More builder auctions coming to Valley - East Valley Tribune: Business

More builder auctions coming to Valley

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Posted: Saturday, April 26, 2008 5:16 am | Updated: 11:49 pm, Fri Oct 7, 2011.

A growing number of Valley builders are trying to entice buyers with a more unconventional sales tactic - the auction - in an ongoing effort to unload excess houses.

Misty Williams on Real Estate

Search Valley foreclosures

A growing number of Valley builders are trying to entice buyers with a more unconventional sales tactic - the auction - in an ongoing effort to unload excess houses.

Misty Williams on Real Estate

Search Valley foreclosures

Builders and lenders alike are motivated to get speculative houses off the books, said real estate auctioneer Eric Nelson, who's holding an event Wednesday in Scottsdale.

"They understand the market has changed," Nelson said.

Residential real estate has become the fastest-growing segment of the auction industry in the past five years, according to a report by the National Auctioneers Association. The market segment has jumped 46.6 percent since 2003 - raking in $16.9 billion in sales last year.

Builder auctions are gaining in popularity nationwide, as the housing market continues to lag, association spokesman Chris Longly said.

Roughly 160 builder houses were recently sold off at a two-day auction in Minneapolis, Longly said.

"Builder auctions have been around for a long time, but you're seeing much more of them now," he said.

Some industry observers say builder auctions can be more marketing gimmicks than opportunities for big discounts.

Like a special weekend blowout sale, the auction is another technique to offload houses quickly, local housing analyst R.L. Brown said. Holding speculative houses is a costly burden for builders and prevents them from starting new houses, he said.

"Builders are supposed to be building, not selling," he said.

Still, the auction is a tool that works, in some cases, Brown said.

It's also another way to try to create a sense of urgency for buyers, said John Fioramonti, senior managing director of Meyers Builder Advisors.

"It's all buyer psychology," he said.

Auctions can mean extra work and some added risk of buyers not getting the houses they want, Nelson said. But they can also snap up properties for sometimes 50 cents or 60 cents on the dollar, the auctioneer said.

"We've got some unbelievable buys in the marketplace," Nelson said.

At the Scottsdale auction next week, Nelson's firm will be auctioning off 17 houses and 11 lots, including multimillion dollar properties in north Scottsdale.

Valley custom homebuilder LaBlonde Homes is selling seven houses originally priced from $1.9 million to nearly $3.5 million. Now, suggested opening bids range from $900,000 to $1.6 million.

M&I Bank is also sponsoring properties. The bank is willing to finance up to 95 percent of new sale prices and offer discounted interest rates, Nelson said. Bidders are required to bring a $25,000 cashier's check for each property.

Nelson, who has offices in Phoenix, Las Vegas and Salt Lake City, added that his company will likely be busy in the Valley for several years.

"This is one of the most unique markets I've seen in 25 years," he said.

Auctions allow people to take advantage of the down market, while allowing lenders to generate some positive cash flow from vacant houses, he said.

"That's much better than just having it sitting there," he said.

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