Daily Real Estate News  |  August 16, 2006  |   As Sales Slow, Sellers Give Property Auctions a Try
More sellers are putting their homes on the auction block in hopes of getting a quick sale.

"We do for real estate what a Fourth of July sale does for retailers," says Lynn Gardner, the owner of Homeland Auctions Inc. in Leesburg, Va., which auctioned 57 homes in this year's first half, up from 11 in the last six months of 2005.

Larger auction firms — including Sheldon Good of Chicago, Williams & Williams of Tulsa, Okla., J.P. King of Gadsden, Ala., and Pacific Auction Exchange of Bakersfield, Calif. — also report rapidly rising demand from individual sellers as well as home builders and investors stuck with excess inventory, and banks with foreclosed property to sell.

Auction services aren't cheap. Commissions and marketing fees often exceed 10 percent of the home's value. Sellers generally pay upfront for all or part of the costs of newspaper ads, mailings and other marketing used to drum up interest.

Home sellers tend to show more interest in using auctions when the housing market is weak. The last time auctions were popular was in the late 1980s and early 1990s when home prices fell sharply in many parts of the country.

But Chris Mayer, a professor of economics and real estate at Columbia University’s Business School, says sellers have it backward. Auctions work best in strong markets when there are plenty of determined bidders to push the price up.

Source: The Wall Street Journal, James R. Hagerty and Michael Corkery (08/16/2006)