Any thoughts on the Bill Effros' 5 day method on selling your home (via auction)?nm - Posted by Donna

Posted by chris on May 28, 2000 at 21:54:14:

Hi Vic-

I’m operating from memory on this so I suggest grabbing a copy of the book to check this. He places an ad in the paper showing prospects that the place is priced below market and that it will be sold to the highest bidder in a few days with an open house held over the weekend. He is willing to give up some equity to get rid of the property quick. He knows that if there are not many lookers his pricing needs lowered. He has a week long marketing campaign which you are guided through.

With low enough pricing the low income aspect could be taken care of by unloading it to an investor who deals with these types of properties. These investors will probably check out the house anyways. I don’t remember how he felt about owner financing. You could always sell a note. Effros adopted this selling tactic for his own residences after going the realtor route and not selling the thing after it was on the market for 90 days. It sounded like he had decent, middle class homes in bread and butter neighborhoods.

Amazon.com has reviews on the book also. It looks like there is a 2nd edition out now. For pricing go to http://www.bestbookbuys.com/. I would suggest that you buy a hardcover edition instead of paperback for the reason that the forms are full sized and ready to copy.

-Chris

Any thoughts on the Bill Effros’ 5 day method on selling your home (via auction)?nm - Posted by Donna

Posted by Donna on May 25, 2000 at 23:41:51:

nm=no message

Saved my behind!! Would do it again. (nt) - Posted by Lisa in Oz

Posted by Lisa in Oz on May 26, 2000 at 20:37:27:

nt

Check out Bill Effros’ website http://www.5-Day.com/ and Amazon.com book reviews (NT) - Posted by David

Posted by David on May 26, 2000 at 14:06:18:

.

Re: Any thoughts on the Bill Effros’ 5 day method on selling your home (via auction)?nm - Posted by HR

Posted by HR on May 26, 2000 at 07:49:11:

Donna,

I was thinking about using it to sell a duplex I have going on the market soon. After checking with my re atty, I learned that verbal contracts are binding in Louisiana. To do his method, I felt I would have to change the ad and paperwork to make it clear the bids were OFFERS, not accepted contracts. This would, of course, change his method. I decided against it and will sell it thru my wife, who has her realtor’s license.

HR

I have his book and url…some people among my family say it’s a risk… - Posted by Donna

Posted by Donna on May 26, 2000 at 14:21:00:

what if you don’t get what is fair? is their primary concern. I think I’ll take that risk…but will push for closing to be just a tad beyond 30 days or ask to rent for one month after closing…only cause I want to sell it before the interest rate goes up again, but by doing that, I’d be in a cram to be out before closing as I have a non-refundable trip I’m going on smack in the middle of the month of July. Thus why closing would have to be put off or the house rented to me for one month.

Bad?? Don’t know.

Donna

HR, which attny. told you that? … - Posted by Vic

Posted by Vic on May 27, 2000 at 11:01:32:

Hal,

Hi! It’s me Vic. Sounds like you’re making some good progress with those properties.

I just read your post in which you said that your attny. said that verbal contracts were binding in La. Would you email me & let me know which attny. you talked to that told you that?

I have a feeling he may have given you some bad advice. I know I had told you once before that in La an offer had to be in writing to be enforceable. I wanted to make sure that what I told you was correct, so I asked one of the re attnys. that I use, who does real estate closings all day long. He told me that it does have to be in writing to be enforceable. I also remember my instructor in my real estate class from a few yrs. ago saying the same thing. It’s called the statue of frauds.

Now, there may be a couple of extreme examples where a verbal offer may be enforceable. I’m talking about extreme cases though such as when the buyer has already taken possession & when all of the terms have been met that you’ll verbally agreed upon - in other words you have your money, he has possession & stuff like this.

But for the most part, unless I’m getting bad advice,
the contract does have to be in writing to be enforceable. Now if a contract is non-real estate related, then it may be a different matter. But if it’s real estate related, then the statue of frauds would apply.

If verbal offers were binding, how would co’s. like Gilmore & Assoc. be able to conduct their auctions? How would the parishes be able to conduct tax sales?

Although it hasn’t happened to me yet. I’ve known agents who have verbal offers agreed to by all parties, only to have one wiggle out before all the offer can be put on paper.

So I’m really curious if you’re attny. knows of a loophole that I don’t & if so, then I need to find out more about it.

In any event, having met you, I’m sure you’ll be able to get that property sold for top dollar & get it sold quickly.

Talk to you soon,
Vic

Vic

It DOES eliminate how often your place is a showplace… - Posted by Donna

Posted by Donna on May 26, 2000 at 08:42:51:

I have several dogs, that I’d put in a kennel just for that weekend and a few days before. It’d cut my worries in half by doing this.

Believe it or not, that is one of only THREE reasons I’d use his method.

1.The showplace appearance for just two days (and the day of closing too).

  1. With the interest rates climbing, I’d like to sell it before another big hike late June coming.

  2. The most obvious reason is to net more from the sale. (no commission=more money for me)

I’m in IA, so I’d have to check with the laws here. You’re lucky in that your wife is a realtor, that eliminates some of the commission factor for you (not all, but some).

Thanks, HR.
Donna

We tried it with sucess… - Posted by David

Posted by David on May 26, 2000 at 14:36:14:

Donna,
One of the key points of the book is that the market decides the price. You and I might not agree with the market but the market is right. Fair market value means that with adequate advertising that sufficient buyers with compete against each other to determine the market price.

In another recent post I commented that some say that if you haven’t sold a property in 90 days its overpriced.

The hardest part about using the 5 day method is the mental block that you start low, unlike most real estate transactions where the seller starts high and negotiates down. But I think effros covered that when he said if you haven’t gotten 50 calls by Friday night call it off.

we had an appraisal and used a modified 5 day approach and sold the house for over $50,000 more than appraisal. I’d use it again but I wouldn’t use it every time. Every weekend there are many house auctions, you’re doing a house auction that takes a couple of days rather than a couple of hours. Good luck.
David

Re: HR, which attny. told you that? … - Posted by HR

Posted by HR on May 27, 2000 at 19:26:06:

Vic,

Thanks for the info. I hear what you are saying; I’ll have to check it with my atty. I will give you her name at the next reia meeting.

Let’s play this situation out. I advertise my duplex (fmv=110k) for $39,900 to attract bidders like Effros says. I get a bizillion calls by Friday, thus the sale is on. People make offers Sunday night, but none of them reach my price I want (lets say I want 105k and get a high bid of $89,900). I advertised it FOR SALE and said (using his materials) that it would be sold TO THE HIGHEST BIDDER. Guess what? Come Sunday, I don’t sell to the highest bidder and back out instead… ie my wife lists it on the mls, etc.

My question to my atty was: could this land me in some trouble? Answer: yes. Would it? who knows? I would certainly argue that we had signed no purchase and sale agreements and thus the sale was not enforceable etc., but their atty might argue that I advertised it as such and then renegged. Would I win in a legal battle? Probably. Do I even want to waste this time and money to see this to transpire? Definately not.

I’ve learned that just 'cause the law says it’s so don’t make it so. Those darn folks called judges get in the way and make those aweful things called judgements. I don’t like that. I like maintaining as much control as possible, and when selling this often means sticking as close to the norm as possible (while putting as many of the variables in my favor as possible). I’ve concluded this means using the normal, ie realtor method, in our bayou state.

Why don’t you ask your atty what his opinion is of this scenario, and I will ask her your points, and we will discuss it at the next reia meeting.

Case in point: when I bought this duplex, I was told by the seller (let’s call her Barbara) that the junk in one unit was the previous owner’s stored materials (the previous owner – let’s call him Fred – had lots of property and evidentlly this was his storage shed). That was conveyed to me verbally by Barbara, who only owned the place for about 60 days. Turns out, the stuff belonged to a previous tenant that now claims, to me, that she had a rental contract with Fred, giving her permission to leave her stuff there. Barbara had no awareness of this, and the former tenant can produce no lease.

This case is open and shut: I should have no liability here. Her legal beef should be with the previous owners (Fred or Barbara). Yet, this woman claims this was all her worldy possessions. They are now distributed to the four ends of the salvation army world. Who is to say some bleeding heart judge won’t say I should pay her something to redress her loss? After all, if she were smart, she could get a free lawyer. I would have to represent myself, or pay for it.

Would I win? Maybe. Probably. Would this be a herculean pain in the arse? Absolutely.

Just cause the law says it’s so don’t make it so. To make it so, one needs to go thru the legal process. And that treatment may be worse than the original disease.

That’s my point with the 5 Day Method: if it fails to produce what he maintains it does produce… a sale at fmv… and one consequently backs out of the arrangement, it may lead to legal entanglements. Especially since few have ever seen this technique used.

My conclusion is it’s not worth the potential hassle. Playing out these scenarios was the content of my conversation with my atty, and that’s the conclusion we came to. I still stand by it.

HR

Re: HR, which attny. told you that? … - Posted by ScottE

Posted by ScottE on May 27, 2000 at 14:11:50:

Vic,
You are correct about the Statute of Frauds. It says that verbal contracts are usually binding EXCEPT in those involving real property.
However, Louisiana is classically out of step with the rest of the country. Having said that, the only logical answer is to consult with a local LA attorney when doing business in LA.

Scott

Re: HR, which attny. told you that? … - Posted by Vic

Posted by Vic on May 27, 2000 at 21:52:18:

Hal,

Your points are well taken & I can see your concern.

First, before I respond to your concerns though, let me metnion, that I did not read his book from cover to cover. I did however skim through it about a month ago, mainly because the title caught my attention. I wanted to get the main gist of it, which I’m pretty sure I did. I thought his technique was interesting, but it wasn’t something that made me say, “Wow, I’ve got to try this”. To me it just seemed like another technique to sell a house. Maybe because I’m in the biz & have seen so many ads proclaiming so many different techniques that I just thought, oh well, here’s another one. I just kind of put it in the back of my mind.

I would think that your concerns about not doing what you said in your ad (mainly not selling), would lend themselves more to being accused of false advertising (if even that) as opposed to being locked into a real estate contract that you don’t want. If this is your concern, I would think that all you would have to do, is do like some of the auctions do & have a reserve price. If your min. price isn’t met then you don’t sell. (I’m not sure if this would violate the rules of the book, but if I was going to use this technique I would defenitely want to make this a condition, just in case some idiot decided to report you for false advertising).

I would also print up a sheet that lists the terms & conditions of the sale & explain how the auction works. I would list the conditions in such a way that you always have an out if you want one. In other words, insert some weasel clauses like you might use in a purchase agmt. I’m sure you can think of many such weasel clauses that you could insert into this “terms of sale” sheet that you would give to potential buyers. Some that come to mind besides the reserve price, are you must receive a certain # of offers in order for the auction to be official. Perhaps another weasel clause could be that the buyer agrees to buy the house in “as is” condition with no repairs. Perhaps another clause could be that the high bidder must meet all of “your” financial qualifications in order for there to be a successful auction, and so on. I think you get the point.

Let me ask you a couple of questions to kind of put this into perspective:

  1. What happens if the highest bidder doesn’t qualify to get a loan for the purchase? What happens then? In a situation like this, wouldn’t you then have a way out? Wouldn’t you then not be selling to the highest bidder? Could you be accused of false advertising? Of course you can be accused, but would it stand up? I think not.

  2. What if you accept the highest offer, and later after inspections the buyer asks you to make certain repairs that you really don’t want to - does this mean that you couldn’t tell him no, because if you did & the deal fell apart, could he then accuse you of not acting in good faith? Again, I think not.

Now I understand your concerns about not wanting to spend all your time in court. But isn’t it true that if somebody wanted to, they could sue you for just about anything. Just by being in this biz, you put yourself at risk everyday of being sued. It seems to be the nature of the biz. I do agree that you should do everything you can to avoid being sued, & that’s why I reccommended that “terms of sale” sheet.

The bottom line though is that if someone decides they want to sue you, for whatever reason, there’s not much you can do to stop them. This can also happen when a property is sold the normal way. Fortunately though, the costs involved with a lawsuit will stop most folks, before they get too far, especially if you have good documentation. I think the key is that you deal fairly with people, make sure you have your paperwork in order & don’t try to deceive anyone. Even though I’ve only met you a couple of times, you certainly seem honest & so I’m sure you already do all of this.

The situation with all that junk (I mean worldly possessions) is interesting. I’ll give you my take on it. If the lease was only verbal, as apparently it was, then you have nothing to worry about. A verbal lease in La. is considered month to month. That means that if a tenant doesn’t pay on the lease as agreed, then whatever the eviction process is in relation to stuff left behind would apply here (I’m not real sure what the eviction process calls for in regards to this). Since the lease was not recorded, then how would you know what the terms called for? Therefore, how could you be responsible. You had no knowledge. The way I see it, it definitely goes back to either Fred or Barbara.

In your purchase agmt. was any mention made of the lease or was any mention made of what to do with this stuff? If not, then I think you’re probably OK. I wouldn’t lose too much sleep over this. I think you’re OK. I mean all you did was get rid of stuff that you thought was left behind that nobody wanted. Seems like common sense to me.

Let me ask you this though, if that was everything that the woman owned, how did she survive the last few mos. without it? Surely she knew that the property was being sold, right? If not, where has she been?

I think if this went to court, there is a good chance that the judge would say that no lease existed at all, at least not while you were the owner. All you can do with situations like this is shake your head & wonder how people get by from day to day.

Let me know how this turns out. I have a feeling that it will just fizzle out. She’s probably just lying anyway.

One of the good things about this biz is that it’s never dull. Every deal is so different & you never stop learning.

If you decide to do that 5 day sale thing, let me know how it turns out. I’d be real int’d in seeing how it works.

Before I did it though, I’d consider the type of buyer you would attract. If that property is in a bad area, it might be best just to sell it the regular way cuz you’d probably have a hard time finding qualified buyers anyhow. That means you might need 2 bazillion offers to get it sold instead of one.

Oh well, another interesting day.

Hope some of this helps.

Vic

Re: HR, which attny. told you that? … - Posted by chris

Posted by chris on May 28, 2000 at 15:30:23:

  1. What happens if the highest bidder doesn’t qualify to get a loan for the purchase? What happens then? In a situation like this, wouldn’t you then have a way out? Wouldn’t you then not be selling to the highest bidder? Could you be accused of false advertising? Of course you can be accused, but would it stand up? I think not.

  2. What if you accept the highest offer, and later after inspections the buyer asks you to make certain repairs that you really don’t want to - does this mean that you couldn’t tell him no, because if you did & the deal fell apart, could he then accuse you of not acting in good faith? Again, I think not.

Vic- I looked through his book at the library sometime ago. If I remember correctly Effros has all of the seller protections layed out for the prospective buyers to read and sign before participating. He sells AS-IS after disclosing all known flaws as is required by law.
It is made clear to the winning bidder and the next few in line that if the the winner cannot come up with the funds or for some other reason cannot purchase in a few days his chance is lost and the next in line is contacted. Effros has forms in the back of the book to look over. These forms are compiled and given to prospective buyers so that they cannot claim they were left in the dark. There is a minimum bid that he gives you a formula to figure out so that someone does not stick you with a high bid of $200 for your $125,000 property. He also knows that if he does not get a certain number of prospects that he calls this off and resets his price.

Next time you’re near the library you may want to check the book out and go through it again. Effros
covers the details pretty good, but it was not a book you could skim through.

-Chris

Re: HR, which attny. told you that? … - Posted by Vic

Posted by Vic on May 28, 2000 at 16:39:19:

Chris,

Thanks for providing that info. From what you’re saying, it sounds to me like all of Hal’s concerns are already addressed in the book. If all of those issues (& others) are covered, then I really see no reason why he couldn’t go forward with it if he wants to. I fail to see the danger in trying it then, if that’s what he wants to do.

I especially like the fact that you can call off the auction if you don’t get your price. To me, that would be very very important, cuz like you said it wouldn’t be good to get stuck with a high offer that’s thousands below FMV.

Chris, what does he suggest you do, if the property you are selling is in a low income area, where probably 90% of the people have bad credit, no jobs, etc.?

Thanks again for the imput,
Vic

No, they are not… - Posted by HR

Posted by HR on May 29, 2000 at 20:36:26:

Vic,

You should read the book. The points you make destroy his whole technique. For instance: listing a mimimum winning bid price before the seller consumates the sale. That’s the whole point of his technique: you list the property so dirt cheap that every tom, dick, and harry comes out of the closet to buy it. And, according to Effros, you do sell it to them. Regardless. Because his argument is, if that’s all it could fetch that particular Sunday, then that’s fair market value. Nonsense.

You are making points on a technique that he does not suggest. Read the book first.

I’ll talk to you about it at the next reia meeting.

HR