This past Sunday the Bel Air auction was hosted at the Hilton hotel. I was out of town, unfortunately, and was not able to record the winning bids. Keye reported 300+ attendees. All of the units had a winning bidder.
After Brazos Place, the Bel Air auction was the second high profile condo auction in Austin. There was some speculation in my office that the undisclosed reserve would be roughly 2/3 of the original price. My sources indicate that most of the winning bids were in the ballpark of 60% of the original list price, but these were all won “Sold Subject To Confirmation.”
Here is the shocker: Of the 25 units that were auctioned at the Bel Air condos, only two of the winning bids were accepted! The Seller/bank was still negotiating hours after the auction and many of the units may have added 5-10% on top of the winning bid [and on top of the 4% buyers premium] in order to meet the reserve minimum.
The auction rules clearly state that the Seller was allowed to set a reserve:
“All homes have an unpublished reserve price (Unpublished Reserve Price) which means that the seller has established an unpublished minimum selling price. The Starting Bid is not the reserve price. In order to become the winning bidder of a home, a bidder must have the highest bid and meet or exceed the unpublished reserve price. The highest bid is subject to acceptance by the seller (see ‘Subject to Confirmation’ section below). With respect to a high bid less than the seller’s reserve, the high bid and resulting purchase agreement/offer are subject to the seller’s acceptance, counter-offer or rejection during the auction, in the contract room, and/or within 3 days following the auction.”
The rules go on to state…
“With respect to a winning bid that is not immediately accepted by the seller, the auctioneer will inform the winning bidder that acceptance of their winning bid is ‘Sold Subject to Confirmation.’ The winning bidder acknowledges and agrees that winning bidder’s purchase/offer is subject to and contingent upon the seller approving the resulting purchase/offer, acceptance, counter-offer or rejection during the auction, in the contract room and/or within 3 days following the auction.”
Over the next couple of days we will see how the dust settles. Because it was behind closed doors we don’t know how many of the auctioned units actually went under contract nor where the final negotiated price ended up for those units. I wouldn’t be surprised if someone from the DAB readership was in attendance. If so, please share your experience in the comments! 🙂
If we can confirm the final negotiated prices, then it appears we can expect the average clearing price at Bel Air condos to be in line with what I’ve been suggesting: a 25-35% discount is the magic number for a developer to quickly unload condos in bulk, in either the open market or the auction market.
When the undisclosed reserve is set too far above what the market is expecting it can ruin the effectiveness of the auction. It’s situations like this that I suggest bidders bring a Realtor they trust – per the rules of the auction it cost bidders nothing – and they can help with strategy, understanding the project’s history, and negotiating when unexpected scenarios like this occur.
-Jude
