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Bel Air Auction Latest – Did The Auction Work?

Jude Galligan | August 11, 2009 |

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“All homes have an unpublished reserve price (Unpublished Reserve Price) which means that the seller has established an unpublished minimum selling price.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 In order to become the winning bidder of a home, a bidder must have the highest bid and meet or exceed the unpublished reserve price.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

Filed Under: austin condo auction, Real Estate Tagged With: bel air, bel air auction, bel air austin, Bel Air Condos, condo auction

Auction Systems

Jude Galligan | August 3, 2009 |

[youtube = http://www.youtube.com/watch?v=3j2ff1YydWE]

The auction of the Sage Condos will use a different system than the auction at Brazos Place or the Bel Air.  Rather than auction each individual unit, the auctions are for the right to choose which unit you want.  Everyone bids and the highest bidder gets to choose the unit he/she wants. The auctioneer repeats this process until 10 units are sold.

The different models necessitate different tactics.  For instance, at the Brazos Place auction, a buyer was able to study the units they wanted and were only required to participate in the auctions for those specific units.  Collectively, with only those interested in the same units, buyers would only participate in the auctions for those units.  Conversely, the auction system being used at the Sage encourages all buyers to bid in every auction.

At the Sage, if I simply want the best deal – without regard to view, size, etc – then I am still competing with other buyers that DO want a premiere unit and are willing to bid more to win the right to choose that unit.  It is hard to say if this would encourage or discourage me from bidding.  This system should clear out the premiere units early.  Most likely, those that want the choice of premiere units will bid early and aggressively.  Those that want the best deal at the Sage will bid in subsequent auctions once the premiere units are absorbed.

It remains to be seen if the bidding system used at the Sage will be of greater benefit to the Seller by encouraging more bidders and higher bids.

The Bel Air auction is this Sunday.   The Sage auction is a couple of weeks from now.

-Jude

[Update from local auctioneer, Mike Hanley: “This is called the Multi Parcel Auction Method. It can be very effective!  I have seen it used at Sheldon Good Auctions of Condos in Dallas,a Tranzon-Hanley Auction in Wimberly and have used it myself for the sale of undeveloped land in Utah and New Mexico.”]

Filed Under: austin condo auction, downtown austin Tagged With: austin condo auction, bel air auction, bel air austin, sage auction, sage condos

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