November 17th, 2008
Seattle Real Estate Auctions
This past weekend I had my first experience with a real estate auction. A few weeks ago as I was driving home I noticed that a huge sign had been posted in the yard of one of the houses in my neighborhood. The house was going to be auctioned. They had listed the dates of the public open house so I went to check it out. The house itself was a bit scary; green shag carpet, it smelled like old people, the kitchen was tiny and very outdated, some windows needed replacing but all in all the “bones” of the house were good and the lot was great.
My father (who is always looking for a good investment) seemed interested when I told him about it so I decided to do a little more research. I called the auction house to find out more about the terms of sale. Here is a snapshot of what I learned:
1. They add a 10% buyers premium to the winning bid. This means that if the high bid is 100K, the actual sales price is 110K. They didn’t come out and say it but I am pretty sure this is to cover their commission.
2. Because this particular sale was a Guardianship sale the transfer of the deed was to take place with a Bargain and Sale Deed vs a Warranty Deed. This is very standard in this type of transaction (as with estate sales).
3. They do offer a commission to real estate brokers as long as they register their clients at least 24 hours in advance. This is good news for buyers who are working with an agent. They don’t have to feel guilty about circumventing that relationship and it opens up a whole new source of properties for the broker to show the client.
I went ahead and registered my Dad and then showed up on auction day. The auction was scheduled for 10am with an open house starting at 9am. This gave us a chance to walk around the property one more time and really contemplate if it would be a good investment (in other words, how much money would need to be put into it). There were a ton of people who showed up but when the bidding started only a few people participated.
It was a very causal environment. They simply ushered everyone into the front yard, the auctioneer read off the terms of the sale and then opened the bidding at $400K. No takers. The bid went down to $300K. No takers. Down to $200K. Just when I thought it would drop down to at least $150K someone bid (I think they may have been a plant but I can’t be sure). From there the bidding went up to $280K with only two couples participating. The whole thing was over rather quickly. I really expected a lot more action (at least more bidders). I was surprised the whole thing was as low key as it was.
After seeing the process, I am definitely interested in attending more. I will be doing some research as to where to find these opportunities. I really think that with the housing market the way it is, we are very likely to see more of these auctions in the future. I will keep you posted on what I find out!
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