Once upon a time, real estate auctions were solely for troubled properties. While the conventional stereotype of an auction is that of a vehicle to move distressed properties, the old scenario no longer strictly holds true. Today, real estate auctions provide an alternative to the traditional sales process, with an increasing number of sophisticated sellers and buyers choosing the auction route.
A real estate auction is an efficient and effective sales tool for both luxury and more modest co-ops and condos alike. Apartment auctions offer several distinct advantages. They work the same way as auctions for fine art and antiques, generating excitement and attracting a wide pool of potential buyers beyond the immediate geographic area. For example, the auction of a premier condominium residence at the Ritz-Carlton New York, Battery Park, generated more than 5,000 inquiries from all 50 states, as well as close to 1,800 international inquiries.
By attracting a variety of prospective buyers, an auction sets the fair market value and certainty of closing, because the buyer is able to submit a bid at the price they are comfortable paying. In some cases, an attractive minimum bid is used, creating value for buyers looking in the area and sparking additional interest. And unlike the conventional sales method, where a property can languish on the market for an extended period of time, an auction provides a firm date on which a sale is going to occur.
All of these benefits are enhanced in a cooling real estate market. According to the Douglas Elliman 4th Quarter Manhattan sales report, 2016 was a “lackluster” year relative to the “frenzy” of the past several years. Sales decreased and inventory increased, with properties on the market longer and more room for negotiation.
If there are apartments on the market in your building, the owners may be considering an auction, particularly in this sales climate. Should one of your unit owners or shareholders wish to proceed with an auction, here are three important facts you need to know.