With bidding tickets in hand, dozens of people gathered near Bud Boozer’s home in Mauldin last week, prepared to claim the 1970s-era ranch-style house.
Auctioneer R Dwayne Johnson with Townville Station looked over the crowd as he discussed the rules. The house would be sold as is. A 10 percent buyer’s premium would be added to the winning bid to reach the full contract price. A check should be written for the full price once the seller had accepted the bid.
“The last person with their hand, if we’re not at the reserve, has the negotiation power. They’re the ones that we’re going to talk to. When you submit offers, you don’t get this ability,” Johnson said.
Housing auctions, once mainly used for estate sales or foreclosures, are becoming more popular with sellers across the U.S. For those like Boozer who live in a tight housing market, auctions are a way to get top dollar for a home without all the costs associated with a traditional sale.
“I’m seeing more and more of them, especially since we have, in a lot of cases, more buyers than available properties,” said Wes Hasty, a general appraiser and South Carolina Professional Appraisers Coalition board member.
Hasty said it’s not all that different from traditional listings that receive multiple offers, some above listing price.
“They end up with the highest and best offer scenario anyway, so that’s almost like an auction,” he said.
Why an auction?
Auctions are touted as a faster, more transparent and more predictable way to sell a home. In some cases, particularly in a competitive market, the sales price can be higher than what a traditional listing would bring.
The benefits of selling by auction, according to the National Association of Realtors.
(Photo: National Association of Realtors)
Boozer and his wife liked the convenience and lack of Realtor fees. They recently moved to an assisted living facility, and were already planning to auction the things they no longer needed. They decided to just include the house.
“I saw all the work Dwayne put into this and thought it would be the best way to go,”
Bud Boozer stands in front of his home in Mauldin before it is auctioned on Thursday, March 21, 2018.
(Photo: JOSH MORGAN/Staff)
Boozer’s son, Chevis Boozer, said the auction seemed like a “win” for his family.
“We won’t pay any Realtor fees as normal,” Chevis said. “Also, when you auction, you sell it as-is. Whereas, if I would have went through a traditional real estate company, they’re going to want to do inspections and want me to fix a leaking faucet, and this was better for us.”
He added, “It’s in great shape, but working like we do, and my mom and dad don’t have time to mess with it, I just felt that this would be a lot easier.”
Getting a foothold
For buyers, auctions can be a way to get a first home in a competitive housing market.
Barry Dietrich and his son Jeff participate in a real estate auction at 98 Salado Lane in Mauldin on Thursday, March 21, 2018.
(Photo: JOSH MORGAN/Staff)
That’s what drew Jeff Dietrich to the Mauldin auction. Dietrich, a first-time homebuyer, said he’s been going through agents but also keeping an eye on auctions.
Interest in the $150,000 to $200,000 price range is particularly high among buyers like Dietrich, Johnson said.
“We have so many young, first-time homebuyers, newlyweds — they’re frustrated. They’re not experienced and spend a lot of time looking at houses online,” Johnson said.
The challenge with traditional property listings is that by the time potential buyers and their agent arrange to see a home, an offer might already have been accepted.
“I’m not saying the agent’s delaying the process, but half the inventory is gone and (buyers are) left with their second- or third-choice picks, or maybe foreclosures, which are more work and they’re not geared up for that,” Johnson said.
By bringing all interested buyers together at once, auctions eliminate the back-and-forth sales negotiations between agents, Johnson said. Inspections and appraisals are done before the auction, which also helps speed up the sale.
Taking a gamble
But the system isn’t without risk, for both sellers and buyers.
The first round of live bids on Boozer’s home was less than what he was hoping for, said Johnson, who started the bidding at $200,000 but ended it at $148,500.
It’s a risk many sellers are prepared for, Johnson said. Boozer had set a reserve price on the house beforehand — a minimum amount he’d accept — and retained the right to deny the final bid if it was too low. He did not disclose what what the reserve was.
A few days after the live auction, Boozer’s house sold through a sealed bid. The price and buyer remain confidential until the sale is recorded with the county.
A home at 98 Salado Lane in Mauldin is auctioned off on Thursday, March 21, 2018.
(Photo: JOSH MORGAN/Staff)
“I can say that it exceeded our estimates by an additional 4 percent,” Johnson said in an email.
From Jan. 1 to March 25, 14 people bid on Boozer’s house and 96 potential buyers viewed the home.
Sunil Varghese, an auctioneer and real estate agent with Keller Williams Drive, said buyer pools can often be small at auctions, given a general unfamiliarity with the process and tight auction rules.
He said there can also be a perception that houses sold at auction are somehow less desirable, given the association with foreclosures or distressed properties.
“Historically, a lot of those properties do go to auction,” he said. “But sometimes you will sell a property that has absolutely nothing wrong with it, the homeowner’s not in any distressed situation and (the seller) feels that the auction method of sale will fit their objectives better.”
Varghese said while real estate investors are usually well represented at auctions, about 40 percent of the people he’s seen recently have been average homebuyers.
Buyers should also be aware of auction risks, particularly if they’re not familiar with the process. Johnson requires bidders to disclose their maximum bid before the auction so they won’t be tempted to bid more than they can afford.
“I will keep reminding the bidders that I know they set a maximum amount, so don’t let emotions overrun the process,” Johnson said.
Stan Crawley and his father Ralph participate in a real estate auction at 98 Salado Lane in Mauldin on Thursday, March 21, 2018.
(Photo: JOSH MORGAN/Staff)
Hasty said it’s also important for potential buyers to go through an appraisal process before an auction, even it it’s just a basic one.
“You can even get what we call a desktop appraisal, where the appraiser doesn’t have to go out and inspect the property or anything like that, and a lot if times it can be done a lot quicker,” Hasty said.
He noted buyers should also be aware that the sales price of an auctioned home may not reflect its fair market value. That could have an impact on any loans, which base a home’s value on comparable sales in the area.
“Both the buyer and the seller by the market value definition have to be well-informed and typically motivated,” Hasty said. “Sometimes buyers, or even sellers, in auctions are not typically motivated, especially if it’s a distressed property.”
Some other things to consider as a buyer:
Less time to negotiate: Negotiations can be wrapped up in minutes at an auction, and properties are sold “as is.” Any inspections and appraisals of the property are done beforehand.Payments due in full: Buyers need to be ready to pay their entire bid amount , along with a nonrefundable auction or commission fee, immediately after an auction. Any loan money needs to be secured ahead of time, Hasty said.
And as a seller:
Risk tolerance: Varghese says the seller should be willing to assume some risk when putting a property up for auction. An absolute auction would be the most risky because the homeowner does not establish a minimum price. “They are agreeing to sell that property to whatever the highest price is on auction day,” Varghese said. A seller can lessen risk by holding a reserve auction, where they have a disclosed or undisclosed minimum. Property demand: An auctioneer will consider how much interest the property could generate. Things like location, property type and price point can all play into the perceived demand. “I auctioned off a property in the North Main area a couple months ago and we sold it for $70,000 above the appraised value,” Varghese said.