Those are some great and important questions and I'll be happy to give my input.
I didn't know that even happened on a reserve auction. I always thought that was the cost of doing business for the realtor. On a traditional listing, yes. On an auction, not necessarily. It very much depends on the situation. Type of land being sold. Reserve Price. Realtor's ability to be honest, ethical and realistic with the seller about the likely market sale value of the land being sold. Landowner's ability to be realistic about likely market sale value and trust his realtor's professional input. Lots of different variables.
No different than a regular listing where you never know if the seller will take anything less than the asking price. Actually this is far from a cut and dried statement, for a couple reasons. In my opinion it is quite different, though again, there are a lot of variables potentially at play.
1) Costs for an auction can be very different than costs for a traditional listing. Sometimes with a traditional listing a realtor may have no specific out of pocket expenses (other than time) for a specific listing, other than whatever he may pay to be able to list on the MLS through his brokerage (and the MLS disseminates out to a lot of other sites, like realtor.com and zillow.com) and just in general to be able to use the tools the brokerage has or subscribes to. I do some special advertising for all of my traditional listings, but not all realtors do. It varies a lot. This is $ straight out of my pocket, in advance, but not as much as you'd likely spend doing proper advertising for a land auction. With an *auction*, it *can be* totally different, again, depending on the brokerage/auction house and other variables that change from sale to sale. An auction is just a different ball of wax than a traditional listing in a lot of ways. Some brokerages will advertise their auctions heavily through print media (postcards, etc.), or in some cases maybe radio, or specialized placement ads on the land.com network of sites, Google Ads, etc. That can get really expensive, really quick. And then there are materials that usually are printed to have at the auction itself, sometimes including very large maps on heavy duty poster-boards. These expenses can add up very quick. And then there is the auctioneer. Not all land brokerages have an in-house auctioneer, and auctioneer's don't usually work for free, not even if there's a "no-sale". An auctioneer has the same amount of effort in a no-sale auction as he does in a "sold" auction. Lots of variables, and a lot of different ways to structure a land auction contract where everyone feels their bases are properly covered, but the bottom line is if you're doing a "reserve" auction, you can just expect to pay for some of the auction expenses out of your pocket as the landowner if the winning bid isn't to your liking and you declare a "no sale". A brokerage that says they'll cover all the cost of the auction no matter what the reserve price is, is a brokerage that may be in financial deep water at some point in the not too distant future.
2) The end result is often based on how the business relationship starts between realtor and landowner. Realtors are just like any other kind of businessmen, they have different business strategies. One of my personal strategies is I make it a practice not to take traditional listings that I feel very confident will not sell anywhere close to the price the landowner wishes to list the land at. I have turned down more than a few listings because I knew they would never sell, the price just wasn't close to the market value. I have a family I have to support and I will give 150% effort to sell a property at something close to a market value price. But I need the land I list for sale to actually sell. I haven't yet figured out how to pay my bills and feed my family on showings alone. If a landowner has land he wants to list at a price well above realistic market value, there are plenty of realtors out there who will take the listing at any price. I'm just not one of them. I can't afford to be. And the land either won't sell, or may sell for a significantly lower price the landowner may not be happy with because of expectations. I don't want to know what is the "least" amount my sellers will take for their land, because by not knowing, I feel I can do a better job trying to get them the best price possible. But if I get a sense in my first meeting with the landowner that we're just on very different pages on likely sale price then I'm ok walking away from that listing. Plenty of realtors would disagree with me on that, and that's fine, they've got all the right in the world to do so. I do not want to become known as a realtor who can't get his listings sold.
You might no-sale a listing if that's the case and eat the advertising there as well. If you list at a price well above realistic market value, then you are indeed correct. I haven't yet had a listing expire without a sale, so I have never personally had to eat the advertising cost. But I'm selective, I don't take every listing available to me. Again, some other realtors would say I'm nuts not to take every single listing I can, and would probably also say I'm even more nuts to be admitting it here on a public forum. But I consider myself a straight shooter. If you called me tomorrow and said you want to list your land at $6,750/acre and I know it is likely to sell for something closer to $5,000/acre, I'm going to tell you thanks for the opportunity but I'm probably not your guy. That's just too large of a gap between list price and likely sale price to have a high percentage chance to get the deal done, and to get the deal done at a number that will make the seller happy on closing day given their beginning expectation.
I've never sold land via an auction. I've been approached by some realtors wanting to auction a parcel, but they hedged when I mentioned having a reserve price. It never went to market as I wasn't going to auction w/o a reserve. I understand both sides of the coin. There are ways to make it an acceptable risk for both sides (realtor and seller), but if you want to do a reserve land auction and are thinking there's a way you can do it with no downside $ risk as the seller, I think you'll discover that isn't likely possible, or if it is then I'm not aware of it. The one caveat might be if your "reserve" price was one the realtor thought was a price extremely likely to be met at the auction, then the realtor might be willing to accept more of the $ risk themselves on the front end of things. But that would depend on what your reserve price was. By the way, this is why I think it is a much better idea for rec/hunting land to be sold via a traditional listing rather than through an auction, because in many cases, in that situation there *is* no downside $ risk for the seller. If the realtor doesn't bring him an offer that meets the list price and he doesn't want to take something lesser then he doesn't have to. If the listing expires without a sale then the seller is in no different of a situation than when the listing began. It doesn't all happen on a single day in 20 minutes like it does at an auction, but there's a lot less risk for both sides (realtor and seller) in a traditional listing. At an auction, as the seller you're either selling your land at what the market said that day was the value of your land (absolute auction, or reserve auction if the reserve is met) or you're likely paying something out of pocket for advertising and auctioneer fees in a "no-sale" (reserve auction where the reserve is not met).
I see both sides. What I'd do is have a realtor tell me what they think it'd sell for. If I think it's a price I'd sell at, then I'd sign a contract saying if I get that offer price or higher, I'd sell, or pay them the commission they'd have received at the offered price. That protects the agent if their appraisal was reasonable. If both seller and realtor were equally "reasonable" in such negotiations, much of what I've said in this post would not need to apply. But unfortunately that doesn't happen as much as you'd like to think it should. The number of overpriced (and "price reduced") pieces of land unsold on the market right now are proof of that.
Now, if no offers come in at the reserve price, and the seller decides no sale, the agent eats the advertising. Cost of doing business. Depending on the many variables of the situation, I think you'd find few "takers" among brokerages on doing a contract like that. Just too much downside risk for them of a "no-sale", especially if the reserve price is one they deem unlikely to be offered. Just doesn't make financial sense for a brokerage to lay out several thousand dollars at minimum to advertise and put on an auction that's likely to end up as a no-sale. Unless it's a brokerage that does no special print or other media advertising of auctions out of the ordinary general advertising they do for their brokerage. But do you want to do an auction with a brokerage like that? I wouldn't if I was the seller.
1) It'd keep realtors from blowing smoke that it should sell at xx.xx, just to get the listing, or at least the risk is on them if they inflate the price. There's a lot of smoke that gets blown on both sides too often. Just a fact.
2) If they don't do enough advertising, in enough places, they take the risk of a no-sale.
We'd have a common ground to work from, they don't get to take 3 pictures, put it on a single auction website and still make money with no reserve price, and I don't take it in the shorts. If it was my land, I don't think I'd want to list with an auction house/brokerage like that for any reason regardless of the agreement. Just my opinion. I'd want to work with someone that respects their time and the value of their work enough to be honest and say, basically, we're going to get out of this what we put into it. If neither side wants to take any risks (speaking of auctions specifically here), then neither side may be able to realistically expect the possibility of higher rewards from a better sale.
If everyone is realistic in the approach, it can work out for everyone. "If" is the hinge-point.
So - how do you write up auction terms so buyers agents have incentive to bring their clients? For purposes of this question, the only terms of the auction that really matter for starters are whether the listing brokerage allows buyer's agents to bring buyers to one of their auctions or not. Some brokerages simply do not work with buyer's agents at their auctions. See my comments in a previous post about getting "both sides of the commission." If you cut buyer's agents completely out of the equation, then the listing brokerage is guaranteed to get "both sides" of the commission/fee. But the seller may not end the day as happy as the listing brokerage if there is a smaller pool of buyers, less competition among bidders, and the winning bid is a lower price as a result. I'm not saying there never are happy sellers in that type situation (where no buyer's agents are allowed to bring buyers), but it does put more risk on the seller.
