Property Auctions

[HighBidder]

Perhaps most people misjudged what this auction was all about. These properties weren't in foreclosure, but when I hear "real estate auction," I think of desperation or "smokin' deals". Obviously that wasn't the case here. Isn't this a rather new way of selling properties?

Hi Camp,

The auction process is not a new way of selling property, whether real or personal. It is actually the oldest recorded method of selling any item, dating back thousands of years and used throughout the world. Notify the prospective buyers and offer the property for sale, selling to the highest and best bidder. The auction chant as we know it today originated about 150 years ago and is uniquely American.

The auction method of marketing has a stigma of "distress" due primarily to the advent of mass communications combined with several serious economic adjustments in United States history.

What do I mean by this?

The Great Depression was the first major market adjustment in US history, a result of the incredible (and unsustainable) economic boom of the Industrial Revolution. Beginning in 1929, massive dollar volumes of assets were suddenly available on the market and with no buyers available to purchase these assets. The auction process was utilized as always to find the highest and best buyer, but at a frequency never before seen, much less reported upon in the media & history books. In this case the auction process did exactly what it was designed to do, acheive the highest and best dollar available for the seller under that day's terms and conditions.

In more recent memory we experienced a massive selloff due to the S&L/RTC fiasco. Everyone here remembers all the media coverage of that.

Under our current situation, some of the problem is that so many properties are on the market not because the seller is intent upon selling, but rather "hoping" to reap the rewards of the boom. Now supply significantly exceeds demand thereby killing a market that was questionably sustainable to begin with, and we haven't even touched on "interest only loans" yet.

The auction process is an incredibly fair method of marketing, and is the best way to exchange assets for the highest possible dollar value under the current set of conditions, whatever those might be.

 

[HighBidder]

Sorry for delay. Left town Friday but had 3 people at the auction. Let me clarify that I was not there so am getting second hand and paraphrasing. They said there was about 150 people there. All 3 said it was embarassing. That the auctioneer actually stopped one and said that he wouldn't let the seller take the offered price or something like that. I was told that they explained all the rules of the auction up front but didn't mention the appraisal issue and of course said they were "as is". Was told that they did address the doc stamps, title policy issue and at one point told buyers that some or all of these costs would be paid by the seller for all of the auctions but then they took it back and said buyer pays them. High can clarify if he wants.

Also was told that the seller has 3 days to decide if the bid will be taken so as Franny said, even if it "sells" at auction, it may not be sold. Just as everyone has reported, I was told that bids were ridiculous, when they got them (about 50%). 2 of my people were there for several hours and said only 3 out of about 18 properties had been "sold" (don't know what to call it since they probably won't take the offer) . Those 3 were the beachfront lot and seacrest lots.

Only 2 of the lots on Trigger Trail were entered into the MLS after they were subdivided (lots 5&6) and looks like the owner, (both owned by same person )paid $295 per lot in 4/04 so I can't imagine him taking the $185K offer. If I remember correctly, I was looking at those lots before they were released and the agent told me that they were going to be much higher than $295 so I wouldn't be surprised if all 4 lots are owned by the same person. The county records still doesn't have a card on them. Wasn't somebody just saying how up to date the county records are? These are 2 year old sales!

In speaking to one of my clients, he indicated that he was under the impression that the seller does pay something for the attempted auction in addition to the buyer's 10% fee. Can anybody tell us if this is true? High? Baby Blue? Am truly interested.

I would assume that someone had significant expenses putting the auction on so it would make sense that the seller would have to pay expenses of some sorts.

When I asked one of my people to give me an honest answer regarding whether he would buy at an auction like that after having seen it - he said no, prices were about the same as listed.

When I asked if he would sell one through an auction, he also said no, it was a waste of time and would just tick him off.

So it doesn't sound like it was very successful at all but the good news is people showed up and are still interested in the area, they just want to get in for less than our values are right now. Any developers out there? Affordable family housing! They keep building them nicer and nicer with hugh sq footage, elevators etc. I certainly dont mind but it's looking like the VERY wealthy will be the ones buying South Walton in the future. Does that make those of us who own very wealthy?

Hi Cork,

In this auction we had several different sellers. Several were willing to pay doc stamps, while several wanted the buyer to pay for the stamps. Prior to commencement of bidding, the auctioneer made a decision that all stamps would be paid by the buyers to eliminate confusion on the part of the buyers (Remember "Terms & Conditions". This goes under the heading of "Please Bid Accordingly). The intent was to simplify the process.

In most cases, the seller typically pays for the advertising budget in advance of the auction. This is the direct cost of advertising and marketing the sale. None of these proceeds are retained by our firm.

We did have a pile of people at the auction, but only about 15 bidders. The values were set in at about 50-60% of current listing prices. These are not "bottom feeders". Both stats are representative of current market conditions. It is important to realize that asking prices do not establish market values, but merely reflect past market values. Current transactions represent current market values. If no transactions are occuring, wouldn't it then be safe to assume that the market values are significantly lower than owners/sellers are willing to admit? What percentage of total properties are currently listed? SoWal has a serious Supply & Demand issue, hence the adjustment in property values that are currently being experienced.

 

[HighBidder]

So if bids were half of market price (by all reports) and that was half of what sellers were hoping for, it sounds like sellers were hoping to get market price.

Would like to know if there was any of the properties where the seller was willing to take 70-75% of market price? My thoughts are that since the property could sell as low as 90% on the open market, when you subtract the additional 13% the buyer is paying , plus risks outlined below, I would want to see these properties going at least 75% of market or lower to motivate me to buy one. I wonder if any were priced that low. Anybody?

I would submit that the term "Market Price" is being confused with "Asking Price".

 

[HighBidder]

I questioned this first statement in bold text, and since we are not hearing about all of the sales, my suspitions appear to hold true.

Regarding qualified buyers, I define a qualified buyer as someone who is not only able to purchase, but someone who is also willing to purchase. It sounds like the "buyers" who showed up were hoping for prices of desperation, not the going list price or a small reduction, thereby making them un-qualified in my terms, aka tire kickers or sight-seeers.

As for the last sentence, I guess there were not many cases at the last auction.

In summary, how can we do nothing more than speculate? I have not and probably will not in the future, based on history, see the auctions in the ECAR's listings.

Hi Joe,

These bids were not "prices of desperation", but rather "bids of reality".
All our buyers were qualified buyers. All were willing to buy...at a price. With the sheer volume of property on the market in SoWal there is absolutely no need for a buyer to pay anywhere near the current asking prices. There is also no need to be in any hurry to buy. Many are just waiting to see how far this market is going to fall. Once the owners/sellers/brokers realize that the current asking prices are not sustainable, then you'll see the market react to the purchase prices being offered.

BTW, the bid prices achieved at auction were far, far higher than most of these properties were purchased for just 3-6 years ago. The inability to recognize the changing market prevented most of these sellers from realizing a still significant profit, not to mention the elimination of any associated debt burden.

 

[Smiling JOe]

"The most significant (benefit for auctioning) is the ability to sell their property at a pre-determined time"

So, were you able to provide the most significant benefit to the people trying to sell their property? Why have we not heard of any sales? Did anything sell? Have I answered my own questions?

 

[HighBidder]

I guess I am terribly naive but it seems to me that if you put your property up for auction, you suck it up and sell for what your property goes for at gavel. Otherwise, you stick the little 'for sale' sign in the sand, pay your taxes and wait for a bite.

Hi Skunk,

You pretty well hit the nail on the head.

We'll bring the buyers, but in a market like this, the best thing for a buyer to understand is that the sellers are motivated. Once the buyers are motivated, then I can truly go to work to bring them the very highest dollar available. Once things are adjusted, it also won't take long for the market to start easing back up, either. Relatively speaking.

 

[DuneDog]

Highbidder,

I would also like to know if anything sold.

 

[Smiling JOe]

Hi Joe,

These bids were not "prices of desperation", but rather "bids of reality".
All our buyers were qualified buyers. All were willing to buy...at a price. With the sheer volume of property on the market in SoWal there is absolutely no need for a buyer to pay anywhere near the current asking prices. There is also no need to be in any hurry to buy. Many are just waiting to see how far this market is going to fall. Once the owners/sellers/brokers realize that the current asking prices are not sustainable, then you'll see the market react to the purchase prices being offered.

Knowing this, why did you waste your time and money knowing that the prices which were bid would not meet the reserve prices set by the sellers? That is not smart business.

BTW, the bid prices achieved at auction were far, far higher than most of these properties were purchased for just 3-6 years ago.

Name one example please. What is the parcel id and what was the bid? I don't know what was auctioned, but I believe you must have made a typo.

 

[HighBidder]

If I were auctioning one of my properties, I would not do so without a reserve, especially these days. I doubt if any of the 21 properties at Saturday's auction were without reserve.

Joe,

Using a reserve is a good thing in many circumstances, maybe even most. However, if a seller is not realistic about the current market value of their property then it is best to utilize conventional marketing to sell the asset. Eventually, the market will rise to meet the anticipated price.

 

[HighBidder]

You are right SJ there were no absolutes at the auction unlike the upcoming auction this weekend. Also Cork, the beachfront bid was NOT accepted at the auction for a high bid of 1.25m.

Franny,

You are correct. There is no more accurate barometer to establish market value than a properly advertised absolute auction. The market will protect itself, however many sellers don't have the stomach for it. No crime in that.

I hope to hear from you all as to how that auction goes.