Hooray For Home Auctions
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(As the housing market continues to slow, home auctions are becoming more popular than ever before, something we haven’t seen since the last housing downturn in the 1990s. )
Home auctions seem to be emerging as a way to sell a home that benefits both the buyer and the seller, and they are becoming especially popular amongst home building companies looking to unload a surplus of newly-built homes.
An October 27, 2006 article by Annette Haddad of The Wall Street Journal, “Auctions’ appeal grows with builders’ inventory,” looks at the growing popularity of auctions to get rid of homes on the slowing market.
“Last in vogue during Southern California's previous real estate downturn in the early 1990s, auctions at new-home communities are gaining steam again as builders look for ways to move their merchandise quickly in a sluggish market.” “For buyers like Kern (who just purchased a $394,000 condo in Aliso Viejo), these auctions are indeed often an opportunity to get a deal. Yet the auctions also can benefit real estate developers struggling to close deals with buyers the conventional way. More often associated with foreclosed properties, auctions tend to draw ready; willing and able buyers who delight at the chance to snap up what they believe will be a bargain.”
Supporters of home auctions say that it is a great way to stimulate a slowing market because nothing like the prospect of a good bargain will bring out people thinking of buying a home.
Auctions seem to be gaining popularity amongst big home building companies who have a lot of homes to sell in a limited amount of time.
“Sares-Regis Group, an Irvine-based developer whose Aliso Viejo condos were auctioned to Kern and other buyers, was able to unload 30 units in one afternoon and avoid piling up losses on its 344-unit development that was still half complete. ‘With the auction, we had the market set the price,’ said Ed Eyerman, Sares-Regis' vice president of sales and marketing.”
The fact that builders are able to unload a lot of homes at one time is very good news for the overall health of our housing market, since this is one of the major factors that are contributing to the slowdown.
“These auctions are well suited for developers of new-home communities because a surge in unsold new-home inventories is one of the chief earmarks of the current housing slowdown. The supply of unsold homes in all stages of construction has tripled in the last year, data show.” “For developers, getting saddled with unsold units drags down the bottom line. So selling off a slew of units at once makes sense, even if it cuts profit margins in the short term.”
But auctions do not always result in unloading inventory, since a seller can decline bids they feel are two low, if stated before. Most sellers will have an undisclosed “minimum bid” and will not accept any offers below that benchmark.
This is to ensure that properties do not go for too much of a discount.
And if you are a potential buyer gearing up for an auction, be sure to have done your research on the property and have cash readily available.
