Homeowners turn to the auction block for a sale

I'm located in St. Louis and very interested to see how this auction on Saturday turns out. Auctions are still new in many areas, St. Louis included.



By Riddhi Trivedi-St. Clair
ST. LOUIS POST-DISPATCH
Friday, Feb. 22 2008

Like so many others trying to sell their house, Ann Auer, is finding this a frustrating time. Her four-bedroom, two-car garage house in south St. Louis has been listed for $189,000 since July with no takers. She and her husband have already moved and are maintaining two houses. That makes them "motivated sellers," Auer said.

Now Auer is trying something unconventional to get her house sold: a real estate auction."The market is so stagnant. I thought this (an auction) was an unusual marketing tactic and worth giving a shot," Auer said.

Auer is one of almost 50 sellers hoping that an auction will help get their house sold, or at least generate some interest from potential buyers who otherwise seem to be sitting on the sidelines.

Phil Hunt and Sonny Brockman, agents with Prudential Advantage Realtors in Webster Groves and co-owners of St. Louis Auction, are organizing the auction to be held Saturday morning.

Whether it's a sign of desperation or inspiration remains to be seen. Auctions are a creative alternative in a slow market, Hunt said." We are not getting enough showings and contracts. We need to do something different to encourage buyers to buy and sellers to negotiate," Hunt said.

"Auctions are one of the oldest and most proven methods (to sell something)."Auctions — for everything from livestock to art — are not a new phenomenon. And they were fairly common for houses a few years ago in hot markets like Florida and California. They are generally used to create competition among buyers and obtain a better price for the seller.

But house auctions are unusual in the St. Louis area except for foreclosed properties. Some local real estate professionals are skeptical that auctions will work, especially in a slow market. "There is just so much property out there right now. I think you would have a much better chance if you get your house in the best condition inside and out and price it competitively, maybe even a little under everyone in the neighborhood," said Jane Nuckolls, an agent with the St. Louis office of Coldwell Banker Gundaker.

John Williams, owner of Missouri Online Real Estate based in Chesterfield, has a different perspective. The purpose of an auction, he said, is to create a "buying mind-set and environment."Truth is, there are properties sitting around that should sell but people are waiting for them to get cheaper," Williams said. "If someone is interested in a property and is faced with possibly losing that property to another buyer in an auction, it might encourage them to buy."

About 35 buyers have pre-registered for the auction and, Hunt said, he has received another 100 or so phone calls. All the registered buyers must be pre-approved by a lender, he said, and there will be a lender on site for last-minute registrants.

The auction houses range from $40,000 to $1.2 million and none is involved in a foreclosure, Hunt said. All the properties are listed in the Realtors' regional house listing service, giving buyers the chance to look at them prior to the auction.

Sellers pay a $100 fee to include their house in the auction and another $400 if the house sells, Brockman said. There is no fee for buyers. There is no minimum bid, but if the highest bid is unacceptable, the seller has the right to refuse a deal, Hunt said.

Tim Meyer, manager of the St. Louis office of Coldwell Banker Gundaker, sees that as a potential pitfall."Buyers come to an auction expecting a deal," Meyer said. "I went to an auction recently that had about 25 attendees and the auctioneer was still unable to obtain a minimum price bid."

Putting a house on auction may convey desperation to the buyers, Nuckolls said, making them much more likely to bid low. "And if they don't get what they see as a good deal, they will walk," Nuckolls said. "I would never put one of my sellers' properties on auction."

Brockman and Hunt aren't setting their sights too high. Before organizing the auction, they spoke with other companies around the country that have conducted the auctions. She will consider the auction successful if 20 percent of the properties are sold, Brockman said.

As for Auer, she considers the $100 an investment and the auction as another shot at attracting buyers. The auction sign in her front yard attracted six people to view the property at an open house, Auer said. "I hadn't had that many showings at an open house in months," she said.

"I don't know if the house will sell because this is a new tactic here in St. Louis. But to me it is another marketing tool."

Real Estate Market Sold on Auctions

The stats are in. Auctions are definitely growing fast. This is from the February edition of REALTOR magazine.

The real-estate auction market rose 5.3 percent in 2007, generating $58.4 billion in revenues – 39 percent more than it did in 2003, according to the National Auctioneers Association.

Arkansas auctioneer Joe R. Wilson predicts that a sluggish real-real estate market will make 2008 even stronger. "Sellers like it because it's fast, efficient and effective," says Wilson of Wilson Auctioneers Inc. in Hot Springs. "Buyers like it because they believe they're getting a deal."

In December, the National Auctioneers Association launched what is believed to be the first real-estate auction multiple-listing service. Prospective bidders can view coming auctions on AuctionMLS.com. The association also teamed up with the Auction Network to develop a multimedia cable television network devoted to the auction industry.

Source: The Wall Street Journal, Jilian Mincer (02/06/2008)

Realtors learning auction-speak to speed sales

This article is a good indication of how the real estate market is changing. I'm still convinced an online auction is the way to go, because they require less effort and the bidders can be located anywhere, but live auctions work as well.

DENVER – The tough housing market has some home sellers going to auctioneering school to develop a fast way to move properties.

Ask Shelly St. John of Denver if she ever expected to be practicing the rapid-fire verbal pacing of an auctioneer and she would have laughed. "Never in a million years," she said. "Never." Friday afternoon, she participated in the Bid Calling Boot Camp at the Colorado Auctioneers Association Convention at the Four Points Sheraton in Denver. She practiced her diction, delivery and crowd-interaction style. St. John is not alone.

According to the National Association of Auctioneers, real estate is the fastest-growing segment of the auction business. Residential property auctions accounted for $16 billion in sales in 2006.

"As the real estate market has changed, traditional agents are coming to the auction people to look for different ways to move properties because the traditional method is becoming very slow," said Walt Partridge, president of the Colorado Auctioneers Association.

Sellers worried about their homes sitting on the market for a year or more are asking auctioneers to move them faster, according to Partridge. He says the average time from listing to closing on a residential property auction is 60 to 90 days. The galloping cadence of the auctioneer doesn't sound like traditional real estate sales.

That's what St. John thought until she decided to give it a try. Now she's sold.

Can 2008 be as dismal as 2007 for residential real estate market?

Another interesting article. This one from Worcester, MA

Real estate has perhaps been one of the gloomiest sectors this year: The industry has faced declining prices, increased foreclosure rates and homes that sit with "For Sale" signs staked into their front lawns for months without even a look.

Statistics show a continued gradual decline over the past year: Sales from August 2006 to August 2007 dropped by more than 6 percent in Worcester County, according to The Warren Group.

Similarly, median house prices fell by more than 4 percent, from $261,700 to $250,000, during the same period.

To The Highest Bidder

Those in the industry lament there's more misfortune to be had in 2008, as prices haven't quite bottomed out. But at the same time, there will be some positives. The market will be ripe for qualified buyers, and sellers willing to improvise can continue to take advantage of crafty options.

One of those includes "auction-by-choice," in which sellers willingly put their homes up for bid.
Already, it's a rapidly growing alternative. Mark Shear, president of Berman Auctioneers & Appraisers in Worcester, noted that he had more calls in the last year for by-choice sales than he had in the previous 17 years combined. He estimated that foreclosure auctions and by-choice auctions will comprise about 30 percent of the industry next year.

"We know there's going to be a surge" in 2008, he said. "The numbers are strong."
The fact that by-choice auctions are increasing is promising, Shear said, as the market is about adjusting and experimenting. In line with that, he also sees an increase in electronic methods, such as Internet-based sales and online auctions, in the coming year.

Like foreclosure auctions, by-choice auctions are often done on the front lawn. Unlike the latter, however, bidders are provided with much more information about the house - such as recent upgrades, installations or remodeling work - that help net better bids, Shear said. And sellers at the very least get the fair market value - and sometimes more than that, due to "supply and demand" as the auction process ratchets up, Shear said. Besides price, though, sellers are increasingly drawn to the method because it's date specific, so it's easier to plan for than a regular home sale.

Shear stressed, however, that the process is most successful with desirable properties that haven't been listed anywhere else. It's also helpful when sellers maintain a realistic expectation of the current value of their property.

"Something is only worth what someone is willing to pay," he said.Holding On
But some sellers just aren't willing to budge on that front, and many are deciding to ditch their plans altogether and go with another option - remodeling. At G.M. Bergeron Custom Builders in Worcester, home remodeling grew by 20 percent this year, according to general manager Wade Bergeron. He expects that trend to continue in 2008, as more and more people get frustrated with their homes staying on the market for months on end.

Although remodeling can help move a home when it's in bad structural shape, Bergeron noted that many sellers and potential sellers are doing it because they ultimately decide to say put.
"They don't want to discount their house by $50,000 or $75,000," said Bergeron. He noted that a remodel is cheaper or at least equivalent to what a buyer would have spent on a new home.
But as much as remodels and auctions-by-choice have helped boost the market, industry experts say there's still about six months of downward adjustment to go.

Bergeron sees at least another 5 percent downgrade, he said. Then, he predicts, sales will "bounce along the bottom" for between two and four years before another bout of heavy growth and price appreciation.

Along with that, we're likely to see increased foreclosure rates that will continue to do "lots of financial damage" in 2008, according to Jeff Hall, vice president of the Worcester Regional Association of Realtors and a Worcester-based RE/MAX agent.

"It's going to take us another couple of years to turn it around," he said.

Taryn Plumb is a freelance writer based in Worcester.

Banks turn to auction houses to unload real estate

Here is another interesting article on real estate auctions.

Memphis Business Journal - by Einat Paz-Frankel

Financial institutions seeking to sell a growing number of foreclosed properties in the wake of the subprime mortgage meltdown are increasingly turning to auction houses as an alternative avenue for real estate marketing.

The Memphis metropolitan area has one of the highest foreclosure rates among the nation's MSAs. With 6,239 foreclosure filings recorded during the third quarter, up 38.6% compared to the same period in 2006, Memphis is ranked No. 14 in the nation, according to RealtyTrac, Inc. Tennessee has the 12th highest foreclosure rate among the states, with 12,198 filings in the third quarter. Overall, foreclosures more than doubled in the U.S. during the third quarter this year to reach 635,159.

The mounting properties under foreclosure leave many financial institutions with real estate properties they wish to dispose of.

"There are an awful lot of foreclosures in the area," says Jody Hopkins, vice president of finance and administration for Roebuck Auctions. "Lenders own deeds to properties and as a result there's a tremendous influx of lending institutions that opt for auctions thanks to their speed and sense of urgency."

Professional live auctions, which involve a bidding process, are not to be confused with foreclosure auctions held on courthouse steps. Foreclosure auctions were held recently in Memphis for Matthews Brothers Builders LLC properties foreclosed by Paragon National Bank and other financial institutions. Such auctions may or may not result in a sale. They may result in handing the title over to the bank, which is then the new owner of the property.

Traditionally, banks have assigned the marketing of their real estate to a real estate broker. Now, many lending institutions find themselves owning many unwanted real estate properties, for which they need to carry insurance and other costs. With home sales being soft -- Memphis Area Association of Realtors reports year-to-date sales fell 13.8% from the same period last year -- they are looking for a quicker way to sell their newly acquired homes, which are considered non-performing assets.

"The sooner they can turn them into cash the better," Hopkins says.
In recent months, professional auctioneers have seen a flow of residential real estate auctions done on behalf of banks. Hopkins says last year 5% of the firm's business came from banks; this year the share has grown to 10%-15% and the rate "will go higher if the trend continues."
Jeff Morris, owner of Morris Auction Group, says a growing number of properties are coming in to his auction house from banks.

"Holding a piece of property can be costly over time," he says. "Time is their enemy."
The typical turnaround time for an auction sale is four to five weeks, he says. After several weeks of advertising the auction in multiple media, the property sells on a set date and closes 30 days later.

"Now, with so much on the market, they're much more eager to clean up their portfolios," Hopkins says. "They know the property will sell on a certain date."

Bob Byrd, founder and chairman of the Bank of Bartlett, says the financial institution uses auctions to sell off foreclosed properties in addition to traditional avenues such as Realtors.
"With the decline of the market, more foreclosures and liquidations have occurred," he says. "An auction is a viable strategy."

Nationally, residential real estate auctions are the fastest-growing segment of the auction industry. From 2003 to 2006, residential real estate auctions grew 39.2%, according to a study by the National Auctioneers Association. In 2006, auctioneers sold $16 billion worth of homes, up 12.5% over 2005.

Hopkins says some banks bundle several properties and put them on the auction block at the same time, accepting bids for all of them from a group of qualified bidders on the same day.
Morris believes the trend will continue "whether the market is good or bad." And, the expedited process can benefit homeowners before their house is foreclosed.

"We'd like to see people coming to us before the foreclosure, so we can sell their house and save their credit," he says. "Sell now; don't prolong the inevitable."

Roebuck Auctions
Address: 4932 ParkPhone: (901) 763-2825Web site: http://www.roebuckauctions.com/
Morris Auction Group
Address: 310 UnionPhone: (901) 579-4004Web site: http://www.morrisauctiongroup.com/

Looking for Real Estate Agents

As the success and popularity of Internet real estate auctions continues to grow, there are many homeowners who will want to take advantage of this selling strategy.

One thing is for sure, most of them will want help from a real estate agent. Some real estate agents are taking notice and learning how to incorporate this powerful strategy.

If you're a real estate agent, there are now tools and training to help you get involved with online auctions. It's a great time to get educated and started.