Tuesday night I attended an auction here in West Palm Beach where about 80 residential properties were up for sale. The properties were located from Boca Raton north to Vero Beach and west to Clewiston and Okeechobee. They ranged from small one bedroom condos to large single family homes in golf course communities. This was my first auction of this type and it was an interesting several hours.
To preface the discussion, I reviewed the list of properties, printed out those that were in areas that I know and have an interest in. Then I went to preview them during the auction open house days. Some of the properties were not open during the open house days, but as a Realtor I was able to get lockbox codes from the listing agents and go preview them. Out of the 80 or so homes for sale I probably looked at a dozen or so.
The two key factors to consider prior to attending an auction are that any due diligence, including inspections, needs to be done prior to the auction itself and secondly that the properties seemed to sell for about what they were worth, so set your expectation level.
As I mentioned before a number of the properties were not available to preview but yet sold at the auction. Some how, some way you need to get into the property and bring an inspector to inspect the property, if you feel it’s necessary. An accurate assessment of the condition of the property and the work that needs to be done is critical and must be done prior to the auction. Take some time and go visit the local municipality to verify that there aren’t any assessments or fines associated with the property. It is also wise to consult an attorney to review the contract prior to the auction to make sure there aren’t any legal issues you need to be aware of. Be sure to conduct thorough due diligence.
By saying that the properties were selling for what they are worth I am not saying that they aren’t discounted somewhat. They are, but just not as much as people think when they think of auctions. Buyers and sellers alike always imagine properties going for pennies. There were a few condos and villas that sold in the $20-25,000 range. I was not sure of the condition of some of them, but even if someone needed to spend some money doing renovations, they probably pan out to be good rental income. Most of all, the people buying knew exactly which property they wanted and the maximum price they would pay. In the end if you pay 10% less than market value for a house that you want, then you got it for a discount.
One example is a town home in the Cloisters sold for $135,000 (plus a 5% buyers premium), or $67.50 per square foot. Over the past year town homes in Lake Worth have been selling for $68.00 per square foot. Comparing apples to apples though this unit sold for about $25,000 less than the last sale of the same model, although that sale was almost a year ago. Another example is a 2BR/2BA condo in the Moorings in Lantana sold for $50,000 (plus a 5% buyers premium). Sounds like a great deal, but there are listings in the same building below it and on the same floor starting at $64,800. The last sales in the building were as low as $70,000. So $50,000 is a good, solid discount. To reiterate, if that is the specific community that you want to own in, then you purchased the unit at about a 20% discount, which is certainly worth the extra effort.
Auctions are a viable way to buy and sell homes, but it is a different process than a traditional sale. Learn the process, follow the advice of the professionals you hire to help guide you and make sure you do your homework before you bid.
