Real Estate Auctions Benefit From Arizona Housing Surplus
Valley home sellers frustrated by a lack of action on their listings will soon have another selling tool: real estate auctions.
According to the Arizona Republic, more than 100 homes are expected to go up for bid in a mass housing sale set for next month in downtown Phoenix.
Housing auctions, popular during the economic downturn in the early 1990s, are re-emerging as sellers look for different ways to make their home stand out. In the Phoenix housing market, more than 40,000 resale homes are on the market, 10,000-15,000 more than historic inventory.
National Real Estate Auction Corp. is planning the auction, scheduled for March 24 at the Phoenix Convention Center. The Scottsdale-based company is trying to buy serious inventory - 125-200 houses with prices ranging from the $100,000s to multimillions in the first of what it hopes will be a regular series.
“People think there’s a deal, and there’s a curiosity factor,” said John McCann, president of the auction company. “It creates buzz about the property. It’s pretty much a new form of marketing and advertising.”
The Valley’s housing market is struggling to pull out of the doldrums after the frenzy of 2004 and ‘05 when speculators and easy Arizona mortgage money created record sales and prices.
In addition to the 40,000 resale homes on the market, it is estimated that there are as many as 25,000 “spec,” or speculative, houses that builders have completed or are still working on but have not sold as Arizona home loan demand wanes.
“I like the concept of an auction,” said seller Dave Bean, who’s struggled for months to move his property. “It creates a sense of urgency to sell something. For some reason, the word ‘auction’ has a touch of magic to the consumer because they think they will get a good deal.”
But real estate auctions, especially for houses, can project the image of a cheap sale from a desperate seller. Sellers not willing to make big cuts may be frustrated to learn the buyers are bargain hunters looking for the cheapest possible mortgage loan or vulture investors who can afford to be choosy.
“I think they’re just kind of predators in a market where they can hopefully get a bunch of new home buyers and get enthusiastic response,” said Doreen Drew of Daisy Mountain Real Estate in Anthem, referring to auction companies.
“A lot of times, they don’t reach the reserve or the minimum amount. These guys are trying to create a little buzz: ‘I got my house at auction, and I got it cheap.’ And I don’t think the sellers have capitulated yet. I don’t think they have said: ‘I just don’t care. Just drop the price to the mortgage and I’ll walk away from it.’ ”
Brett Barry of Realty Executives said the two things stopping a home from selling now are price and the condition of the house.
“If sellers are going to participate, they need to say, ‘We’ve been overpriced.’ The typical seller, they are greedy, they will think this is the magic pill. What is the magic dust that makes the house sell? To me, it sounds more like a gimmick unless they can get the prices down,” Barry said.
McCann has high hopes that with home loan costs so expensive in Arizona, housing auctions will continue to gain steam.
Burns sees them as a symptom of the real estate cycle that will disappear when the housing market stabilizes, but he thinks people will go to them.
“It will be a function of price,” he said. “I think tons of people are ready to gobble them up if they are a real deal.”