Troy Fowler

Sold:Auctions becoming popular alternative to sell homes

By Marilyn Bowden,

We've heard from members that 2008 was a sit-out year as people waited to see where the market was heading.' Chris Longly `If I had a property to auction, I would not want the gamble on an absolute auction unless I had to.' Troy Fowler

More and more would-be sellers are looking into auctioning off residential properties rather than listing them for an indeterminate time in a market where prices continue to fall, auctioneers say.

According to the National Auctioneers Association, the number of residential real estate properties sold at auction nationally increased 47.7% from 2003 to 2008.

"Auctions have not in the past been common in real estate,"
said Chris Longly, association spokesperson," but they are becoming more so as we move forward." He said it's estimated that sales of residential real estate by auction grossed $58.6 billion across the US last year, a 1.1% increase over the 2007 total.

"We've heard from members that 2008 was a sit-out year as people waited to see where the market was heading," Mr. Longly said, "but they are seeing more activity this year as people accept reality and become much more aggressive."

Jim Gall, president and founder of Miami-based Auction Company of America, said auctions have two advantages over traditional sales.

"People are realizing that auctions are not only the fastest and most effective way to sell their homes," he said, "but also bring the true fair market value of the property. They can sell as is without any financing contingencies, so it can be a real win for them."

Those who need to sell within a specific timeframe are most likely to seek out the auction process, said Laura Brady, president of Boca Raton-based Concierge Auctions, an affiliate of Sotheby's concentrating in the luxury market.

"We are definitely seeing it growing as an available alternative to traditional brokerage,"
she said.

Mr. Gall said the most activity currently comes within the $500,000-$1 million price range, where mortgages are just now starting to adjust.

"The area where I have the most success is with probaterelated properties," said Troy Fowler, principal of Auction Generation in Miami, "people who have inherited a property they are not emotionally attached to and that will become a burden."

Sellers who want to guarantee a certain return can set a minimum price, or reserve.
Otherwise, in what is called an absolute auction, the property is sold to the highest bidder.

"An absolute auction is the way to go," Mr. Gall said, "because it brings out a lot more buyers, the bidding gets intense and the seller ends up with more money."

Sometimes, Ms. Brady said, it's necessary to get lenders as well as buyers to agree to an absolute auction, especially when, as is common today, the price achieved is likely to be less than the amount owned on the loan.

"We have to educate sellers on the inventory situation in their area," she said. "It could take upwards of five years for some of these properties to sell.

"We've found that the majority of our sellers are very pleased. They have been so frustrated by the status quo that they're happy to see the turnout that we've produced. And they are able to see the value of the property firsthand on auction day."

Mr. Fowler said about 90% of his auctions are reserve auctions, and he finds they can draw a good crowd.

"Sometimes an absolute auction is too risky," he said.
"If I had a property to auction, I would not want the gamble on an absolute auction unless I had to."

Mr. Fowler, who is also licensed as a real estate broker, said he won't take a property unless he believes the reserve price is achievable ­ but often sellers end up accepting lower bids anyway, rather than forfeit the money they paid in advance for advertising and gambling on listing the properties with a broker instead.

For buyers at auction, it's caveat emptor, said Mr. Gall.

"They need to know their pricing," he said, "and they might want to have a home inspection done as well, because the property is sold as is."

The terms include a 10% buyer's premium added to the top bid to pay the auctioneer, he said, and buyers must pay a 10% deposit on auction day.

Ms. Brady said about 85% of buyers over the years ­ 100% so far in 2009 ­ have been endusers.

"We've seen investor interest in some of our properties," she said, "but end-users are paying the highest prices. We get a lot of international participation from bidders."

Not all bidders are physically present, Mr. Fowler said; his auctions frequently include bids taken over the phone or the Internet.

There's some distrust, he said, between auctioneers and brokers.

"I'd like to see more collaboration" he said, "between the traditional real estate community and auction community."

One the other hand, Ms. Brady said, "we oftentimes hear from Realtors and buyers that we produce market value, and the auction process is a viable alternative to producing the highest value on the property."

As Florida continues to deal with partially completed high rises and town home/residential communities, those who are often the first to occupy them can often face multiple challenges.

Many developers have reported that due to unpaid maintenance and original buyers that have backed out of these purchases, those remaining have to deal with challenges that they never expected. This has left many of the new owners that have moved in dealing with issues including theft, squatters, lack of hired security, few if any amenities, poorly maintained grounds and a general feeling of lack of safety.

With scarce buyers and thousands of unsold units, it is time that developers and lenders begin to take aggressive measures to sell theses properties so that many of these concerns can be addressed and these communities can begin to operate as the plans called for.

A well managed real estate auction can provide the critical benefits to aggressively market a property to thousands of potential buyers and generate sales that can start the process for turning these properties around.

I was watching a panel debate on this topic last night (with my dog) and one thing became very clear, no one is clear on this answer. Of course, when you have the company leaders of the countries largest real estate firms weighing in, they are almost obligated to put a positive spin on things. Being in the real estate industry myself, I want to believe the worst is behind us. Unfortunately, I do not.

I do believe that there are rational arguments for why one would take either position. Depending on where you live in this country, your exposure and the reality can look very different. I happen to reside in South Florida, one of the hardest hit markets in the country. Without getting into the dynamics of why certain markets and speculation played a key role that put us in this situation, I believe that the result has spilled over into the overall health of our economy and it will take at least another 2-4 years to work our way out of it.

I also believe that until we once again reach a normal supply/demand ratio in housing, the economy will remain vulnerable, as so much of our GDP is either directly or indirectly tied to housing and construction.

Until then, we have to work with what we've got and strive to make deals happen that move us back in the right direction.

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SOLD!

In today's stagnant economy, real estate continues to prove to be a challenge to sell in most cases.

Sellers are being forced to wait years to move there property and often at prices that they never imagined they would have to sell for.

Coming to the realization of what a property may sell for vs. the asking price is the first step in determining if a seller is ready to auction. The auction method offers so many benefits over the traditional listing/sales methods.

One benefit which is becoming more and more important is time and the time value of money which is locked up in idle real estate. Today's. many sellers are more motivated than ever before and buyers are scarce. This is all the more reason to choose a creative, high impact approach to sell your property through auction.

I personally think the raffle approach is very creative and offers a wonderful alternative to link with a non profit as part of the sales approach.

I also believe that there is still a lot of awareness and confidence building needed to make this a more viable approach. Real estate auctions have been around for decades. They are once again becoming the preferred method for sellers who are seeking a quick and efficient method to attract multiple buyers at one time to sell your property and close with 45 days.