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Bids on the block

In a shifting market, property auctions are catching on with owners who want a quick sale and buyers hoping to find a bargain: Shades of EBay.

July 09, 2006|Diane Wedner | Times Staff Writer

FANNED by EBay flames, it was bound to happen. As buyers have regained an upper hand and sellers have started to sweat, real estate auctions -- live and online -- have caught on.

The changing market has nervous owners trying to sell quickly rather than letting their homes languish while their fears of declining values mount. Buyers, sensing the realty winds shifting their way, see bargains, something they've only dreamed of in the last few years. And then, of course, there is human nature and the thrill of bidding competition.

It has led to scenes like this one, on June 25 in Pasadena, with Kennedy Wilson auctioneer Dean Cullum bellowing, "Who'd like to open up the bid at $100,000? Do I see $100,000? Over there! Who wants to bid $125,000?" Minutes later, after a rat-a-tat-tat of climbing offers for a condo, investment partners and auction veterans Robin Morgan and Miriam Wimberly came up with the winning bid of $436,000.

"I think we got a bargain," Wimberly said. Agents say that comps for the two-bedroom, 2 1/2 -bathroom condo in 1,023 square feet suggest the sale price was right on target for the neighborhood.

Fueling the auction trend too is the higher comfort level most Americans feel using the Internet, which allows them to take virtual tours of homes they're interested in and to practice their bidding skills on EBay.

"EBay is the greatest thing that ever happened to our industry," said Steven Good, chairman of Chicago-based Sheldon Good & Co., the nation's largest auctioneer of real property. It has legitimized auctioning as an acceptable form of commerce to the masses, he explained.

More accepted as a way to sell real estate on the East Coast, the trend has taken longer to capture an audience in the West, where buyers have considered home auctions as the last-chance route to a home sale.

"So many people here think auctions are only for distressed or really bad houses," said Marti Barajas, an executive for Pacific Auction Exchange, a real estate auction franchise company. Most homes sold at auction, she said, get there because sellers chose to sell them that way.

How popular has the home-buying niche of auctions become? Gross sales of residential properties rose nationally to $14.2 billion in 2005, up 24% from $11.5 billion in 2003, according to estimates reported by the National Auctioneers Assn., an auctioneering trade group.

The two most well-known types of auctions are "open outcry," in which an auctioneer calls out the bids to the public, and sealed-bid auctions, in which all bidders submit their offers to the auctioneer on the same day, without knowing the bids of other participants. Online auctions also are gaining steam.

In the first two cases, the properties are offered under the following methods: absolute, in which the highest bidder wins the property, no matter the price; "published reserve," or "minimum," bidding, in which the seller and auctioneer have agreed to accept the published minimum bid or higher; and "unpublished reserve," in which the high bid is subject to the seller's acceptance.

Some open-outcry auctions also permit bidding by telephone, proxy and Web-cast bidding.

Inspect, then bid

Auctions for condos, condo-hotel units and fractional ownerships, in particular, are gaining traction among builders and home buyers, Good said.

Some buyers love the transparency of auctions. Unlike the traditional way of selling a home -- in which buyers first make a bid, sign a sales contract, then pay for the home inspections -- auctions let them do their homework before the sale. Auction companies typically allow 45 to 60 days for buyers to attend open houses and in some cases bring their own inspectors, said Todd Wohl, vice president of Premiere Estates Auction Co. in Manhattan Beach.

Other buyers dislike that they must spend time and money upfront on reading title reports and hiring inspectors, without a guarantee of winning the property.

Owners, for their part, like that they can sell their properties without financial, cosmetic or termite contingencies. On the downside, properties that are not aggressively marketed by auction companies may result in just a few low-ball offers.

The 70 or so bidders at the Pasadena condo auction, braving 100-degree temperatures, vied for a small unit that could generously be described as Cinderella before her fairy-godmother makeover. The unit was part of a cluster of probate sales that weekend. Probate auctions -- where the owners have died and the properties are sold, usually subject to court approval -- make up about 30% of residential real estate auctions, Wohl said. The rest are private-owner sales and foreclosures.

The potential buyers flowed in and out of the condominium, checking out the stained carpets, tired bathrooms and dated kitchen, small bedrooms and tiny built-in bookshelves before gathering in front of the building for the bidding.

Auctioneer Cullum tersely reminded bidders to use their auction cards to bid and kept the proceedings moving briskly.

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