What is the fate of residential property auctions?

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From left: Bid on the City co-founder Vlad Sapozhnikov, Paramount Realty USA co-founder Misha Haghani and 552 West 43rd Street, where Paramount is conducting an auction

With the steady stream of distressed residential properties in New York City, foreclosure auctions have dominated recession-era headlines. But auctions at non-distressed properties have also gained prominence throughout the recession, especially among developers looking to unload remaining units in a new project.

But with many industry experts ready to tie auctioneers’ success to antsy sellers and developers, some wonder whether they can sustain momentum in a slowly stabilizing market, as auctioneers try to evade the stigma that pigeon-holes their business as a “last-ditch” approach to sales.

Misha Haghani, co-founder and a principal at real estate auction company Paramount Realty USA, said he’s optimistic that this market is a turning point for the industry, with more sellers viewing auctions as a viable sales tactic.

“I think we’re going to see three to five years of precipitous incline [in the number] of auctions,” Haghani said, contending that a multi-year recovery can keep auctions rolling.

Haghani, whose former company, auction house Sheldon Good, filed for bankruptcy last year, said that the true test for his business will come after the market regains its footing.

“That’s the major question: ‘what will happen post-stabilization, in a rebound?'” Haghani said. “I think that the marketplace is much more willing to accept this new forum for buying and selling real estate than ever before. But I guess we’ll have to wait and see in four or five years.”

In an effort to close out sales at West 43, a condominium at 552 West 43rd Street, Paramount is conducting an auction for the building’s last two units. And Paramount recently closed on the last unit at the Shop Architects-designed m127 condo at 127 Madison Avenue between 30th and 31st streets, after selling five other units at the building in June.

The Bronx’s Solaria put its units on the auction block late last year, while Jersey City condominium the Saffron bucked trends by launching its sales with an auction.

Haghani concedes that real estate auctions are often seen as a sign of desperation, but he’s hoping to alter that perception and keep the business afloat when the market stabilizes.

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Non-foreclosure New York City auctions were “commonplace in the early 1990s,” Haghani said, adding that he hopes the similar economic climate today will help spur momentum. “Clearly, there’s a huge parallel between [the market] now and then.”

Some real estate pros do not envision the auction industry faring well when the market is stronger.

“Auctions appear in down markets,” said appraiser Jonathan Miller, co-founder of Miller Samuel. ” The sellers are looking for faster absorption [rates] since inventory is higher than the go-go days. [But] I am doubtful that non-foreclosure auctions are going to sweep the market as the next new thing.”

Vlad Sapozhnikov, one of the founders of Manhattan-based online real estate trading site Bid on the City, is bullish about the industry’s future.

“I think when the market recovers, it recovers for everybody,” Sapozhnikov said. “There are going to be more buyers.”

Bid on the City launched its beta site in May 2009, during the depths of the recession, and has nearly 50 properties listed on its site today. Earlier this month it launched an international outpost: Bid on the City Russia.

George Graham, CEO of Concierge Auctions, a nationwide luxury real estate auctioneer, said that while he’s confident that auctions will have a place in a recovery environment, he’s unsure that the residential real estate market will bounce back to where it once was.

“When [are we] ever going… back to that kind of market? I think we’re going to be slogging this out across the country for the next five to 10 years,” Graham said, echoing many industry experts who say that the current economy resembles the market downturn of the late 1980s and early 1990s.

But if Graham is right, this could be good news for auctioneers, Miller the appraiser said.

“In a down market, auctions are more closely aligned with distressed properties, even though they don’t need to be linked,” Miller said, noting that bad market conditions can hasten sellers’ efforts. “With rising foreclosures and a shadow inventory problem that has not been solved, we will definitely see more of them.”