Real Estate Auction: Quick Sale On the Cheap, or Marketing Ploy?

You be the judge.

But depending on how you look at it, Sylvestri Investments’ auction of 25 condo units at Ocean Walk in New Smyrna Beach, Fla., last weekend was either a desperate move or the bold setting of a new trend - but it has drawn criticism from some Realtors concerned about the sagging Florida condo market.

“I’m getting calls from Realtors. They are saying the market is really bad and you are going to show how bad it is,” said William R. Bone, president of the Alabama-based National Auction Group.

“They are afraid the condos will sell real cheap and hurt everybody,” Bone told the Daytona Beach News-Journal. “Everybody’s property values are at stake here. But something’s gotta happen. Things will move at some price.”

On the other hand, some developers are watching Sylvestri’s experience.

“They are telling me, ‘Gosh, if you can do this, I’ve got others to sell.’”

It didn’t take an auction to expose how bad the market is; the numbers speak for themselves. In December, sales of existing condo units in the Volusia County-Flagler County housing market plummeted 83 percent from December 2005, according to the Florida Association of Realtors.

The year-end figures showed a 55 percent drop from 2005-2006.

Local Realtors continue to sound upbeat, stressing the drop in sales is simply a painful correction of the once-booming Florida housing market.

Bone said his company, which auctioned Mary Kay Ash’s pink mansion in Texas and the homes of Kenny Rogers and Harrison Ford, is receiving more requests from builders to auction new houses and condos.

“I think you are going to see the trend continue,” he said. “We’re new to Volusia County, but we’ve done a few in the Panhandle. People say it is a tough market here. We’re used to working in tough markets.”

The 25 Ocean Walk condos sold at auction for an average of $290,000 each, an affordable Florida mortgage compared to many areas. The new condos at Ocean Walk usually range from $379,000 to $850,000 for a penthouse, said Rob Camporese, vice president of Silvestri Instruments.

Neither Bone or Silvestri would say what the price range was of the condos sold at auction.

Silvestri put up 30 condos for auction, but 10 had reserve prices, which meant Silvestri had to approve the price.

Five of the reserve condos weren’t sold. Winning bidders at real estate auctions are required to pay 10 percent on auction day and have $10,000 in certified funds for each piece of property. Bone said 128 bidders from 19 states and Canada came to the auction.

An oceanfront property in Daytona Beach also went on the auction block Wednesday but was involuntary. Regardless, it’s a different real estate climate here than previous years.

Gone are the days when buyers simply walk into condo developers’ offices.

“Most of these guys are great home builders, but the marketing strategy has to change,” he said. “They need an event. We’ll have plenty of music, plenty of food. It will be under a big tent and people get to compete to win.”

Some Realtors worry auctions of new condos will hurt sales of existing condos.

Don Woods, president of the New Smyrna Beach Board of Realtors, said he understands why Sylvestri would auction off its condos.

“It’s a case of the developer having a lot of inventory and needing to get the money out of it to continue on,” he said. “But I think it will hurt resales pretty badly in the short term.”

Woods, who said he would be at the auction representing a client, said other developers - still reeling from the decreased demand for Florida mortgage loans - are cutting their prices on condos.

Camporese said Silvestri bought the Ocean Walk property 26 years ago and plans 20 buildings. He said 12 of the buildings are complete, with 33 units in each, and two buildings are under construction. Camporese said some of the condos being auctioned had been sold, but buyers walked away from their earnest money deposit.

“Basically what has happened everywhere is people got caught up in the real estate market and some went out and purchased units. They continued to buy and roll, but they got caught in the roll,” he said.