Realtors let the hammer fall in Vail Valley
VAIL VALLEY, Colorado- In a down real estate market, sellers are looking for an edge. For some, it’s time to hold an auction.
A couple of auctions are scheduled for the valley in the next week or so. Each represents a different way to think about selling property to the highest bidder.
Longtime local developer Bob Warner decided to use a new auction service from Sonnenalp Real Estate to sell a couple of homes his company built in Arrowhead. Val Devine is using her own company to sell a lot she owns at Arrowhead.
Warner, who had the homes listed with Sonnenalp before putting them up for auction, has a bottom-dollar price, or “minimum bid,” attached to the homes. Devine is selling her lot – and a home in Vail – at “absolute auction” with no minimum bid. Each is an advocate of the sale they picked.
Bob West, a partner in Hoffman West Real Estate, is also working with an auction company, J.P. King, but the company has yet to sign a client for an event. But Hoffman believes in the auction process – at least for some sellers.
“If you have high debt-to-value, or you need a certain price, you’re not qualified for an auction,” West said. “But people who want liquidity, and who want to close in 30 days or less, can benefit. It’s a proactive, not a reactive, process.”
Hoffman West linked up with J.P. King because it also does “absolute” auctions.
“In an up market, you get maximum value,” West said. “In a down market, you’ll find out what your property’s worth.”
Devine has been in the auction business for several years, and believes absolute sales are the way to go. But she agreed that auctions aren’t for everyone.
“The seller needs to understand where the market is, and accept that the market is the best appraisal,” she said. Of every 10 potential sellers the company talks to, maybe five will have what Devine called “realistic” expectations.
While the real estate market across the country is in the doldrums, it would be easy to assume there would be more auctions now. Devine said that’s not the case, at least on the high end of the market.
“We’re no busier now than we were in 2007,” she said.
West and Devine believe absolute auctions are the best way to drum up interest, and boost value for sellers. But, both said, a good sale won’t happen without top-notch marketing. Devine said her company advertises locally, nationally and internationally.
Sometimes it works – Devine was buzzing recently about a property Grand Estates sold on Nantucket Island that had been listed for nine months for $5.4 million. The sale price was $5.2 million.
“Nobody really expected it to top $3.6 million,” she said. “We got lucky. But the harder you work, the luckier you get.”
The argument against minimum bids – made by both Devine and West – is that the seller has essentially named his bottom-dollar price. Savvy buyers know that, and make small bids up from that level, if they bid at all.
“Most of the minimum-bid auctions I see end up on the courthouse steps,” Devine said.
Warner isn’t sold on the idea of no-minimum auctions. That’s why he’s put a floor price on his Arrowhead properties.
“I just think it’s a much more straightforward process,” Warner said. “You know when the hammer falls that that’s the price you’re paying. There are no buyer premiums, and in some cases that can be another 8 or 10 percent.”
Any auction can also be affected by national and world economic situations. Auction dates are set weeks in advance. A rash of bad news in the days before an auction can affect bid prices, and, ultimately, the sale price.
“If the stock market drops 10 percent the day before, what happens?” he said.
Another reason for putting a bottom price on an auction is, frankly, the need to get a specific amount of money.
“If you get a $500,000 bid on a $3 million property, can they really deliver clean title to it?” Warner said.
For Devine, though, selling at absolute auction is the way to go.
“I believe in the process,” she said. “If I didn’t, I wouldn’t be auctioning off my own lot. And it’s going to sell.”
Business Editor Scott N. Miller can be reached at 970-748-2930 or email@example.com.