Twenty-nine condominiums at The Residences at Stone Gables in Malden will be auctioned this Saturday.
Bargain hunters searching for a good deal on a condo may get lucky this month – or maybe not.
One developer is auctioning 29 condos targeted to first-time buyers this Saturday. Another is accepting sealed bids through the end of the month in what is being billed as a builder’s inventory closeout to sell three units in an active-adult community.
But despite the perception that auctions can help buyers get a bargain, they can just as often not – particularly if a builder is using it as marketing strategy to sell off inventory and is not being forced into it, according to some auctioneers and Realtors.
“It’s a misperception that you can get a deep discount. You’ll get what the house is worth,” said Donna Brooks, an auctioneer and Realtor in Leominster. “People have the wrong mindset. Right now, people still have the foreclosure mentality.”
Auctions and other alternative sales strategies started gaining more attention in the Bay State last year as home sales plummeted and prices dipped for the first time in more than a decade. In the fall, an auction for Folio Boston, a 97-unit luxury condo development in the city’s Financial District, made headlines.
The firm handling the widely publicized auction, Velocity Marketing of Burlington, deemed it a success after all but one of the 31 available units was sold. The condos reportedly were sold for between 21 percent and 36 percent below the last asking price.
This Saturday, the same firm will be auctioning 29 condos at The Residences at Stone Gables in Malden. The auction will take place at the Sheraton Colonial Center in Lynnfield.
Stone Gables consists of 104 one- and two-bedroom single-level units and townhouses that are located in what was once an elementary school. The condos – which have sold for between $186,019 and $311,000 over the last 14 months, according to the Suffolk County Registry of Deeds – are targeted to younger first-time homebuyers. Minimum bids ranging from $170,000 to $255,000 will be accepted on Saturday.
“Given the current market conditions, the assumption is that at the current absorption rate it would take another year to sell the rest of the project,” said Sue Hawkes, managing partner of the community’s marketing firm TCC. “The owner viewed this as a good opportunity to accelerate the absorption and to be sold out in the first quarter [of this year], as opposed to 2008.”
David S. Drinkwater, president of Grand Gables Realty Group in Scituate, said buyers may look at auctions as a good opportunity to buy property. “But the auction process is very different,” said Drinkwater, noting that buyers may not be able get an inspection or include other types of contingencies as part of their offer.
The owner of Stone Gables, Coliseum Development, acquired the property almost two years ago. The property was initially rental units, but Coliseum converted it to condos. Most of the units that are being auctioned include gleaming modern kitchens, with features like granite countertops and stainless-steel appliances.
Three of the units, however, were not renovated and look as they did when they were apartments.
‘It’s Being Embraced’
Stephen Paulin, president of the Massachusetts State Auctioneers Association, said auctions have been gaining popularity faster in other parts of the country, but New England is starting to accept them as another selling strategy.
“It doesn’t suggest it’s a desperation move. It suggests that it’s being embraced by the public as an alternative marketing method,” Paulin said.
Residential real estate auction activity nationwide grew 12.5 percent in 2006 from the prior year, generating $16 billion, according to the National Auctioneers Association. The association reports that residential real estate auctions are the fastest-growing sector of the industry.
“People, I think, in Massachusetts are finally catching on that auctions can be a good thing,” said Brooks, owner of Brooks Auctions and Boss Realty Group in Leominster.
Global Property Developers Corp. began advertising its closeout sale for three condos at Dunham Farm in Hanson late last month. Dunham Farm, a community for people 55 and older, will feature 52 luxury townhouses and garden-style units once it’s completely built.
The first phase consisting of 16 units was finished last summer. All but three condos were sold.
George Jamieson, an executive with Norwell-based Jack Conway & Co., which is marketing the project, explained that offers to purchase five units fell through last year after the prospective buyers couldn’t sell their current homes. Eventually, two of those condos were sold, leaving only three unsold units.
“One of the difficulties we’ve had with marketing this property obviously is that most of the [buyers] have homes they need to sell. So closing dates were pushed out as the builder accepted some home-sale contingencies,” said Jamieson, vice president of sales and marketing for Conway Development Sales, a division of Jack Conway & Co. “We lost a few deals because of people not being able to sell their houses.”
Jamieson emphasized that the latest strategy – seeking sealed bids – isn’t like a traditional public auction. The developer will be accepting bids over several weeks, instead of only one day, and has the option of rejecting offers or negotiating with bidders. There are also no set minimum bids.
The original asking price for a Dunham Farm townhouse was $379,900, while the garden-style units were offered at $329,900.
“What we’re trying to do is motivate buyers to act by showing that there’s really value if you buy one of these units. Potentially there’s savings for them,” he said. “The builder is expecting for bids as close to that asking price as possible Â… these bids that come in, I think, will be an indication of what the public feels the market value is going forward.”
Sealed bids for the three units are being accepted through Feb. 25, and the developer will select the winning offers the following day.
Jamieson agrees that local industry watchers are starting to pay more attention to auctions and other sales strategies.
“I think there’s been some notice of late that some other firms, some other developers, are using the auction process to sell off their final inventory,” he said.
He added, “I think it’s a good way for builders to move on and deplete their inventory – whether it’s an auction or a sealed bid process.”
Brooks, the Leominster-based auctioneer, said she’s getting more calls from homeowners, builders and Realtors wanting to learn about the auction process.
“They’re finding it’s a quicker and better way to sell to you, especially in a flooded market,” she said.
When there are a large number of homes available for sale, an auction can provide extra exposure. But even in a seller’s market, an auction can be beneficial for consumers, according to Brooks.
“If it’s a seller’s market, you don’t have to worry if your offer is going to be accepted,” she said.
“An auction is the last bastion of capitalism. It will tell you exactly what the market is willing to pay. Whether it’s an up market or a down market – that’s what the house is worth, what the market is willing to pay,” she said.
