Craig King, president and CEO of JP King Co. in Gadsen, AL, says there's been a definite increase in auction interest since 2005. He points out that, when time is of the essence in a sales situation, people will likely turn to auction houses to get things moving.
"The ordinary sales process may not be fast enough for today's seller," King explains. "They're building a development and borrow money based on pro formas. But developers aren't making those pro formas." As a result, he adds the quicker that developers can sell the properties, the better it is.
JP King is holding an auction Nov. 1 to sell 36 condominiums on the Island of Lake Travis in Lago Vista. King explains the developer had converted senior housing units to condos and had sold many through traditional methods. "They're down to their last 36 units," he says. "They needed something to blow out the units and generate some excitement for them."
Charles L. Castor Jr., a partner with Texas Gulf & Harbor Ltd. in Port Aransas, TX, says he's putting 90 acres, 165 acres and 326 acres up for auction to de-leverage his position. The land, part of his 2,117-acre Newport master-planned community, is situated on the north and south side of Texas 361 on Mustang Island.
"We were encouraged by some of our existing lenders to auction the land," Castor confides. "It will lead to a substantial reduction in our principal. In this market, going auction was the best way for us." The 90-acre site has an appraised value of $30.3 million while the other two tracts have a combined appraisal of $40.2 million. C. Pierce Owens, vice president in CB Richard Ellis' Houston office, is working with Dallas-based auctioneer Hudson & Marshall to market the land, which will go under the hammer Nov. 11.
Carl Carter, who works for Schrader Real Estate & Auction Co. in Columbia City, IN, says there's been an uptick in the number of property owners and managers who rely on auction services. However, he points out that it doesn't necessarily mean the property is in some kind of distress or foreclosure.
"There are a lot of reasons why people might need to move property quickly," Carter says. "In this marketplace if they can't get anyone to look at their properties, they take it to an auction house. Once people see the property and know they have a deadline by which to act, they'll move quickly."
In a market with a large supply of inventory and smaller pool of investors, King says auction houses are being considered valuable tools by many property sellers. Auction houses are better able to showcase the properties to people who might be interested, he points out. And, they also advertise through a variety of methods.
On the buy side, however, financing is still an issue. It's just as important to ensure there is a lender backing the buy, King says. "Financing at auctions is key," he stresses. "The buyers need to know and have financing arranged before they get into the process."
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