Archives July, 2007


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.



The High Cost of Waiting

Quite a few would-be homebuyers tell me they’re ready to buy, but not before they’re positive prices are as low as they are going to go.  I certainly understand where they are coming from and would love to be able advise them exactly when that will be—or was.  No one wants to spend more than they have to on any purchase, especially one of this magnitude.

Unfortunately, even the best financial minds can’t say with complete certainty when prices will finally level out here in Sarasota-Bradenton.  Many believe they already have and local statistics tend to bear this out.   According to monthly statistics compiled by the Florida Association of Realtors, ours is the ONLY market in Florida that has been consistently showing an increase in unit sales versus this time last year.  That trend began last December and continues today.  But even if prices were to roll back by a few more percentage points—which is doubtful—you could unwittingly increase your final cost of ownership by not locking in on today’s low mortgage rates. 

Why?   Although biding one’s time seems like the smart thing to do in a transitional market, betting that mortgage rates will cooperate—by remaining historically low—isn’t.  Rates are already trending upwards again, with financial pundits expressing scant optimism they’ll retreat any time soon.

Even the smallest jump in interest rates can be costlier than it appears at first glance.  If you secure a 30-year fixed-rate mortgage in the amount of $600,000—with an interest rate of 6.75%—your monthly payment, with principle and interest, will be approximately $3,870.  If the rate creeps up a point to 7.75%, the monthly payment suddenly leaps to $4,270, or an additional $144,000 over the life of the loan.  Likewise, if you are comfortable budgeting no more than $3,870 each month for your mortgage payment, you must now reduce your asking amount to $543,680 and bring more cash to the closing table.   Or start searching for a lesser-priced home.  

It’s that simple.  Rising interest rates mean less purchasing power and can even compromise how much home you are ultimately able to buy. 

Now is the best time in years to buy real estate in Sarasota.  Which makes it an even better time to explore your borrowing options.  The experts at MS&C Mortgage will be glad to help.  We’re a division of Michael Saunders & Company and an affiliate of Wells Fargo Home Mortgage, the nation’s leading retail mortgage lender.  Besides offering exceptional service, with flexible financing to meet your specific needs, our goal is to help you get the most out of today’s low home prices by offering financing that is every bit as attractive and comfortable to afford.

Months from now, don’t find yourself muttering that age-old lament we too often hear from people who missed the boat in previous buyers’ markets:  “If only I had bought when I had the chance.”  Don’t let rising interest rates ruin your chances to buy your ideal home, or consume every penny you had hoped to save by waiting.  Like the ad slogan says, “Don’t wish you had, be glad you did.”



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