Going once, going twice...SOLD!

With fewer homes offered and plenty of buyers, auctions fetch nice prices

November 30, 2003|By Anne Lauren Henslee | Anne Lauren Henslee,SPECIAL TO THE SUN

IF public auctions bring to mind images of run-down, foreclosed properties in less-than-desirable areas, don't be fooled.

Increasingly, homeowners are putting their houses on the auction block in hopes of making more money without investing the time and hassle of a conventional sale, according to real estate experts. And many are succeeding, thanks to a limited number of homes for sale and high demand because of historically low interest rates.

"In prior years, when there had been an excessive number of houses on the market with moderate demand, you would probably expect somewhat of a discount from market value at auction," said Paul Cooper, of Alex Cooper Auctioneers Inc. in Towson. "But this type of marketplace where you have very little supply and high demand, auctions can work great for voluntary sellers."

Attendance at auction sales has risen significantly this year, as have sale prices for residential property, according to auction houses. Property owners like the quick nature of the sale and avoiding the customary visits by prospective buyers. Auctioneers typically earn a percentage of the sale price, which often is paid by the buyer.

Experts said investors still make up the majority of the buyers at auctions because these deals typically are not contingent on property inspections and appraisals - those duties are almost always included in conventional real estate sales. And though most properties sold at auction command prices below market value, real estate experts said the gap in pricing between conventional and auction sales has narrowed during the past year.

"Owners will auction properties because it is a clean break," said Daniel Motz, a Realtor with Coldwell Banker Residential Brokerage in Roland Park. "The auction is over and the property is sold. There are no inspections, no waiting for loan approval, and, in their minds, no nonsense."

And most real estate experts predict that more property owners will choose this method of selling in coming years.

Doesn't always work

"Who ever heard 10 years ago of selling these kinds of houses at auction? But the system, from our standpoint, works," said Jack Billig, of auction house A.J. Billig and Co. in Baltimore. "I can also tell you it doesn't work in every area."

"Sometimes it should never have been attempted, because the sellers have talked to someone who has given an over-inflated concept of what their house is worth or they themselves think they should get a certain price because a friend of theirs got it three miles away."

Ability to fix up

The growth of guardianships by an aging population that is leaving estate planning to their children also has fueled the sale of real estate at auctions, Billig said.

"People get older, they can't take care of themselves. They get moved into nursing homes," said Billig, whose company sells two or three guardianships each week.

"Their families don't want their houses, and the houses many times need extensive repairs. Generally, they're in very good areas and they require people who have the ability to fix them up."

Cooper and Billig, like most larger auction houses, work with real estate agents, list their properties on multiple-listing databases and market the properties extensively. Foreclosures remain a big part of the business because of loan delinquencies.

Cooper estimates that his company receives about 300 foreclosure referrals a week. Of those potential sales, about three-quarters get canceled, often because of bankruptcy filings or other resolution, he said.

Meanwhile, the amount of third-party voluntary sales is "unbelievable," Cooper said.

"I used to go down to Prince George's County when we'd just sit there by ourselves, because nobody would show up. We'd fill out the paperwork and come back. The other day I went down there, and I had five sales. I sold four out of five. Montgomery County is like a turkey shoot, as are Howard and Anne Arundel counties."

Cooper said he turns down more properties than he accepts for auction, mainly because of unreasonable expectations from the property owner. If a market is saturated with homes for sale and few have sold recently, Cooper said, it likely won't make sense to hold an auction.

"It's a colossal waste of time if you bring a property to the marketplace that is overpriced. Buyers are put out, sellers are put out, auctioneers are put out, and everybody walks away disappointed," he said. "The least I can do is my homework to try to determine whether it's worthwhile."

'Waste of time'

Working with the real estate brokerage community spurs interest in auction properties, say auctioneers, who typically share commissions with Realtors. Real estate salespeople have access to more buyers and will direct them to auctions if a property meets their criteria.

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