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Recent Auctioneers
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On-site Auctions More Popular |
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Written by Florida Auctions
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Friday, 11 April 2008 |
 Standing on a sidewalk in 80-degree weather, trying to whip potential home buyers into a spending frenzy during one of the worst housing markets in a generation isn’t easy. But it can be effective.
On-site auctions, where the bidding is staged in the front yard of a property, are becoming more popular in South Florida as sellers and lenders with ballooning real estate portfolios struggle to dispose of real estate assets in a sluggish market.
Many sellers, particularly lenders that own numerous foreclosed properties, have traditionally sold off multiple properties at a set time and at a single location.
But now, despite the large volume of properties that need to be dumped, some lenders are trying the on-site method of auctioning individual properties – at all price points.
“It’s not that we haven’t tried everything else,” said Dean Williams, chairman and chief executive officer of Williams & Williams, a Tulsa, Okla.-based company that auctions an average of 50 properties on-site in South Florida each month. “But the authenticity and transparency of an on-site auction has shown to be more effective,” Williams said.
Bidders usually are more comfortable making an offer on a property they can tour at the time of an auction, he said. Williams also said the company has found that on-site auctions help focus attention on a specific property.
The bidders that show up for on-site auctions, especially in this sluggish market, are usually limited — about 10 people, he said.
But sometimes all it takes are two potential buyers standing next to each other to get the bidding war going. That was the case with a three-bedroom south Miami-Dade house auctioned Saturday.
Minutes before the auction on a foreclosed house at Southwest 142nd Court began, Richard Caso, 51, saw signs promoting the auction and checked it out.
“What do I need for the auction?” Caso asked the auctioneer. “Five percent of the highest bid? Do you take cash? I’ll be right back.”
And he was. Meanwhile, another bidder appeared.
At 6:30 p.m. the auction, conducted by Auction Services International, started with an opening bid of $100,000. The house, which is owned by Chase Home Finance, last sold for $305,000 in July 2006, according to Miami-Dade County property records.
“$105,000,” Caso offered.
“$110,000,” countered the second bidder, Robert Perez.
The two traded bids until Caso dropped out after Perez made a $130,000 offer.
Perez signed the contract and wrote a check for $6,500 — the required 5 percent deposit.
“It was a good price,” said Perez, who plans to rent the house.
But that didn’t mean it’s a done deal for Perez. At most auctions — whether on a front lawn or in a hotel ballroom — properties are “sold subject to [seller’s] confirmation.” That means that the seller — Chase, in this case — has the right to refuse the offer, said Troy Fowler of Miami-based Investor Realty & Auction Group.
Caso, 51, who is taking advantage of the market to acquire several distressed properties, said he wasn’t disappointed at losing the bidding.
“There are plenty of [lender-owned properties] out there,” he said.
Caso said in the last two months he has bought two houses out of short-sale, situations where the homeowner facing foreclosure sells the property for less than what it’s owed on the balance of the mortgage loan with the lender’s approval.
“I usually try to get to the property before it is foreclosed,” said Caso, who said he has seen properties selling for about 40 percent off their 2005 prices and about 20 percent less than the property’s loan principal.
Williams, who was not involved in the auction of the south Miami-Dade house, said he receives a reasonable bid at about 95 percent of the on-site auctions.
Yet not every on-site auction is successful, especially if the property is a condominium unit.
Real estate agent Leo Venereo stood in the lobby of a North Miami condo building for more than an hour on Saturday waiting for bidders to show up.
One woman stopped by and asked, “If my friend offered you $50,000, would you take it?” The friend and potential buyer later toured the unit but didn’t bid, Venereo said.
“People have a misconception about auctions,” Venereo said. “They think they can offer whatever they want for the property, but it doesn’t work that way.”
The condo unit, which is owned by JP Morgan Chase Bank, according to property records, had been listed at $159,000, Venereo said.
Venereo, of Miami-based All-Star Realty Sales, specializes in selling lender-owned properties through conventional listings.
Recently, about 15 of All-Star’s listings were put up for auction. That decision was made by the lenders or the asset management companies hired by the lenders, he said.
The listing agent has to be present at the on-site auction. If the property is sold, the commission is split between the auctioneer and the listing agent, Venereo said.
Auction Services International handled the auction for the condo as well as the south Miami-Dade house. The auctioneer and the real estate agent handling the listing for the house declined comment, citing a confidentiality agreement with the lender.
Auction Services held five on-site auctions in South Florida on Saturday and is auctioning another 43 lender-owned homes in 14 states across the U.S. from April 5-20, according to promotional material.
Williams, who specializes in on-site auctions, said demand for his company’s services has exploded. Last year, Williams & Williams auctioned about 9,000 properties across the country. At the current pace, the company is expecting to auction more than 20,000 residences this year, Williams said.
In the last few months, the company has auctioned about 700 properties in Florida, he said.
Fowler said it’s hard to determine whether on-site auctions are more effective than large, multi-property auctions.
“It’s basically, whatever it takes to sell,” he said. “With so few buyers out there right now if you don’t give a single property enough attention and just throw the house into a pool of properties, it diminishes the chances of selling it.”
Fowler has done both types of auctions and is pushing to have about 75 of his auctions conducted at the properties. However, he says it is more costly and time consuming to do on-site auctions and a large bank that is trying to dispose hundreds of properties, probably would prefer a large auction.
Williams, who works with national lenders with large foreclosure portfolios, said the distressed housing market is forcing the lenders to rethink their auction strategies.
“It’s more expensive but substantially more effective,” Williams said. “We may receive 300 properties to sell in Florida. It would be a lower cost to us to rent a ballroom and try to sell them there, but the results wouldn’t be the same.”
Not every auction company sees the value in on-site auctions.
Bret Richards, a sales manager for Hudson & Marshall, said on-site auctions create “a little bit more of a pulse from the audience,” but most of his inventory is sold at large auctions.
The Dallas-based company, which has a major presence in South Florida, is conducting a bank-owned, 170-property auction in Miami this weekend, Richards said.
“From time to time we do on-site auctions, but it doesn’t make sense to do that under these circumstances,” he said. “The decision is made on what makes sense for the local market. If there are a lot of investors looking at several different homes, it’s a hindrance to them to have to drive from one property to another.”
And the prices achieved in both types of auctions are comparable, he said.
“Both types of auction are very effective,” Richards said. “It depends on the volume you have in a particular market area.” |
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