As South Florida Housing Market Cools Off, More Sellers Turn to Public Auctions
A five-bedroom house in Davie with new hurricane shutters, a pool and guest cottage was put on the market last year for $1 million-plus.
When it languished for six months with no takers, owner Les Galex decided to try something different - hiring an auctioneer. Fred DeFalco, of Boca Raton, hosted open houses, advertised in newspapers and put thousands of public-sale brochures in the mail. The result was 17 bidders, each toting the required $50,000 cashier's check, crammed into the Galex residence on an April day. DeFalco worked the bidding over $900,000 within seconds.
A Broward County couple made the highest bid: $976,500. They signed the papers, and the sale closed less than a month later.
As the South Florida housing market softens after a five-year boom, more sellers are eschewing traditional real estate listings for public auctions, which accounted for 6 percent of all U.S. real estate sales in 2004, according to the National Auctioneers Association. That number grew to 19 percent in 2005 and is expected to balloon to 30 percent by 2010.
The Florida Auctioneers Association doesn't provide specific numbers, but President Neal Van De Ree said sales statewide have increased tenfold in the past eight months alone. The process is fast, gives the seller some control and almost always brings fair market value. Therefore, it's easy to see why more Floridians are turning to auctions.
"We're getting tons of calls," Van De Ree said.
Another reason to consider an auction is that it brings attention to a house, really helping it stand out - no small factor in South Florida, where housing inventory has more than doubled since last year in Palm Beach County and tripled in Broward County.
A seller who commits to an auction usually doesn't have to pay commissions or most of the closing costs, which are the responsibilities of the buyer, but does have up-front marketing expenses that vary, depending on which auction company is brought on board. Some charge up to 3 percent of the value of the home, which ends up being cheaper than listing the property with a real estate agent in many cases. Others charge more.
It's not uncommon for a firm to get $30,000 to market a property, money that is quickly spent on TV, newspaper and Internet advertising, signs and direct-mail brochures to ensure a dearth of qualified bidders on auction day. The steep price often causes sellers to forgo auctions, but the flip side is that homes will nearly always sell within 90 days or so and fetch top dollar.
"They might be carrying two mortgages and they might just want to get on with their lives," said Annette Elms, president of Jupiter auction firm Christenson-Elms. "If you list your property, it's going to be on the market a very long time. No matter how nice it is, it's just one of many that people have to choose from."
Real estate agents still can get commissions from auctions, but some don't like the concept.
"If the sellers have priced their homes correctly, they're going to get the same type of activity and interest," said Scott Agran, president of Boca Raton-based Lang Realty. "Everybody's always trying to create a better mouse trap. An auction is great hype, but it's not something I would look into or am excited about."
Auctions generally work best for high-end homes, but some observers say they could become more common for mid-priced properties if Florida home loans keep getting more expensive and the housing market remains this sluggish through the rest of the year.
Public sales, generally, aren't meant for homes that lack a certain appeal - many auctioneers will pass on unmotivated sellers and those who don't have much home equity because they're unrealistic about what the property will fetch. Some auctioneers won't handle any sort of damaged, distressed Florida real estate, either.
AS REALTORS... WHAT DO YOU THINK ABOUT THESE AUCTIONS???
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