Despite the soft real estate market, Beazer Homes USA Inc. recently sold 26 beachfront condos on the Jersey Shore in 75 minutes.
Auctions are no longer just for banks seeking to unload a foreclosure. In a sign of just how broad the real estate downturn has become, auctioneers say much of their current business is being driven by home builders reducing inventory, and individuals who can't afford to wait out the real estate doldrums.
Christopher Gillen, an executive vice president for Beazer Homes USA Inc., said the condos were the first the company had put up for auction in the area.
Before the auction, Beazer was asking between $400,000 and $850,000 for the condos, but sold them for between the high $300s and the high $700s, Gillen said.
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The condo sales “may have taken a year-plus to sell if we had gone a more traditional route of putting homes on the market,” Gillen said.
The company faces federal investigations following Observer reports last year that it violated federal lending rules.
On Wednesday, the National Association of Home Builders said the business outlook of the major builders hit a record low in July. The monthly index posted new lows for sales conditions, shopper traffic and sales expectations.
Yet auctions are proving to be one sales solution for both builders and anxious homeowners.
Revenues from residential real estate sold at live auction grew about 5 percent last year and are up almost 47 percent since 2003, according to the National Auctioneers Association, which held its annual conference last week in Nashville.
Tommy Williams, president of association, believes more people are turning to auctions because they're more familiar with them, thanks to eBay.
“EBay introduced a world to the concept of auctions better than anybody. The average consumer began to look at auctions not only as an alternative, but in a positive light,” Williams said.
Residential real estate auctions are the fastest-growing segment with gross sales of almost $16.9 billion last year, up from about $11.5 billion in 2003.
But individual property owners aren't necessarily making a profit, or even getting what they paid for the house if they bought in an overheated market. Often the main benefit of an auction is getting out from under rising interest on house notes and paying other expenses like taxes and insurance.
Mark Bratton needed to sell his Hot Springs, Ark., home so he could move into a single-story abode because of health problems.
He put the property up for auction through a company near his home, where he says houses today can often sit on the market for up to eight months.
“What I wanted was to sell the house and sell it quickly,” said Bratton, who recently sold the home at auction about 30 days after listing it with the company.
He bought the house in 2005 for $139,000 and put about $180,000 into refurbishing it. When the gavel came down, the winning bidder paid just $275,000.
Marty Higgenbotham, who heads Higgenbotham Auctioneers International in Lakeland, Fla., said homeowners who bought in overheated markets and are selling their properties at auction now are typically only going to get back about 60 to 65 cents on the dollar.
Buyers typically also have to pay a fee, usually 6 to 10 percent of the total cost, which covers auctioneer costs and other expenses.
Bernard Markstein, senior economist for the National Association of Homebuilders, said auctions traditionally are not the preferred route for most people because house values are typically not as high.
“The longer you take, as a general rule, you're going to get closer to your asking price … But if you want to make a quick sale, you will probably have to cut your price more,” Markstein said.
But Williams and other auctioneers say if property owners have to sell at a time when real estate housing values are declining in many markets, it's better to sell sooner than later.