January 18, 2007
By Brenda J. Buote - Globe Staff
As seen in The Boston Globe - January 18, 2007
With a pinch of humor and a dash of dramatic flair, auctioneer Jerome J. Manning is trying to persuade prospective buyers to place aggressive bids on a cozy ranch-style home with sweeping ocean views.
He starts off the bidding for the Ipswich home at $500,000. No luck. The only sound to be heard is the whistle of the wind through the trees -- not a single buyer utters a peep.
Seventeen hopeful bidders have registered to play this fast-paced game. Each has come to Great Neck with a $20,000 bank-certified check in hand, in case they walk away the winner. But not one is interested in plunking down half a million for this two-bedroom house.
Manning urges the crowd to consider $400,000. Again, no takers.
"Are we all going home? Come on folks," Manning said with a chuckle. "I've said this before, and I'm going to say it again... I've done over 14,000 real estate auctions, and I have never sold a home to someone who didn't bid on it."
Finally, Manning gets his first offer, for $200,000. Two bidders vie for the property, increasing the price to $300,000, then $350,000 and $375,000. " Four hundred is what I like," Manning calls out, enticing a third bidder to join the action. "New blood and a new leader," he yells, before fielding two more offers.
The home was snapped up in fewer than 17 minutes, but the final price -- $450,000 -- was less than the town's assessed value ($483,200) and the seller's original asking price ($625,000). The closing also moved at lightning speed. The settlement took place Dec. 21, about six weeks after the Nov. 4 auction. No home inspection. No haggling. And, for the seller, no commission costs. The buyer paid 10 percent above the final bid to cover the auction fees.
"I was very happy with what I got for it," said Nancy L. MacDonald, 62, of Boxford, who decided in September to put the home she inherited from her mother on the auction block after it had lingered on the market for four months. She needed the cash from the sale to cover mounting medical bills.
"It was all done very quickly. I was able to stipulate the closing date and sell the home with all its warts and moles."
A growing number of homeowners and builders, unable to sell their properties the conventional way, are turning to heart -thumping, adrenaline -pumping auctions. Live auctions are still the norm, but online auctions are gaining in popularity, said Manning, who's been offering an Internet bidding option since 2000.
The sluggish housing market has translated into a surge in business for auctioneers. In 2006, Manning sold about 125 Massachusetts homes at live auctions and fielded more than 300 requests from anxious homeowners eager to learn more about the auction process, nearly triple the number of inquiries in previous years. And 90 to 95 percent of those auctions were private sales, not foreclosures.
"To be a foreclosure auctioneer, you don't have to have a lot of marketing skills. You have to know how to read and be able to show up on time, that's about it," said Manning, chief executive officer of Yarmouth Port-based J.J. Manning Auctioneers, a national firm that handles both residential and commercial real estate auctions.
"But for John and Mary Homeowner, that's not enough," said Manning, who's been in the auction business since 1976. "They want someone who can aggressively market their property and educate potential buyers about the auction process so that the final bids are competitive."
The surge in residential auctions here in the Bay State reflects a national trend. Across the country, auction sales of residential properties during the third quarter of 2006 were robust, resulting in a 4.5 percent jump over sales figures for the third quarter of 2005, when the conventional real estate market was still hot.
The third -quarter statistics show that the average homeowner sees value in selling his property by auction, said William Sheridan, president of the National Auctioneers Association, noting that the association's figures include both private sales and foreclosures. And figures for the fourth quarter of 2006, due out later this month, are expected to show similar gains, he noted.
"Buyers and sellers are both turning to the auction method, and we foresee this trend continuing to increase," Sheridan said.
But Kim Sandler, president of the North Shore Association of Realtors, said she doesn't see the auction trend taking off in Boston's northern suburbs.
While auctions may appeal to investors looking for a bargain, Sandler said, they're often not ideal for local residents looking to buy a home because such sales have no contingencies. If the high bidder defaults for any reason, he or she forfeits the deposit.
Auctions also pose a risk for sellers who envision big profits. Although the emotional highs of a bidding war can drive up the price, the seller runs the risk that buyers won't be willing to pay his or her desired price.
"In this area, an auction is synonymous with desperation," added Sandler, citing a statistic from the National Association of Realtors that homes sold through a realtor fetch prices 16 percent higher than those sold through other means. "In a slow market, house hunters are looking for a good buy. At an auction, they're looking for a steal."
To protect their interests, some homeowners choose to set a minimum, or "reserve," the lowest price that they're willing to accept for their property. The auctioneer never reveals that price to bidders. If the high bid falls short of the reserve, the owner isn't obligated to sell. But if the homeowner refuses to go through with the sale, the seller is required to shell out thousands of dollars to cover the auction fees.
In recent months, homeowners in Nahant and Boxford have felt the bitter sting of disappointment when their homes failed to command bids that met their minimum prices. The high bid for a sprawling, 5,200-square-foot Boxford home was $460,000, half the $900,000 minimum value the homeowners had placed on it. In Nahant, a single bid of $830,000 was offered and rejected as too low; the homeowners had been hoping to get something closer to their original $1.25 million asking price.
Manning said he turns away a lot of potential sellers because they have unrealistic notions about how much their home is worth.
"I don't take jobs if the seller expects me to do magic that their broker couldn't," said Manning. "Why would I be so arrogant as to think I could sell a home for a price their broker couldn't get?"
Harvey Goldberg, 53, of Rowley, has adopted a different philosophy. He's offering a "real estate deal like no other" on eBay, the popular online auction site. His ad invites potential buyers to buy his four-bedroom home with custom kitchen, basement media center, and "nifty new granite mailbox post" for $1.75 million -- more than double the appraised value.
"You will be helping not only pay off our mortgage and bills but also pay for my children's college educations and assisted living for my mother.... Does that not make you feel great???? Well if it does... we are ready to deal!" the ad states.
He posted the ad the second week of December as a joke, hoping someone might be in a giving mood. No such luck.
"We thought we were going to get kicked out of doing it, because it was tongue-in-cheek, but if someone offers the right price, my wife and I will absolutely sell it," Goldberg said. "Don't get me wrong; we love this house. But we love money more."
Brenda J. Buote may be reached at firstname.lastname@example.org; Kimberly Blanton of the Globe staff contributed to this report.