some digging and listen to your gut.

Once you’ve decided who your agent will be and reached out to them, they will (hopefully) pull the public records such as PVA info, deeds, and other pertinent information and meet you at the property. Notes should be taken, and a marketing strategy devised. Next comes paperwork. Listing contracts will consist of an agency disclosure form, the listing contract, a seller’s disclosure, and a lead-based paint disclosure (if your home was built prior to 1978). There may be other documents specific to that brokerage, but the ones listed above are standard for the most part. The listing contract will contain items such as the list price, listing period, commission rate, and other important details. Once the documents are in order, your Realtor will place the property in the local Multiple Listing Service (MLS). This will make the property available to other Realtors as well as online entities that are licensed to access the information and distribute it on their website. With your consent, a sign will be place in the yard and a lock box will be placed on the property to allow other agents to access it for showings. Showing instructions for agents will be specified in your listing contract and can accommodate your schedule or other specific wishes you may have. In this area we are currently using the SentriLock system which has an automated lockbox that is hung from the doorknob and accessed using an app on the Realtor’s smartphone. The only persons who have access to our system are members of the Heart of Kentucky Board of Realtors. If a nonmember needs access, a one-time code that will expire after 24 hours can be issued to the person by the listing agent and entered on the lockbox keypad. When the lockbox is opened it will email or text the listing agent to let them know it was accessed. The system also stores a log of all activity in the event it needs to be reviewed later. Another automated system recently adopted by our board is ShowingTime. When entering a listing into the MLS, an agent can route the showing requests through this system, which allows for specific instructions as well as concise scheduling criteria. If you wish, the agent can put your phone number or email as a contact, which will prompt the system to notify you the instant a showing has been requested. After the showing is complete, ShowingTime will send the agent a short questionnaire asking for general feedback and providing a space for additional comments. This information can also be forwarded directly to you and provides an insight into how the property is being perceived by potential buyers.

Advertising strategies vary from brokerage to brokerage, so it would be difficult to outline them all. I will say, however, that in today’s increasingly connected world the internet has become the first stop for many property shoppers. Real estate search sites allow a person to enter the criteria they are searching for then sit back and wait for a “ding” from their phone telling them that a property has become available. This means that the first few days of your property being on the market can be pretty telling. In a hot real estate market, no activity in the first week can be a bad sign and may warrant a second look at your listing price or property description.

Ultimately, keeping the lines of communication open with your Realtor about the process will be key. Ask questions about things you are unsure of. Lack of clear communication before and during the listing period can cost you both time and headaches later.

The News Enterprise 03/03/2019 FOCUS ON FINANCE: The Auction Process

By Philip Tabb

You’ve signed up your property for auction, now what should you expect? Services will vary based on the company and the type of property you’re selling, but for the sake of this article we’ll focus on a single-family residential property with personal property contents, which is one of the more common types of auction you’ll see.

Once the auction contract is signed, details about the real estate will be compiled and the property will be photographed in order to start creating advertising material. Personal property items to be sold will be inventoried and photographed as well. The internet has provided a medium that allows people to browse an auction’s entire inventory well beforehand and is very much utilized by auction goers when determining which auction they plan to attend, so thoughtful attention to inventorying items is important. After inventory, the items to be sold are sorted and smaller items will usually be boxed. If warranted, a dumpster will be put on site to dispose of non-saleable items and reduce unnecessary clutter during the sorting and boxing. Boxing up small items doesn’t necessarily mean that they’ll be sold that way, it’s also done to make carry out easier the morning of the auction when the items are unboxed and placed on tables for display. Large items such as machinery or vehicles will usually be lined up in the days prior with the furniture and other items being carried out the morning of. Auctions are generally held on site, which can sometimes pose a challenge if there’s limited space to work with. Auction registration and payment, concessions, portable toilets, tents (if necessary), and attendee parking all need to be considered in addition to the arrangement of items to be sold. The auctioneer must make use of the available space to house what’s needed while still allowing room for the crowd to gather and follow what is going on. Every single site is different, and every auction requires a strategy going into auction day. It’s always nice to have a big, flat, multiple acre space to work with, but often that’s not the case.

Typically auctions with both real estate and personal property are conducted on Saturdays and begin at 10:00 AM. The Auctioneer will make opening announcements, introductions, and share any information that needs to be known or clarified. Sale order varies, but often personal property will be sold for the first hour or two then the real estate is offered. Once the real estate is sold, vehicles, furniture, and other large items are sold. The auctioneer then returns to the remaining personal property and sells until it’s all gone. The seller can usually expect to receive the proceeds from the personal property once all the funds have cleared and are in the auctioneer’s escrow account and ready for disbursement. On real estate, the purchase terms often allow a buyer 30-45 days from the auction date to close on the transaction. Depending on whether the buyer is paying with cash or financing as well as the buyer’s intentions will affect how long until the real estate is closed. The buyer has the right to use the full time period, but a cash buyer may very well order a title opinion and be ready to close as soon as it’s completed, even within a week or so after the auction.

The above are just a sampling of the types of things that demand consideration before, during, and after an auction, not to mention the unforeseen issues that inevitably arise which will require adjustments to the game plan. Auction day is the tip of the iceberg that most auction attendees see and wouldn’t even happen if the auctioneer wasn’t working steadily behind the scenes to make sure each facet of the process keeps moving along smoothly.