Auctions move homes in plunging market
The number of homes sold under the gavel in South Florida jumped over the past year, as auctions become a more acceptable method for distressed buyers to move property in today’s real estate market.
“I would say there has definitely been an increase [in auctions],” said Laura Brady, president of Concierge Auctions, a Florida-based company whose principals have run more than 100 residential real estate auctions in Florida over the past two years.
A massive Italian Renaissance-style estate on Coconut Palm Road in Boca Raton owned by former H. Wayne Huizenga associate Richard Rochon, who defaulted on the mortgage, exemplifies the luxury home bracket of the auction market. Concierge Auctions reports that the home is now under contract after the private auction July 11. Only bidders who presented a $250,000 deposit were allowed into the event. Concierge will not release the contract price until the transaction is closed, at the owner’s request.
The home went to auction after failing to sell for $21.9 million.
Concierge has sold other luxury homes throughout South Florida that are in the short-sale process or bank owned.
“The lender doesn’t want to take the property back so they will let the owner sell it for whatever it goes for at auction,” Brady said. “The lender and seller agree to sell it to the highest bidder.”
Other homeowners are tired of the traditional process of listing the home and dropping the sales price every few months. Some South Florida luxury homes have remained on the market for years, periods marked by a trickle, then torrent, of price cuts.
“They get frustrated by the sales process,” Brady said. “They just want to know that the home will be sold by a certain time. The price reduction strategy hasn’t worked. They reduced the price every single month.”
And recently developers have been using auctions to move vacant condos or homes — sometimes in bulk.
In what may seem like a paradox, the auction can often yield higher sale prices, Brady says.
The company has a team that aggressively markets the property for three weeks before the auction. The marketing strategy targets potential buyers and creates a sense of urgency. Eighty-five percent of all auction buyers pay cash, Brady said.
The short, three-week marketing blitz before either an on-site or sealed bid auction keeps potential bidders from becoming disinterested.
“It does create a sense of urgency,” said Gavin Campbell, founder and managing partner of Steelbridge Capital LLC, a privately held real estate investment company with an office in Miami.
The real estate auction market rose 5.3 percent in 2007, generating $58.4 billion in revenues. That’s up 39 percent from 2003, according to the National Auctioneers Association.
Campbell said he has seen more auctions of homes and very few auctions of commercial property, where a smaller pool of prospective buyers dictates market value. “Usually it is an option of last resort for commercial owners,” Campbell said.
Auctions come with an element of risk. “As a seller you can set a floor price, but you are putting yourself out there and hoping for the best possible bid.”
Brady says her company works to limit the risk during the weeks leading up to auction day.
“If it’s done right, one doesn’t encounter as many risks as one would envision. We identify every single buyer or as close as you can get to people who you think might be interested in that property.”