As everyone in Miami asks, “What’s it worth?,” real-estate auctions are making a big comeback. After all, what better way to gauge fair-market value than selling through a public forum to whoever’s willing to pay the highest price on a given day?
During a climate of rising foreclosures, a mortgage crisis and a depreciating U.S. dollar, government auctions are alluring for those who know the market inside out, do their homework and have the funds (and the guts) to pay for property upfront, in full and often sight unseen. However, broker-sponsored auctions are a better alternative for those looking for a bit of a safety net – or at least a shot at a walk-through and a month or so to arrange financing.
Broker Jim Gall, president and founder of Miami-based Auction Company of America, says his company hasn’t been this busy in 27 years.
“It’s not that we ever went off the radar, but when everything was selling in three days, five days or a month, there weren’t as many requests for auctions,” he says. “The reality of today’s marketplace is that things are selling a bit slower, and we’re being called upon for lots of reasons. We solve the problems of developers looking to free themselves up from long-term holding costs. We work in pre-foreclosure. And we also work with lots of individuals who are fed up with the fact that their brokers haven’t sold their properties quickly enough.”
Gall, who holds auctions nationwide, says the “crowd mentality” does a lot to jump-start sales and that “absolute” auctions (at which bidding starts at $0, with no reserve price) often results in higher prices than anyone – even the buyer – expects.
At one of Gall’s Miami auctions earlier this year, a three-year-old, two-bedroom, two-bathroom, 1,400-plus-square-foot loft located in South Beach’s desirable South of Fifth (SoFi) area was on the block. Previously listed at $799,000 on the Multiple Listing Service, would-be buyers bid it up to $660,000, which included the final bidding price, plus a mandatory 10 percent commission.
Gall has also been able to move many luxury waterfront homes. At a recent auction, he sold a home in Ft. Lauderdale – which had been listed for two years at $5 million, then $4.5 million – for $3.85 million.
“We create the new appraisal for the neighborhood and for the property, and create the new, true fair-market value,” says Gall.
And when it comes to Miami condos, Gall – unsurprisingly – advises would-be buyers to wait a bit or take the auction route.
“Do the math and look at the research: It’s taken us 10 years to sell 10,000 condos in South Florida, and right now there are about 60,000 available,” he says. “How are 60,000 condos going to be sold? But I do think it’s a great time for people to do their homework and come out to auctions.”