Auction action spurs Florida home sales

Auction sales of homes have been making the news lately. That’s because many banks around the country find that auction sales move their REO (real estate owned) inventory much faster than conventional sales. Approximately 10% of the foreclosures around the country are selling this way. But they’re selling not only to Americans, but to a large percentage of foreign investors.

According to the Orlando Sun Sentinel, 27 luxury condos at Artisan Park in Celebration were recently auctioned for more than $6 million, and so were 10 homes at an active-adult community in Ocala. Using the telephone and the Internet, international buyers from Dubai, Sweden, and the United Kingdom were able to participate.

Auctioned homes typically sell at a substantial discount, around 65-70% of what they would bring if sold conventionally through a realtor. The Baltimore Sun mentioned a package of homes that just sold at auction for $843,000. It was financed 2 years ago for more than $1.3 million. According to the auctioneer, the bids were higher than expected.

This buying surge, especially at higher prices, indicates increased confidence in the Florida real estate market and the general US real estate market, by both domestic and foreign investors. They are seeing a bottom in the market, and are buying before the rise. Typically, these properties bought at discount will be resold to the public at 85-90% of value. As a result, everybody is happy. Investors make a profit and the secondary buyers perceive that they’ve found a bargain.

As foreclosed homes in Florida and other parts of the country continue to glut the market for the next couple of years, we can expect the auction sales of homes to become a larger piece of the real estate sales pie. If you’re a home buyer, don’t be surprised if you find your agent steering you to an auction. After all, as agents, we earn a commission when you purchase a house that we directed you to. If we bring you to an auction—and the house you purchase gives you what you were hoping for in a home—we’ve done our job. What’s more, we’ve saved you money.

However, there is a large aspect of caveat emptor (let the buyer beware) in home auctions. Unlike a standard purchase, where you have the chance to do a cursory inspection on your own and later bring in a professional to make sure everything is in working order, auctions do not grant buyers this luxury.

Should you discover a problem of any kind in a home you’re purchased at auction, there is no no recourse. You own it, and all the fix up costs that go with it. If you change your mind after you’ve won the auction, you lose the 10% cash deposit you’ve already put up, plus you owe the auctioneer up to a 10% buyer’s commission on the full cost of the house.

So, before you put in a bid on that bargain home, you need to do several things. First, inspect the home as well as you’re able. If you’re really serious about it, hire your own inspector or engineer and have him or her take the home for a test drive. Second, ascertain the current value of the home and homes in the surrounding neighborhood.

One of the compelling aspects of home auctions is the thrill of the kill. You perceive a bargain, and you’re going to get it. Of course, your fellow bidders feel the same way. The job of the auctioneer is to take your collective energy and engender great excitement. This translates into ever-escalating bids. So pay attention to the bidding frenzy. Because if you overpay due to overzealousness, it’s not a bargain anymore.

If you’re a seller and you decide to use an auction as your sales vehicle, you’re likely to receive at least two thirds of the current value of your home on average, and perhaps a bit more. You can expect to sell within about 60 days of putting your house on the block, and you won’t pay a realtor’s commission. That expense is paid by the auction company and comes out of the buyer’s commission.

Written by Marc Jablon, Realty Associates
marcjablon@yahoo.com / 561 / 213 – 6139
www.marcjablonhomes.com/
Exclusive to Huliq.com