the highest any bidder
According to a Sarasota Herald-Tribune article, home auctions are becoming far more common. The housing market which was booming as recent as two years ago, has gone bust and people are now trying to unload the homes they once hoped to make a quick profit on.
I feel no sympathy for the owners who tried to profit off the RE market. It's a free world, but life has become much more expensive here in Florida thanks to these people. Homes have tripled in value from 10 years ago. The home I own which I bought for 98,000 in 1998 would fetch 250,000 or more today. Prices have made it difficult for people needing to move, or those wanting to buy their first homes. This is having ripple effects throughout Florida, including the job market. How do we recruit teachers to Southeast Florida if they can't afford housing?
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Back in December 2004, when David Holland paid $315,700 for a new home in an east Venice Centex subdivision, the granite-and-tile beauty looked like an easy flip.
But as Centex's sales slowed down, his property turned into a flop.
Last week, Holland cut his losses. He put his house up for an "absolute auction," meaning no minimum and no reserve. Once the auction company advertised the house that way, Holland had no choice but to let the property go to the highest bidder.
He walked away with $255,000, a painful reminder that real properties, like stocks, do not always go up.
In a real estate market turned upside down, auction specialists find their phones ringing almost non-stop from would-be sellers desperate for some action.
As auctioneer Neal Van De Ree attempted to squeeze as much money as he could out of a tight-fisted crowd on Tuesday, six bargain hunters had to make moment-to-moment decisions on whether to raise their paddles again, or not.
In this case, the winner of Holland's house was an anonymous voice at the other end of a cell phone, willing to pay $255,000. Add to that a 10 percent buyer's premium ($25,500) and all closing costs including title insurance and document stamps, and the buyer ended up with a walk-away price of $285,000.
Van De Ree has sold roughly 4,000 lots and homes in the 20 years since he took the reins of the Van De Ree Auction Co. from his dad. The younger Van De Ree boasts on his Web site that he closed 92 percent of the auctions he held last year.
Nationally, residential real estate auctions are the fastest-growing segment of the U.S. auction business, according to the National Auctioneers Association.
Last year, auctioneers sold $14.2 billion worth of homes in 2005, up 8.4 percent from a year earlier, the group reports. Full-year 2006 sales will show another strong increase.
"With the current state of the real estate market, sellers see the attractiveness of knowing they will sell it on a given day versus keeping it on the market for months and sometimes years and incurring costs such as taxes, insurance on the home, upkeep and marketing," said Erica Brown, a spokeswoman for the auctioneers' association.
This is not news to Brian Herron.
The founder of Bradenton-based All Florida Realty & Auction Co. has been having multiples of the number of auctions so far this year compared to last year.
Herron turns down more than half of the requests he gets, and still finds himself holding as many as four auctions on any given Saturday.
Auctioneer Daniel DeCaro found himself turning away so much real estate auction action this summer that he formed a new division to handle it. Based on Longboat Key, his Daniel DeCaro Real Estate Auctions Inc. has long specialized in properties of $2 million or more.
"We can only do so many. It is like selling a Rolls-Royce or selling a Chevette. Which pays you more?"
But now, partnering with former auction client Dudley Brown, DeCaro has formed "DeCaro South," a new division handling homes as low as $800,000.
"We are getting five to six calls a day to sell homes in that price range," DeCaro said. "It is just unbelievable. The market demand just mandated that we not let that business go."
'Show me your paddle'
In Venice on Tuesday, Van De Ree warmed up the crowd before getting to David Holland's Venice house with a "pretend" auction for a Lexus in the garage that had its trunk stuffed with gold coins.
He invited folks to bid with invisible money for the luxury car as a way to accustom them to his auction patter.
Then he turned to the businesses at hand, selling Holland's house.
After a couple of delays to take $15,000 deposit checks from last-minute arrivals, Van De Ree shifted into an upbeat recitation of the home's attributes, and then into an intelligible but rhythmic auctioneer's patter.
"I have $235,000 from No. 13. Show me your bidding paddle ... Do I hear $240,000?"
The bids were so slow in coming that Van De Ree stalled twice, turning the microphone over to an assistant while he walked around the room, coaxing reluctant bidders into holding up that paddle one more time.
Finally, after 15 or 20 minutes of this odd courting ritual, Van De Ree knew the time had come to bring the gavel down three times in a row: an announcement that the property had sold.
"I knew I would probably lose money," said Holland, the seller, after the festivities. "But I thought it would sell for at least $300,000. The problem is there aren't any buyers. I think the people coming to auctions today know that, and they are looking for just incredible deals."
That's exactly what they are looking for.
Steve and Sara Schwartz stopped bidding at $250,000, which left them in the No. 3 position at the gaveling. The couple is attempting to use the auction process to upgrade at a bargain price from their Sarasota condo.
They had planned to stop at $225,000 on Holland's Venetian Falls home.
"We got a little bit of auction fever," Sara Schwartz admitted. "That always happens. Even at $250,000 I think it would have been a good deal."
Stan Pincus, another bidder, had an even lower cutoff in his head because he was looking for a pure flip. His number was way below the $255,000 win, and here's why:
In his opinion, if Pincus were to take possession and then sell again, owning the home would cost him about $320,000. Under the auction's rules, the bidder would be paying for the county's tax on purchases, called doc stamps and other closing costs, including title insurance. Then, as a normal seller, he would be paying for the doc stamps all over again.
Pincus said he would have gone for $250,000 if he thought he could flip the property within 30 days. That would allow him to assign the title and skip the doc stamps.
"But chances are slim that you're going to sell a property over $300,000 in less than 30 days," Pincus said, acknowledging just how slow the region's real estate sales are right now.