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"Real estate auctions, now a $51.2 billion industry in the United States, allow sellers to increase properties’ visibility to a national audience and to close sales quickly," said Ed Ritti, Prudential Fox vice president.
Usually, real estate auctions flourish as local housing markets cool. The last time auctions flowered was during the late 1980s and early 1990s, when home prices dropped precipitously in certain parts of the United States, southern California and Texas included.
Auctions sold about $14.2 billion in residential real estate last year, up 8.4 percent over 2004, according to the National Auctioneers Association. (That still amounts to less than 1 percent of all U.S. home sales, but the percentage is sure to grow with higher mortgage rates and threats of another recession looming on the economic horizon.)
The growth in real estate auctions " ..is due in part to the eBay phenomenon as Americans have become more familiar with the auction process," said Steven L. Good, chairman and chief executive of Sheldon Good & Co., based in Chicago.
Auctions can provide builders, investors and developers with the ability to buy and sell everything from single-family homes, townhouses and condos to raw and approved land, Ritti explained. Sales in once red-hot markets have tanked so quickly that sellers have little handle on how much their homes are really worth now -- or how to attract buyers to begin with.
Auctions also give homeowners another, often faster way to sell their abode in a market fast losing steam.
(Existing home sales dropped 4.1 percent from June to July, a 2½-year low, the National Association of Realtors reported last week.)
For an individual homeowner, adding the auction option to more traditional ways to sell allows sellers "to control negotiations as if it were still a seller’s market," said Ritti.
Prudential Fox first looked at the New Jersey shore real estate market because certain pockets there are languishing,Ritti said. Existing home listings in Ocean City, N.J., Wildwood, N.J., and Brigantine, N.J., for instance -- markets where people tend to buy homes more for investments than to occupy them --have doubled since a year ago.
The picture is brighter in Avalon, N.J., and Stone Harbor, N.J., where buyers live in their own homes rather than renting them out, Ritti explained.
Sales of existing and new homes in the Philadelphia regional market have slowed down 20 to 30 percent in the last year, Ritti said. Chester County is no exception.
The market for raw pieces of land to be developed is somewhat stronger.
Buyers pay the auction commission, once they’ve registered for auction sales and put down deposits, usually 10 percent of the home’s estimated value.
Sellers are responsible for paying either part of, or all costs of newspaper ads, mailings and other ploys used to whet potential buyers’ appetites. These fees can run from several thousand dollars for a run-of-the-mill home to $50,000 or more for a so-called "trophy" or celebrity property -- sometimes even an island or two.
First client for the new alliance is builder Tom Morello’s Sea Breeze Development, which will put 22 new vacation homes on the auction block in North Wildwood, N.J. come October.
To contact staff writer Sarah E. Moran, send an e-mail to smoran@dailylocal.com.
