Property Auction Blog

Developers have traditionally offered incentives in some way or another especially in the last couple of years as the market really began to take a nose dive. A free parking spot, the “premium” furniture package, we’ve even seen golf carts offered: all incentives to get buyers interested in the development. We all remember that when the market was hot, the developers took these away, no giveaways, no incentives, and product just continued to roll of the shelf.

Incentives are now becoming part of auctions, we’re seeing a lot of firms offer a “home warranty” as an incentive on the single family residential side. The Fisher Auction Company, being out of Florida, means tons of experience in the developer space. Next month, they are going to be focusing their efforts on a developer in Viriginia and offering great incentives to interested parties. *All Purchasers,”regardless of their purchase price”, will receive a Seller Incentive of $4,000.00 which may apply towards Mariners Landing Dollars or a Golf Membership! They even have a dedicated page to the incentives being offered for each unit.

PropertyAuction.com Tip: One thing about incentives that you need to watch out for during a comparative analysis of properties: Be sure that you are comparing apples to apples. If you’re looking at a property that came with a boat slip you must weigh the value of that in your analysis. The same goes for a property that is part of a “hotel program” where the developer has guaranteed some sort of income on the unit for a pre-defined period of time. Often this information is not made public and can’t be found on any records so make sure to do your research!

For the last few years we’ve seen auction companies go from single asset auction events to multi-property events that contain sometimes tens if not hundreds of properties.
Mostly the residential auction houses enjoyed the larger multi-property events but now we’re starting to notice that commercial auction events are getting larger. Is this a sign of a turn in the commercial real estate markets or just spillover from the carnage over at residential? The answer is that it’s probably a little of both.
Most notably, Tranzon is conducting a 14 commercial property auction event at the end of the month that will take a few days to complete. The auction is “lender ordered” so typically that means great deals for buyers. The auctions are being performed on site which allows buyers to really kick the tires just prior to bidding, a practice that seems to be beneficial for everyone involved.
Other auction firms are following suit by offering commercial properties in bulk to investors who have been waiting for their opportunity to swoop and scoop. Most properties being offered however, seem to be outside of major markets that enjoyed a nice run up in valuation these last few years.
We expect this trend of commercial grade properties being offered at public auction to continue upward for the next several quarters.

Seems like realtors are trying more and more to get in on the auction fun these days. Many realtors are partnering with auction companies to get their client’s properties sold with the time-defined auction method.

Some realtors are holding on to properties for 6-12 months these days with no end in site. The question is: What is best for the client’s objectives? We know some realtors will take that exclusive listing to the grave but this practice is often not in the client’s best interest.

Rowell Auctions out of Georgia is conducting a multi-property auction sale “in cooperation” with two realtors, ERA and Prudential. Last month’s realtor magazine had a column about the subject as well, getting the message out there (from Steve Good) that auctioneers are not your competition, they are your friend.

So it seems to be that partnering with an auction company to get that listing sold is a pretty good idea. We are hearing that owners are actually contacting auction companies to have them talk to their exclusive broker about partnering on the sale. Word of advice to brokers: call an auction company before your seller does! Look for several more auction sales like this in the next few quarters.

It’s been a while- 25+ years or so since the big condo sell off craze of the 1980’s. Auctioneers are warning developers to think about the mistakes that others made at that time and don’t get caught with a building full of empty units. Those who did back then, paid dearly for it.

Marsha Wolak Auctions is putting on an auction of condo’s on the east coast of Florida in early February. A minimum of 10 units are being sold absolute. It seems like these are the last 20 units in a 250 unit complex, the developer is probably just trying to close out their position. This certainly spells out good deals for buyers as the “absolute” offering really gets the juices flowing.

Developers are listening- From Florida to Maine, from New York to California, here we go again. Advice to buyers: pick up as many as you can hold until the market turns. Advice to developers: sell as many as you can in one shot to get your cash out and move on to another project.

If you’re a celebrity or just going to jail in a heavily media covered case, you might benefit from a real estate auction. Although the seller of Michael Vick’s dogfighting compound failed to sell, the “developer” who bought the place certainly got a lot of attention for the sale. Jack Welch was successful in selling his CT property at auction. The property lagged on the market for 3 years before he turned to auction to get it sold quickly, definitely using his notoriety to attract attention to the sale.
Meanwhile, the seller of the Vick property rejected a bid of close to 300K more than what he bought for a few months earlier from Vick. Somebody needs to let him know it’s not 2005. I’m sure Vick isn’t going to be happy when he gets out of prison, having potentially left that kind of cash on the table.
We just saw another famous guy, (well, made famous by insurance fraud) put his property up for auction. It didn’t seem like a forced sale, since Robert Stokes has “set a minimum” for the auction. It’s getting a lot of media attention and that might well drive up the price.

Some sellers these days that are behind on their mortgage or in the foreclosure process have very few options when it comes to dealing with their lender. Turning to an auction company before a foreclosure occurs might be the answer.

We are seeing a lot of “pre-foreclosure auctions” out there. This means that the auctioneer has contracted with the debtor to sell the property at a reserve price in one of the following methods:
1) above the mortgage amount owed
2) below the amount owed but with the seller making up the difference at closing
3) at any amount on paper and then going to the lender and negotiating a short sale.
In scenario 1 every one is happy. In scenario 2, everyone may be happy however the seller will have to come to the closing with a check, most people don’t like to do that or simply cannot. If the seller has nothing to lose, such as their credit, they would rather skip this scenario and just throw the keys back to the lender.

Scenario 3 is one that is becoming very popular in today’s market. The auctioneer will bring the executed contract to the bank and figure out if they can get the bank to take less than what they are owed based on what was obtained at the auction. The important item to note is that most banks will not negotiate unless you have a contract in hand and that’s what the pre-foreclosure auction procures. The sale, of course, is subject to the lender’s approval and this might take a while so buyers are encouraged to hang in there while the auctioneer does the work to get everything resolved. This may be a long process that includes at least one or more appraisals, broker price opinions, and a thorough evaluation of the debtor’s particular situation. Most auction companies have already gone through this process with the lender so many of the items required for a short sale are most likely checked off.

Since the auction process, if executed correctly, achieves the highest price in the shortest period of time through competitive bidding, the pre-foreclosure auction is an excellent option for any debtor that meets the criteria.

Some auctioneers in certain pockets of the country seem to be constantly changing the terms of sale. With the changing markets this is to be expected but how does giving the seller the right to think about the bid for a certain period of time affect the auction?

In the past we have seen the option for the seller to think about the bid for up to 24 hours before having to confirm acceptance however buyers are really starting to grow weary of leaving their deposits in this often times unfruitful exercise. Buyers claim the sellers should be under the same pressure as them to make a decision on the spot.

“The auction will not be absolute, the [sellers] will have up to 10 days to review any offers made on the buildings before they reject or accept the offers.” This is a little much for a private individual seller or small group. This scenario would be more understandable for an institution or a lender in a case in which the bid comes in below what was acceptable and several committees need to sign off on accepting the low offer.

Typically buyers come in at a number considerably below what they had bid (or were willing to bid) at the auction in the “post auction” market. No real data is available to be able to affirmatively state whether the practice of letting the seller “think about it” is helpful in getting properties at auction sold or not.

We are seeing a lot more absolute auctions coming across our screens these days. We all know that means the most “motivated sellers” who are willing to accept the high bid at auction, regardless of price, have put their property up for auction. But is an absolute auction that only has two or three bidders really a fair deal to the seller or the auction company for that matter?

An average of 1-3% of the value of the real estate is spent up front by either the seller, the auctioneer, or sometimes both entities for the marketing and advertising campaign to create the auction. So after all that, only a couple of bidders show up at auction: it happens. This is certainly unfair to all the parties involved and grounds for cancellation of the auction are clear.

The exact number of bidders required to create a competitive environment that will result in an auction price that is considered “fair market value” for that piece of real estate, on that particular day, is not really known. Depending on the size of the real estate, you could say five, you could say ten, a seller might say twenty. An auctioneer should note and buyers need to understand that there needs to be a minimum amount of qualified bidders in order to facilitate the auction and have a fair playing field. Anyone care to comment?