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Unsuccessful Real Estate Auction – Part II

Redland Auction GavelI wrote about an unsuccessful real estate auction in the Redland about two weeks ago. I commented that the fact that it was not an absolute auction was the primary reason for it’s being a flop.

Last week I had the opportunity to attend another auction in the Redland. This one was different in that it was an absolute auction. When the public thinks ‘auction’ they think whatever’s being sold will be sold to the highest bidder. I, personally, think it’s a gimmick to give them anything but. But that is just my opinion. When an auction is not absolute, I think it’s just a ploy to spark more interest in the property and hopefully get it sold. There’s nothing wrong with the marketing premise, in itself. I still have issues with calling it an auction. Maybe we just need to educate the public that an auction isn’t always what they think it is.

Last week I attended the absolute auction hoping to see some action and see a property get sold to the highest bidder. The property is a larger-than-most, but older and well-kept home in the Redland area. It’s right smack in the middle of the Redland and sits on 2.5 acres of tropical paradise, well manicured yet plenty of flora. Adjacent to the property is a natural hammocks, designated as such. Beneficial to the property is that most of it has a property tax benefit because of the hammocks and the property pays about a third of what a similar property without the tax benefit would pay. With the issue of property taxes being so high in Florida, this by itself is a huge benefit to the property.

On top of the tax benefits, an acre of land in the Redland sells for about $180,000, although many would like to have you thinking it’s a lot more than that. Right now, that’s about the going price (albeit not the asking price). And even though on a single property lot an additional acre isn’t technically worth the same as the 1st acre (simply because you can only build one home on it, whether it’s one acre or five) let’s give it the benefit of the doubt and do what the county property appraiser does and calculate each square foot as being worth the same. That means the land on this parcel is worth $450,000 by my calculations.

The auction was to open at $489,000. And it was going to sell to the highest bidder. Period. Seeing how the land alone was worth just $39,000 less I figured it would be like getting the structure almost free if you could buy it at the opening bid. By the way, the county property appraiser has the structure valued at $213,000, so it’s not as if there wasn’t a lot of wiggle room there.

The winning bidder would be responsible for a 10% buyer’s premium so if he won the bid at $500,000, he’d have to pay $550,000. No matter, this home was priced right, so a good deal could still be had.

Upon arriving at the property I recognized a couple from the last auction. I guess I wasn’t the only curious one. I struck up a conversation with them as we waited for the proceedings to begin. Twenty minutes after the bidding was supposed to begin we realized they weren’t going to have an auction. Of the several parties that were there (perhaps 4) none of us were registered to bid. I was dumbstruck by this fact.

Here was a prime property in the Redland available for sale at way less than market price and no one was bidding.

Is the market in South Florida that bad? Or had the auction not been advertised fully? My opinion tells me it’s the former. I had personally found the auction online but because I specifically looked for auctions. I wasn’t searching as a home buyer. The couple I met said they had seen it advertised in the local papers. So it had been advertised. Exactly how much, I wasn’t sure.

That day I went home shaking my head and thinking that the local real estate market may be in for a really looooooong adjustment. Hmmmmmm………

Unsuccessful Auction Part I

Spoken by Maggie Dokic | Discussion: 9 Comments »

Going, Going, Still Here! (or A Not-So-Successful Auction)

Redland real estate auctionAre you trying to sell your Redland home in this market? Have you looked for alternative methods of selling your home? Have you looked at real estate auctions?

Real estate auctions can be very successful. And they can be total flops too. Yesterday I attended the latter at a gorgeous home in the Redland.

The home had been appraised at $900,000 back in June. My trained eye tells me the market value is more like $750K today. Was it an inflated appraisal back in June? Maybe just a little. No matter. The appraisal wasn’t an issue. The bids were.

I had seen the signs proclaiming this coming auction a few weeks back. I had read the small print. I knew what was going to happen because of it. Here’s the small print in a nut shell:

  • -Bidders had to register and provide a $1,000 check at registration (no problem. If you didn’t win the bidding, you would get it back)
  • -Winning bid had to add 7% as a Buyer’s Premium and that would be the sales price. So if the winning bid is $100K the sales price would be $107K (OK, this sounds good for the seller, but only good for the buyer if he gets the home at an appropriate price. Bidder, set your limit and stick with it)
  • -House is sold As-is (no problem here either, you still have an inspection period and can back out if severe problems arise)
  • -Seller to provide clear title at closing (good, because anything but is unacceptable)
  • -Closing to take place with pre-chosen closing agent (this can be OK, but ordinarily the buyer chooses the closing company as the buyer is paying the title insurance. I’d need to ask more questions about this before I give the go ahead on this.)
  • -and the one that I knew would result in a flop of an auction: Seller can accept, reject or counter-offer the winning bid. ah hah!

That last one is the reason the auction failed to reach it’s mark. There were approximately 25 people in attendance. From their nametags, I would guess that 10 of them were from the listing agent’s office. Perhaps another 10 were observers such as myself. The owners of the home were apparently there. They provided some info to the auctioneer and I took them to be the owners anyway. There were 4 registered bidders but only 3 did any bidding.

The low # of bidders was not the reason for this auction turning out the way it did. It was the last item on the list. Why is that last item the one that can make or break an auction? Because it told everyone who may have had an interest in bidding that it was not an absolute auction.

An absolute auction means that the winning bidder wins. Period. His bid does not have to be approved by the seller. The seller has agreed beforehand that he will accept whatever the highest bid is.

Can this be risky to the seller? You bet your sweet potatoes it can! But can it result in a heck of a lot of excited bidders at an auction? Bet those same sweet potatoes on it. Heck yeah.

Anyone who knows that a desirable home can be had for any amount less than the market value is going to try to be there and win the bidding. And once bidding starts, chances are he will get caught up in the furor and the bidding will start going the way a seller wants…up..up..and up!

That’s not what happened yesterday in the Redland. It took the auctioneer about 6 minutes to start the bidding at $150,000 and take it to $350,000. At $350K it stalled. He had a very hard time getting anyone to offer more than that. After some cajoling and dropping down from $400K, $375K to $360K he was able to solicit a bid at $360K. After a little more effort he was able to get it to $365K. But the buck stopped there. Not one of the 3 bidders was willing to bid more than that for this $900,000 home (that I think is worth $750,000).

Will the winning bid be accepted by the seller? My expert opinion is…heck no! Was it a total waste of time? No. I got an article out of it.

Unsuccessful Auction Part II

Spoken by Maggie Dokic | Discussion: 7 Comments »

These articles are not intended to give legal or tax advice, and you should consult your attorney or financial advisor for additional information.

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