Home auctions a risky business - East Valley Tribune: Phoenix & The Valley Of The Sun

Home auctions a risky business

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Posted: Friday, October 13, 2006 10:27 am | Updated: 4:34 pm, Fri Oct 7, 2011.

Bill Yakobovich’s ritzy north Scottsdale estate sat vacant for nearly five months before he decided to ditch his real estate agent and put the home up for auction.

“Nobody stepped forward to give me the greenbacks,” he said. “I said ‘I am not going to go through another winter. I am just going to sell it at auction.’ ”

Next month his 4,500-squarefoot Desert Mountain home, which was originally listed for $2.9 million, will sell regardless of price, for no minimum bid and no reserve. The house is guaranteed to sell to the highest bidder when the gavel drops.

It’s a risky move, Yakobovich admits, but it’s a chance he’s willing to take.

“I’m not using the home,” he said. “If the market tells me it’s worth less than I expected to get when I listed it a year ago, then that’s OK. It’s really worth it to me, just to get rid of it.”

Frustrated by the Valley’s lukewarm housing market, more sellers like Yakobovich are turning to home auctions.

And while the method was once viewed as a desperate attempt to unload a foreclosure or bankruptcy, it’s become a popular choice for Scottsdale homeowners to sell their lavish estates.

“More and more high-end luxury-home owners are seeing the need to go the auction route to get the appropriate marketing exposure and to pull in buyers,” said Shirley Ector, auction sales manager at Mesa-based Excelerate Auction Group.

The latest quarterly study released by the National Auctioneers Association reports residential real estate is the hottest auction commodity. Home auctions are up 4.5 percent in gross sales nationwide so far this year, compared with the same period last year, the report said.

And the majority of the Valley’s million-dollar home auctions are taking place in Scottsdale, said Bob Boone, the local designated broker for National Auction Group, a company that specializes in luxury-home auctions.

“Homes in this area attract a lot of interest and attention,” he said.

Although homes don’t always fetch what they could through a typical real estate listing, it’s a viable method for people who want to sell quickly.

“If the seller chooses to sell at no reserve or absolute auction, they know for sure it will sell,” said Carl Cunningham, an owner and auctioneer for the Phoenix-based Cunningham and Associates, an industrial and real estate auction group. “The only question is for how much?”

But a speedy sale may not always be the best thing for for someone looking to get the most money for a piece of property, said Dominic Scappaticci, president and designated broker for Scottsdalebased Equitable Real Estate.

“Some people are turning towards the auction because they are holding out for ’05 prices and aren’t obtaining them,” he said. “They’re overreacting and going to an auction company, which is probably going to get them less than if they marketed properly under the corrected price.”

North Phoenix residents Joanna Keeton and Jeremy Hawthorn recently put their home on Sweetwater Avenue and 25th Street up for auction, but instead of using an auction house, they are doing it on their own.

“Its really pretty simple,” Keeton said. “We put an ad in the paper and put fliers up around the supermarkets and colleges.”

Although homes in their areas typically sell for $210,000 to $245,000, the couple advertised their home with a starting bid of $159,500 to attract interest.

“I think people find that it’s a bit of a gamble,” Keeton said. “We thought it would be a cool idea to try just because it seemed fair to people who were looking to buy a house.”

The cost of selling a home through auction is about the same, or slightly higher, than selling through an agent. Auction houses charge 6 percent to 10 percent of the selling price. A real estate agent typically charges 6 percent.

As for Yakobovich’s home, there hasn’t been a lot of interest in the property, said William Bone, president of National Auction Group, the company conducting the auction. But Bone is hopeful the house will generate interest by the auction date.

“Its a beautiful house,” he said. “We hope it will do well.”

Benefits of selling at auction

• Speed. A home sold at auction can close within 30 days.

• Control. Setting the auction date, terms and conditions allows the seller to make plans accordingly.

• Eliminate carrying costs. An auction helps the seller eliminate mortgage payments, maintenance, taxes and insurance, which can be a burden if a property lingers on the market.

Drawbacks of selling at auction

• Price. Houses may come in at a price lower than what the seller hoped for.

• Fees. Marketing costs and fees charged by an auction house can escalate selling costs above what a traditional real estate agent would charge.

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