Real estate auctions grow in down market
Revenue from housing
auctions is growing during real estate slump.
ASSOCIATED PRESS
About 60 people huddle on the front lawn of the white bungalow with green shutters in Ocean Township, N.J. Parents with children in tow meander on the porch, while others weave in and out of the freshly painted rooms, inspecting appliances and the wood floor planks.
Many of them clutch bright yellow paper signs showing a bidder number. They hope to walk away with a house, winning a good deal at an auction while sidestepping the typical six-month house hunt with a real estate agent.
As the housing market slows and foreclosures spike, people who have to sell quickly or lenders that need to unload properties they took back at sheriff’s auctions are turning to the fast-talking spectacle for quick sales. Even some home builders and condo developers are using auctions to reduce excess inventory.
These auctions differ from sheriff’s sales, trustee’s sales or courthouse sales, which conclude the foreclosure process and are conducted by the county. Often, the lender wins the property at these sales and then tries to resell it by auction.
Last year, revenue from housing auctions grew 12.5 percent to $16 billion from $14.22 billion in 2005, according to the National Auctioneers Association. From 2003 through 2006, residential real estate was the fastest-expanding auction sector, the trade group reported.
Still a tiny fraction
Auctions represent only a sliver of the overall housing sales market, just less than 1 percent of the $1.74 trillion in existing home sales last year.
But those in the real estate auction industry are hoping the current market conditions will continue to boost business. Already, states that never hosted many housing auctions are seeing demand jump as home prices plunge and more borrowers find themselves trapped in unmanageable mortgages.
“Until six months ago, we were only selling assets in California periodically; now we’re selling dozens, and it could get into the hundreds,” said Dean Williams, chief executive of auction firm Williams & Williams Marketing Services Inc. “Same thing in Massachusetts, New York, Maryland and Virginia. Places where volume has been light has probably doubled since last year.”
At auction site
At the Williams & Williams auction in Ocean Township, the schedule is full. The bungalow and two off-site properties — a condo in Monroe, N.J., and a four-bedroom house in Trenton, N.J. — are up for sale.
Off-site auctions are risky, though, auctioneer Danny Green says. “You may have no one look at these houses beforehand and the bidding suffers a bit,” he said. But the prospects for the bungalow look good as the group grows to 80 with 35 registered bidders.
“If you get a crowd this large, you can get fair market value,” he said.
However, 29-year-old Tricia Kelly, a local resident living with her parents, is hoping for a bargain. Even though the housing slump has stopped the sharp acceleration of home prices, Kelly still finds prices are too high for her in this town.
She’s been looking around for three months with a real estate agent, but wanted to see what an auction could offer. She ended up buying the Trenton home for $7,000.
Green opened the bidding on the Ocean Township bungalow at $50,000 and bidding surged above $200,000. A West Long Branch, N.J., resident won the battle with a bid of $283,000.
Tony Nardini, who grabbed the condo for $75,000, said: “That guy paid way too much. He let emotion take over as opposed to reality. At $200,000, it would have made sense.”