Homeowners Pull Home Off Market
And Find a Buyer Via Auction
When John and Sandra Barry's 21,000-square-foot home in Sarasota, Fla., didn't sell after nine months on the real-estate market, they started to worry.
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Their brand new home had cost $6.5 million (give or take $350,000) to build and was completed in 2005. However, after two years, the company that Mr. Barry founded, Bonds.com, was moving to Boca Raton, Fla., and he wanted to relocate quickly. So the 35-year-old, who is also the company's CEO, fired his real-estate agent and decided to auction off the property.
In March, he signed with J.P. King Auction Company Inc., which generally handles homes appraised for $2 million and above.
What Mr. Barry liked most about the idea of selling by auction is that his home would have a set sale date, even if it meant possibly getting less than his asking price, he says.
Still he admits to having reservations. "I’d never been associated with an auction before," he says. "It’s like playing poker. Buyers aren’t going to tell you what their hand is."
There is some security in auctioning off a home, insists J.P. King president Craig King. Sellers can sell with or without a reserve, and those who post a reserve have the right to approve or reject the winning bid. Homeowners who don't set a reserve agree in advance to accept the highest bid. However, it is these no-reserve homes that garner the most interest with buyers, Mr. King says. Mr. King also adds that sellers aren't subject to buyer contingencies or financing.
Mr. Barry decided on a $6 million reserve price for his home. And he had his lawyer modify his contract so that if the home didn't sell at auction, J.P. King would have exclusive rights to market the property for 15 days, rather than the 120 days noted in the original contract. The modified contract also set forth that Mr. Barry wouldn't be responsible for making any post home-inspection fixes.
In the three months leading up to the auction, J.P. King advertised Mr. Barry's home in national publications, including the New York Times, The Wall Street Journal and Unique Homes magazine. A month before the auction, shoppers visited his home by appointment and during two open houses. Approximately eight prospective buyers came to see the house and an estimated 2,500 viewed it through J.P. King’s Web site, Mr. Barry says. The open houses were advertised through mass emails, local papers and on the auction company's Web site, Mr. Barry says.
Roughly 20 serious bidders were present at the May 18 auction, held at the Ritz-Carlton, Sarasota, Mr. Barry says. After about five minutes, the bids came close to meeting the $6 million reserve, so he removed it.
In another five minutes, the house sold for a $6.9 million bid from a real-estate agent who had power of attorney for his client. A $900,000 auction house commission was included in the bid.
"Whoever bought my property got a deal," says Mr. Barry. "He will double his money in two to three years if he wants to sell."
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Auctions on the Rise Real estate auctions are gaining traction as a selling method -- the number of residential auctions has grown 39% between 2003 and 2006, according to Chris Longly, public affairs manager for the National Auctioneers Association. The association doesn't track how many of these transactions include foreclosures, however -- foreclosures have been skyrocketing as homeowners contend with falling home values and tightening credit conditions post housing boom. "Real estate is by far the fastest growing market in the auction industry," Mr. Longly says. |
Despite the 23% price cut below his original asking price with J.P. King, Mr. Barry says he's happy with the results. Having his home sold eliminated a distraction while starting his new business, he says.
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| The Sarasota, Fla., home |
Mr. Barry did actually save money on fees: If he had sold his home through his real-estate agent at his original $10.85 million asking price, he would have paid a $250,000 flat commission per his agreement with the agent. On the flip side, his $10,000 auction marketing fee was 2% to 5% lower than J.P. King's usual fee because the home was auctioned with other properties, Mr. Craig says. (The marketing fee is on top of the 7.5% to 12.5% commission the firm gets from buyers; the commission is based on the value of the home, Mr. Craig says.)
Mr. and Mrs. Barry and their two children are now paying $7,500 a month to rent a 5,400-square-foot house in Lighthouse Point, Fla., and are searching for a home in the Boca Raton neighborhood of Royal Palm with the help of a real-estate agent.
-- Ms. Mattioli is an interactive news assistant at RealEstateJournal.com.
Email your comments to dana.mattioli@wsj.com.