By Alan J. Heavens
RISMEDIA, Sept. 22, 2008-(MCT)-In this real estate climate, selling houses, vacation homes or building lots at auction could be construed as a desperate measure.
Instead, developers say, auctions are efficient ways to turn things around quickly when inventory isn’t moving as fast as they’d like.
“Our sales, as you can readily imagine, haven’t been what we expected,” said Marshal Granor, principal in Granor Price Homes, of Horsham, Pa., which hired Sanford Alderfer Auction & Appraisal to handle an offering of a “diverse” package of seven approved building lots, three twin homes, two condos, a farmhouse and barn, eight “to be built” twins, and a “to be built” single-family house at Smith’s Corners, near Harleysville, Pa.
“We decided that an auction would create that same sense of urgency that, in normal times, results in home sales. It’s a different method that we expect will achieve the same results,” said Granor, adding that more than 200 prospective bidders attended open houses in advance of the auction.
In May, Beazer Homes USA Inc. sold 26 of 40 remaining condos at its 60-unit Pointe at Moore’s Inlet in North Wildwood, N.J., at auction. In June, Westrum Development Co. had similar success with 11 townhouses at its Hilltop at Falls Ridge in Philadelphia’s East Falls neighborhood.
In both cases, the builders sold everything they had on the block, and for close to the original asking prices.
“We divided the (North Wildwood) condos into two pools, the first with a $275,000 minimum bid, the second with a $175,000,” said Christopher Gillen, who heads Beazer’s New Jersey Division. “The first sold in the $7s (prices in the $700,000s), the second in the $4s ($400,000s)-and all within 80 percent of their original asking prices.”
Max Spann Sr., president of the Clinton, N.J., auction company that handled the Beazer and Westrum sales, said 5,000 people attended open houses at the developments, and “1,000 showed up for the auction at the Borgata Hotel, Casino & Spa in Atlantic City _ so many that we had to close the doors. We’d never experienced that kind of volume.”
Spann said that 186 bidders “with money” registered for the auction and that the 26 Beazer condos sold quickly.
Beazer waited a week to have all the deals clear and then let the unsuccessful bidders take a crack at the remaining 14 homes. The last closing was Sept. 5, Gillen said.
“We didn’t know how deep the market was when we started, but we knew we should keep some of the condos on the shelf,” Spann said-he learned in the days when his family sold prized cattle that “with too many cows, you run out of buyers.”
Before its auction, Westrum had sold 19 of the 30 units at Hilltop at Falls Ridge, but the remaining units-including five luxury townhouses whose price had been dropped from $725,000 to the low $500s-weren’t moving.
President John Westrum said he needed to sell the units to “pay down debt to build new models,” but it could have taken till year’s end through the normal means.
“It was perfect timing,” said Westrum, adding that 800 people came to the open houses, and of the 300 who showed up at the auction, 120 had registered to bid.
Not only did all 11 townhouses sell-the luxury units in the low $500s, and the rest from the upper $200s to the upper $300s-but “working the lists” of unsuccessful bidders, “we’ve (sold) 13 more units in our Brewerytown and South Philadelphia projects,” he said.
Though real estate auctions are standard in Europe, Americans tend to view them in the context of the Great Depression’s bank-foreclosure sales. But when a builder needs to move the last few houses in a development, an auction can be a shot in the arm.
In 2007, auction companies sold about $58.5 billion in real estate assets-residential, commercial and industrial, according to the National Auctioneers Association in Overland Park, Kan. In the residential sector alone, total sales grew 46.6% from 2003 to 2007, association president Tommy Williams said.
Despite that five-year spurt, he said, real estate auctioneers see challenges today.
“Auctions set the market value, and sellers are uneasy with the realization that their property is only worth what the consumer is willing to pay,” Williams said. “In addition to seller apprehension, today’s buyers are concerned with purchasing assets in an uncertain economy and do not see eye to eye with sellers on the true market value of their property.”
Still, Spann said, participants at real estate auctions are better prepared and educated than in the buyer-seller-agent setup, and are “not in an adversarial position.”
Said Westrum: “In an auction, buyers are not fighting with the seller over price, but with other bidders. When it was over, we didn’t have that feeling that we had been beaten up the buyers.”
© 2008, The Philadelphia Inquirer.
Distributed by McClatchy-Tribune Information Services.