In a depressed housing market, which is still reeling from the devastating mortgage meltdown, a lot of investors and brokers view auctions as a vital portfolio management tool, and like any other tool, it works wonders when used correctly for the right task.
The one thing all auction sellers in Florida, and probably elsewhere have in common is a desire or the need to sell within a shorter time frame than ordinary marketing methods or techniques would usually take.
Why The Auction Markets Are Good For Selling Homes These Days
Because of the slow activity in the housing market, here are among the most common reasons we hear about the perks of undertaking an auction. First, many view that these activities free up cash for alternative opportunities, and also eliminate “carrying” costs like interest, maintenance, utilities and taxes on property that is selling more slowly than anticipated in a business plan. Second, auctions enable home sellers and brokers to draw more attention to the property and set it apart in a crowded marketplace.
Third, auctions help cast a much wider net by drawing prospective buyers from a wider geographical area. And in addition, property auctions allow to establish the fair market value of a property that is difficult to appraise due to a lack of comparables. In reality, there are almost as many reasons as there are sellers. For those who are thinking of undertaking a property or home auction event, first ask yourselves, is the property suitable for an auction?
For instance, if you’re selling commercial land, the auction method is generally well-suited for locations near major cities, preferably with frontage on major roads and high visibility. For residential or commercial buildings, the auction method would most probably be best-suited to those that are high-quality, non-distressed, and in the growth market.
Auction Activity For The Condo Market
As most would expect in a tough residential condo market, auction activity is on the rise as developers and individual owners seek to quickly dispose of units that otherwise might sit idle and empty for longer periods. According to CEO of Pompano Beach-based Fisher Auction, inquiries have risen by 30% to 40% from a year or two ago, mostly from developers or bankruptcy courts.
While at this point, sellers have been end-users who bought on speculation, or were developers who needed their money back, the inquiries are now coming mostly from financial institutions. Most buyers are investors who are looking for deals and are not worried about staying in the market, while some auction buyers are individuals, but most activity is coming from domestic investor groups, and foreign buyers are also coming in to the auction market as well.
Activity Is Peaking In The Auction Markets Despite Some Problems
According to the chairman of Sheldon Good & Company in Chicago, one problem with condo sales at auction is depth of market, which he views greatly varies across the state of Florida. According to the housing market analyst, leverage is everybody’s enemy, as in some markets, prospective buyers worry about a further drop in pricing.
In other property markets where the oversupply isn’t as severe, buyers perceive less value from the auction, however, there’s plenty of business right now in the auction markets, notes the head of Sheldon Good & Co., as they are negotiating as well with other companies in the eastern and western sides of Florida, and the total amount of real estate under consideration exceeds $100 million.
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