Need to sell a condo quickly? Try an auction
|By Marilyn Bowden
As the nation's residential real estate market cools
down, condo auctions are heating up. A penthouse in Denver's Cheesman
Park that had been languishing on the market for two years was recently
auctioned off in less than 5 minutes for $1.935 million.
According to the National Auctioneers Association,
residential real estate auctions represent the fastest growing sector
of the auction industry. The number of residential auctions was
up by 8.4 percent in 2005 and another 4.4 percent in the first half
of this year.
Across the country, developers and owners are opting
to hire professional auction houses to sell residential condominiums
rather than wait indefinitely for them to sell by traditional means.
There is good reason for condo owners to seek alternatives. While
sales of single family homes dipped 1.6 percent in September, condo
and cooperative housing sales dropped 3.2 percent, according to
figures just released from the National Association of Realtors,
signaling that the condo market is lagging other types of housing
in a recovery.
In a changing market where last year's prices might
no longer make sense, auctioneers say public auctions can determine
today's true market value. Buyers appreciate the chance to see what
others are willing to pay -- and you never know when you might be
able to snap up a real bargain.
The trend has even prompted one online condo listing
site to promote a cable TV show featuring live, real estate auctions,
but buyers need to beware of a lot more than getting carried away
by auction frenzy. Sales are final, and experts warn that bidders
should find out in advance exactly what they're getting into.
The seller's edge
"An auction is a great way to avoid long-term carrying costs
on a property," says Scott Kirk, senior marketing consultant
with Grand Estates Auction Co. The company, based in Charlotte,
N.C., specializes in luxury residences.
"The sellers know when the property will be sold," he says, "so they have an end date, and they can set a reserve price and feel comfortable that they will not be forced to sell below that."
About that reserve price -- sellers should be sure they would be willing to accept it as the final sales price, says Alan D. Wallace, a real estate attorney in Sherman Oaks, Calif. Wallace is a former auctioneer who often serves as an expert witness in real estate auction disputes.
"If a condo is worth $200,000," Wallace
says, "many auctioneers will tell the seller he has to set
a minimum bid of $130,000 in order to get enough people to come.
Theoretically, in the auction frenzy it will be bid up to a price
much higher than that. But, it could end up selling for a lot less
than the owner thinks it's worth."
An alternative to a reserve auction is an absolute
auction. In that scenario, the property simply goes to the highest
bidder, regardless of price. The absolute auction obviously exposes
a seller to more risk, but from a buyer's perspective, the tantalizing
possibility of getting a really good deal can be irresistible.
That's why Annette Elms, owner of Jupiter, Fla.-based
Christenson-Elms Auction Group, says she often requires clients
selling multiple units to offer at least some of them on absolute
"The majority of our clients are builders and
developers of high-end properties," she says. Some developers
may want to auction off an entire project; others want to close
out one phase of a project or put just a few units on the block.
Some may be offering a mixed bag of condos, homes and empty lots.