Want a Quick Sale? Put Your House on the Auction Block
After nine months of trying to sell his 2,700-square-foot Manhattan condominium listed at $2.5 million, Manuel Feingold had a stack of 169 business cards from people who said they were interested.
There wasn’t a single taker among them.
So earlier this month, Mr. Feingold placed his property, a 46th-floor unit with 10-foot ceilings and a panoramic view of the city, in an auction by Sheldon Good & Co. The place was sold on the appointed day for $1.9 million, considerably less than the original asking price. Nevertheless, Mr. Feingold said he is happy with the outcome.
``Auctions are the new millennium in residential real estate,″ Mr. Feingold says. ``Unless there is a real impetus (in real-estate broker sales) to close a deal, it’s always tomorrow, tomorrow, tomorrow.″
No longer solely the domain of distressed properties, auctions are gaining popularity among sellers of million-dollar properties like Mr. Feingold.
``As a method of selling high-end homes, it has become more accepted,″ says Tom Saturley, owner of Auction Properties Ltd. in Portland, Maine. ``Luxury-home owners are sophisticated and have sophisticated tastes and are already used to art auctions done by Sotheby’s and Christies.″
William Bone, president of Alabama-based National Auction Group, a company that specializes in ``trophy″ properties, says, ``These people with money are in a hurry. They sell at auction because it’s quick and simple.″
The efficiency of the auction process attracts sellers of even moderate-price homes. A seller can dispose of a property in 45 to 60 days, rather than listing it for months with no real offers. Selling at auctions also tends to minimize the chance of the deal falling through, since, in most cases, potential buyers must qualify financially before bidding starts.
Last year, $40.5 billion of real estate was sold at auction. Of that figure, 17 percent was residential property, up 2 percent from 1993, according to Gwent Group, an auction-consulting firm in Bloomington, Ind. In 1980, only $10 billion of real estate was sold at auction.
Auctioneers say most residential properties put up for bid sell as a result of aggressive marketing campaigns at least 45 days before the sale, including newspaper advertisements, glossy brochures and open houses. The marketing costs are paid by the seller and can amount to 1 percent to 3 percent of the property’s value.
One heavily advertised sale is scheduled for Dec. 2, when a 140-acre private island off Maryland’s Eastern Shore will be sold by National Auction Group. This hideaway, which may bring as much as $10 million, is owned by James Krapf and his brother, Thomas, who own a construction company in Wilmington, Del.
Among those seen looking at the property in recent days: golfer Jack Nicklaus and author Tom Clancy, as well as representatives from two foreign embassies whose dignitaries are interested in Ragged Island as a retreat.
Auctioneers’ commissions are similar to traditional broker fees _ usually in the 5 percent-10 percent range. Commissions on hard-to-sell properties can be higher. Before the auction, the seller must decide whether to offer the house ``absolute″ _ selling it that day no matter what the highest bid is _ or to set a minimum price.
Steven Good, president of Sheldon Good & Co. in Chicago, says people auction their homes when they are trying to meet a particular deadline, such as a job transfer or divorce proceedings, or if they become frustrated with the hit-or-miss nature of conventional listings.
When Don Wetzel had to sell his 77-year-old mother’s Owensboro, Ky., home in July 1994, he decided to bypass the frustration of a conventional listing and took the property straight to an auction by Kurtz Auction & Realty Co. The house sold for $115,000, which was what Mr. Wetzel was hoping for.
``I didn’t want to go through a long drawn out ordeal,″ said Mr. Wetzel, president of a local supermarket chain. ``I didn’t have time to spare and had no further use for the home.″
Five years ago, Shari Vass was under pressure to sell her Chicago condo quickly. She wanted to move to the suburbs before her oldest child started high school. After listing the 16th-floor, 3,000-square-foot Lake Shore Drive property for three months, Ms. Vass placed it in an auction.
``I constantly was having to keep the house clean, the closets straightened and shuttling the kids out the door when someone wanted to see the place,″ Ms. Vass said. ``It was very stressful.″
At the auction, Ms. Vass sold the condo for ``20 percent to 30 percent″ below her listed asking price of $300,000, but she says, ``If I had to do it again, I would skip the conventional brokerage method and go straight to auction. Auction means action.″
Buyers at auction generally pay about 10 percent to 15 percent below what the house is valued at, auctioneers say. But competition also can drive the price above what the seller hoped for. To bid at an auction, a buyer must come prepared with a certified check _ usually 10 percent of the minimum opening bid.
Auctioneers advise that a prospective buyer inspect a property, and even bring along an architect and appraiser, since an auctioned home is sold ``as is.″
``When that gavel comes down,″ cautions Stephen Martin of Gwent Group, ``you’ve bought the place.″