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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

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

    […] Unsuccessful Auction Part IIÂ […]

  2. Teri Eckholm

    Maggie–The big 150 home auction in the Twin Cities 6 weeks ago was quite the event. All the homes sold but not at such bargain prices. The kicker is that yesterday on the news they went back to a few of the “winners” to see what they thought of their buys. These three were contacted from the bank following the auction and told that their winning bid did not meet the reserve and would have to pay thousands more to get the home. Well of course they didn’t close…One agent with 20 of the homes in the auction said he would be lucky if 8 of the 20 close. Not such a great deal huh?

  3. Maggie

    Teri, isn’t that incredible? You would think they would have known, right then and there, the day of the auction, what the minimum winning bid needed to be. it just seems like a complete waste of time to me when they are run that way.

    Set a reserve. Start bidding at that. Winner takes all. Simple really.

  4. Carole Cohen

    Maggie, I know in our market, anything at that price would take a while to move, no matter how much of a reduction. I don’t know enough about homes that sell at auction to know if this is true, but maybe at that price buyer people are harder to come by?

  5. Maggie

    Contessa, I agree with your notion. The price point definitely makes a difference. But the Redland is well known and sought after. Sales take place here each month. It surprised me that no one showed up for this one. Maybe the marketing wasn’t all it could have been. Thanks for stopping by!

  6. Troy

    Maggie,

    Your assesment of the outcome was fair and accurate. My company managed this auction. The only comment for this property is that the previous auction was a minimum bid auction, not absolute. It is being auctioned again tomorrow(Dec 3rd) at noon. It will be auctioned absolute. It will be sold to the highest bidder regardless of price. The property has enjoyed a very intensive marketing campaign that has been highly advertised and promoted for over 2 months.
    Because the owners decided to switch to absolute after not receiving a successful bid the first time, they have received 2 more weeks of advertising including large display ads in The Miami Herald, TV advertising on Fox, CNN and other channels during prime time, signage, open houses etc. You are correct, it is a very tough market. Buyers have very quickly adapted to this and are making it extremely dificult in many cases to obtain reasonable bids for properties either through the auction or traditional sales process. Thanks for attending and for your comments.

  7. Maggie

    Troy, thanks for stopping by and commenting. I saw the signs for the re-do but I saw them too late. I’d love to know what happened at that second one. Hope it was successful!

  8. T G Knight

    Maggie, I wanted to tell you what happened at my home’s auction. This should really bring some perspective from an owner’s opinion as to Miami’s real estate market condition. The home sold for $391k + 10% buyers premium, or close to $430k. Are we in shock? Yes. Are we pleased?–well, yes and no. Recently appraised for between $720k and $820k, it brought almost exactly 50% of appraised value. So why did we decide to do an auction? And when nobody showed at the minimum bid auction, why did we go absolute? We had thirteen open houses and at least 300 people walked the property in under three months. Troy worked every angle he could. TV ads, Herald ads, Flyers, etc. $20k in advertising. Why not go the standard route with a realtor? To be straight to the point, my income has been exceeded by our cost of living for the past 18 months as taxes, property insurance, FPL, etc rose $2000/month since ’05. We had no time to wait 2-5 years for the market to possibly stabilize. Plus I have an invention and no time or funds to perfect it. By then we would have had an additional $100-200K in debt. We had a small $140k mortgage, and plenty of equity. So why not refi? Because if the market stayed down for too long and my business did not increase we would be worse off. We calculated that $375k was the minimum $$$ with which we could survive, move, and purchase another home in central Fla. We will be 100% debt free, and never buy anything on credit or have a mortgage again. Homes in certain areas of Fla are selling pre-forclosure at 30-35% of 2005 pricing. Banks have told auctioneers yes on 40%. We will buy a $300k home for $100-$120. Almost anyone can with cash. Needless to say, we will be OK. I dont care that we turned down $970k in ’05 for this home. Prices were 200% inflated in my opinion, and our home was never worth that much. I feel sorry for those who still think their homes are at 04-05 values. They need to set them at 60% of that to have any chance of selling, or be ready to sit on the property for 5-10 years. At auction expect 50% tops in this market. The blue house topped at $365k, and is worth maybe $700k on paper–it is worth no more than my home. It is only worth $400k in this market or it will never sell. We are not upside down–thank God for that. I hope that realtors and auctioneers work hand-in-hand to help sellers understand they need to look at 2002 values to get an honest value–the comp route is worthless in this market. At least that is my non-expert real estate opinion.
    Geoff

  9. Maggie

    Geoff, thanks so much for stopping by and letting us know the outcome of the auction as well as giving us an insight into a bit of the way you think. You sound like a real estate agent’s perfect customer in that you were not over your head and were willing to listen to the market. But the price that your home sold at is shocking to me. You and I both know that the land only was worth more than that. However, we must always keep in mind motivation. I understand that your goal was to sell as quickly as possible. Congratulations on your sale and I wish you much success in your future endeavors!

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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