Local agents, buyers turn to auctions for home sales

Wednesday, Dec. 19, 2007

Click here to enlarge this photo Staff Photo by Gary Smith Auctioneer Bill Fox looks for bids on a Cypress Homes house and finished lots in a Hughesville subdivision off of Cracklingtown Road. E-Mail This Article | Print This Story

‘‘Look to your right and to your left. These people are your enemies,” the Owings Mills-based auctioneer told about 15 attendees.

Fox was pumping up eight registered bidders to buy a new model home and four finished lots in Hughesville recently for Cypress Homes — a regional builder who is trying its hand at auctions to sell excess inventory in a slumping real estate market.

The idea makes good marketing sense for sellers who missed the real estate boom over the last few years, said John W. Mabry III, an auctioneer with Fox Residential Auctions LLC who helped administer the Hughesville sales.

‘‘We bring the urgency back to the market,” he said.

In his experience with greater Washington, D.C., and Baltimore area homes, the technique has been successful, he said. Sellers get satisfactory prices when excited, competitive and eager buyers bid for a chance at a bargain.

‘‘This is the only time you can go and buy something at your price,” he said. ‘‘You can see other people want the house or the property” and what they think it’s worth, which often drives bidding.

Cypress Homes is one of a growing number of builders across the country who are not desperate, they say, but use auctions as a new marketing tool to draw buyers in and get the maximum possible sale price.

‘‘It’s on the rise,” though the actual number of builders using auctions appears to be low,

said Gopal Ahluwalia, head of research at the National Association of Home Builders. ‘‘More and more builders are just cutting prices [drastically],” he said.

Though there’s no hard data on the trend, the National Auctioneers Association reports overall residential auction revenues have grown 39 percent from 2003 to 2006. In 2006 residential auctions accounted for $16 billion – a 12.5 percent increase over 2005, said NAA spokesperson Chris Longly.

‘‘It’s common in today’s market” and works well for builders and homeowners who’ve found listing properties traditionally isn’t working for them, Longly said. ‘‘A lot of people have the misconception that only distressed properties are auctioned. They bring that market value.”

Chris Guldi, president of the Southern Maryland Association of Realtors and owner broker of Keller-Williams Realty in Waldorf, said he’s used auctions for a couple of resale homes – one of which sold to the highest bidder for only $2,000 below listing price.

‘‘They’re a lot of fun. The benefit to the seller is they know exactly when that house will be sold [but] they may not know for how much,” he said.

Ahluwalia said auctions are used more by big builders and more for condominiums rather than single-family homes because of the quantity of units that must be sold at once.

But that day Cypress put four, finished residential lots and a former model home up for auction. The lots were 3.3, 5.05, 3.09 and 3.51 acres, respectively. The model home originally listed for $788,614, but Cypress’ reserve was $566,000 for the Shelwick Forest property with a stone and stucco exterior, some cherry hardwood floors, granite countertops, skylights, a security system and 9-foot ceilings.

It began with a buyer’s choice auction — the highest initial bidder got to pick which lot of the four he or she wanted. Port Tobacco resident Donald Thomas won that bid and purchased the largest, 5.05 acre lot for $175,000 after Cypress officials agreed to lift the reserve and make the sale an ‘‘absolute” auction.

‘‘The whole deal has been stressful,” said Thomas, who’s been searching for affordable land to build on for about four years. He heard about the auction through his Century 21 Realtors, Marsha and Jonathan Benya.

‘‘We knew what he was looking for and when it came up we showed him [Thomas] the options,” Marsha Benya said.

Using a Realtor for auctions doesn’t cost the customer anything extra because the auctioneer splits his customer-paid commission with the Realtors. The winning bidder must also pay all closing costs and have a deposit up front in cash or a certified check. Customers are also encouraged to inspect the property and research it before the auction because it’s sold as-is.

Marsha Benya said she helped Thomas gauge how much the property was worth and advised him on bidding accordingly.

‘‘The builder has $250,000 into [the lot]. [Thomas] got a very good deal,” she said.

The numbers didn’t work out as well for Pete Cusack, who recently moved back to Charles County after 10 years of military service.

‘‘For the opportunity it was worth coming and trying,” Cusack said. After factoring in the cost to build a home on the lot, he was willing to pay a maximum of $130,000 for land. As a result, a couple bidding $145,000 for the lot he wanted won the property.

‘‘It had to be low enough to where I can afford not to be the next foreclosure,” he said.

While construction costs are about the same where he used to live in Little Rock, Ark. — about $85 a square foot — property is much less expensive. An acre there costs about $8,000, he said.

By the end of the auction, two lots were sold and two lots were withdrawn by Cypress because the owners said bids wouldn’t meet their reserve prices. The house remained for sale.

‘‘This is our first stab at it. We tried a bunch of other things. Some worked, some didn’t,” said Steve Belinky, marketing director for Cypress Homes. This way, the company can focus its marketing funds and resources in one month vs. a year. ‘‘It was a different marketing tool. This auction was hurt a little by the holidays and [bad] weather. Belinky said it looked like a lot of attendees’ first times at home auctions.

‘‘We’ll try it again,” said Tommy Vendemia, Cypress Homes owner. ‘‘Some of these people might come back. It gives us some activity. It’s hard to get some activity in this market [now]. You never know.”

Email Kayleigh Kulp at kkulp@somdnews.com.