Auction Redux
It must’ve been a very slow news week. The mid-May real estate auction that received so much coverage from the local media was back in the news—yet again—this past Monday, July 16.
Herald-Tribune reporter Stephen Frater, in his weekly column “In the House” has apparently been assigned to criticize what the newspaper freely admits is a dwindling supply of real estate ads due to the market slowdown and advertiser defection to the internet. He very belatedly took Michael Saunders & Company to task for the point-of-view we expressed in our insert of June 17. In it we discussed the viability of real estate auctions, a point-of-view on a controversial subject we felt we owed our clients and customers. After an extensive analysis of how the sale was conducted, we came to the inescapable conclusion that this sales tactic, allegedly designed to bring immediate financial relief to desperate sellers, had more to do with attracting publicity and generating immediate revenues for the sponsoring real estate company.
In Monday’s article, Frater stated, “Recently, real estate broker Sky Sotheby’s International and J.P.King Auction Co. sold more than $30 million of property, virtually in one afternoon, in front of a standing-room-only crowd at the Ritz-Carlton Sarasota.”
$30 million? Apparently our intrepid reporter accepted this number without sharpening his pencil to do an auction post-mortem of his own. But we did. Had he done a similar analysis—instead of simply echoing the auction sponsor’s own view of the proceedings—he might actually be more in sync with our way of thinking. After an extensive analysis of the closed sales from that day—the deals that ACTUALLY closed, that is—the amount sold was no more than $9.8 million of the more than $50 million that was initially offered for auction. With buyer paid commissions, the final tally came to $11.4 million.
In the final analysis, the auctioned homes sold at a combined discount of roughly 34% below the sellers’ last list prices. With the 15% commission paid by the buyers, the discount reduces somewhat to approximately 25% of the last list prices, which probably comes as no small comfort to the sellers. They didn’t see a penny of it. The 15% buyer commission was split between the sponsoring real estate company and the auction house.
Of the twenty-six homes originally scheduled to be auctioned, only four were actually gaveled to a sale. Meanwhile, right up until their homes went on the block, anxious sellers desperately sought other ways out. Only three were successful. Their homes were sold conventionally just hours or days before the auction. The remaining homes failed to even muster the seller’s mandatory minimum bid. And so, after at least two months of pre-auction hype and hoopla, only about one in seven was successfully auctioned. Not the kind of track record we would be crowing about. On a typical day, Michael Saunders & Company averages $4.4 million in property sales. We believe in action, not auctions.
The reporter’s bias is showing. Instead of simply reporting the news about the auction and its aftermath, he has—for whatever reason—injected his own opinion into it. Disagreeing with our assessment that sellers were probably in no mood for the auction’s pervasive party-like atmosphere, Frater went on to say: “I attended that auction and did not see any sellers with twisted arms or guns to their heads.”
Perhaps he should get in touch with the real truths of what happened that day before making such glib statements. We talked to more than one of the seller’s real estate agents, while the auction was still in progress, and were advised that there was plenty of anger and dismay to go around. There may not have been any guns pointed to the sellers’ heads, but there are still plenty of open wounds.
Cordially,
