Home sales stalled? Auction that house!
Home sales may be headed lower. So sellers and even real estate agents are turning to auctions instead. Are home sales auctions for you?
When Stephanie Seacord and her sisters were preparing to sell the contents of their childhood home just outside Boston, an acquaintance in the auction business asked if she'd considered auctioning the house.
With her mother's nursing-home bills mounting, the allure of selling the house quickly and "as is" was too good to let pass. The auctioneer advertised the event, held three open houses, and last October the 1830s Federal-style house on one acre went on the block.
Bidding started at $200,000, dropped to $150,000, and then rose to a final sale price of $225,000. It was over in 20 minutes. By December, the family had a check in hand. "I honestly believe the price that was got at auction that day was what that house was worth and what the market was willing to pay for it when we needed to sell it," Ms. Seacord says.
Weary of watching their homes languish under "For Sale" signs in a sluggish market, homeowners increasingly are turning to auctions as a viable alternative. Residential real estate has been one of the fastest-growing segments of the auctioning industry. According to the National Auctioneers Association (NAA), based in Overland Park, Kan., the sector accounted for nearly half the industry's growth between 2003 and 2008.
Auction sales were booming even at the height of the housing market, says Chris Longly, deputy executive director of NAA. He attributes some of the uptick to the popularity of sites like eBay. "Consumers today want it now," he says. "We don't want to wait around or negotiate and, more important, we want to pay the price we want to pay."
Although a popular way to sell homes in places like Australia, and a growing trend in New Zealand, real estate auctions are generally seen as a way to unload distressed homes in the United States. Now, that could be changing.
"The auction model generally is a great market-price discovery tool, even for luxury properties, if positioned properly," says Vlad Sapozhnikov, cofounder of BidOnTheCity.com, which offers high-end residential real estate in and around Manhattan in simultaneous online and in-person auctions. "One of the major challenges of today's luxury real estate market is to properly price your property," he writes in an e-mail. "One of the biggest mistakes you want to avoid as a seller is to overprice your house or apartment and stay on the market for too long."
It can be hard to arbitrarily price a home, luxury or otherwise, especially in a temperamental buyers' market. Auctions quickly gauge what the market will pay. Since launching a beta version of its service in May 2009, BidOnTheCity.com has expanded from Manhattan to the Hamptons on Long Island and Westchester County, N.Y., and sold franchises to major brokerage houses in Miami and Moscow.
Even real estate agents are piling onto the auction bandwagon. At the Nashville Auction School in Tullahoma, Tenn., one of the nation's only full-time auction schools, at least 90 percent of the women attending and 75 percent of the men are already in the real estate business.
"For real estate professionals looking at how to best move real properties, the more opportunities they have to meet the needs of their client, the better they're able to serve their client," says Rhessa Orr, executive director of the school. "If they have a full-service approach to the marketing of real property, they can also have more presence in their market."
The main appeal of auctions is their speed and transparency. "Our sellers are typically real estate brokers or individuals [who] are looking to sell their property for top price within 30-45 days' time frame," writes Mr. Sapozhnikov in an e-mail.
For those considering putting their home on the block, research the company, check references, and visit a sale, auctioneers suggest.
On the day of auction, interested buyers must come with a cashier's check in hand to get a bid paddle, dissuading casual speculators. Sales are "as is" with no contingencies and can either have a reserve amount (the lowest for which an owner will sell) or be "absolute," where any price goes. Closing takes a standard 30 days after the auction.
Another auction advantage: action. Unlike a "For Sale "sign, an auction indicates a finite window of opportunity. Seacord notes that her family home sold to someone in the neighborhood who had wanted the house for years – and seized the chance before it was gone. Says Seacord, "I think she might have paid a little bit more because she loved it."