A risky strategy or a timely tactic?

Buyers and sellers have no shortage of strong opinions about auctions.  Lost in all the hyperbole is the truth about their role and value.

Real estate auctions go back to at least the times of ancient Greece, and have been a fixture of the American real estate market since the 1600’s, according to auctioneers.org.  The same source noted that $264 billion worth of real estate was auctioned in 2006.

We at SKY Sotheby’s have a balanced perspective towards auctions:  they are valid - and powerful - marketing tools when used appropriately.

Auctions are suitable for clients who want an accelerated method to sell their homes in in a predetermined time - and are willing to let bidders drive prices.  As for concrete examples, our Fall 2007 Sarasota luxury real estate auction produced the following results:

• The auction drew more than 400 registered bidders from 18 states and four countries.
• Half the properties auctioned were sold.
• Properties sold for approximately 75% of their lowest list price and 106% of their assessed market value.

As for traditional approaches, homes priced at $1.5 million or more sold through the multiple listing service (MLS) during the same period brought 86% of the list price and were on the market for an average of 295 days.

Comparing these two vehicles, properties sold at our Fall Acution had comparable sales prices to those sold through the MLS - and were on the market for a far shorter time.

So what is the takeaway?

Auctions are effective when used judiciously.  They identify buyers.  They create a sense of urgency.  They generate publicity for featured properties.  They shorten the sales cycle.

In fact, our Fall Auction was so successful that we are planning one for luxury homes in April 11, 2008.  We already have registered 800 prospective bidders, 25% of whom are from outside the United States with a significant percentage from Canada, England, Germany and Russia.

Auctions are not appropriate for every situation.  They are just one tool in a realtor’s toolbox.  They obviously benefit select buyers and sellers.

And they certainly have their place in this uncertain market where buyers and sellers are tyring to find a mutually acceptable outcome.