With bad news about housing markets across the country rolling in almost daily and inventory piling up along with waiting times for nervous sellers, two veteran home-sellers are choosing the fast track: auction sales. And while neither of these sellers needs cash now nor is under duress to rid themselves of their homes, both believe that an auction will deliver a firm market statement about the value of their properties along with the cash to back up the appraisal.
The two are making their moves on either side of the country. Gary Feldstein, a retired physician from Ojai, Calif., has hired auctioneer Sheldon Good & Co. to dispose of the house he bought for about $1.25 million three years ago. His hoped-for take from a sealed-bid auction set for Nov. 7 -- at least $4 million, says Jamie Somers, the broker at Coldwell Banker in Ojai who sold Feldstein the house but who won't be getting the listing this time.
Somers says he is "skeptical" about how well Feldstein's sale will go, although he says he understands the seller's need for speed. "Even in the upper end, things are not selling quickly," he explains. And although Somers acknowledges that Feldstein "did quite a number" in renovating and furnishing the house, "he's asking quite a premium. The upper end is good, but I don't know if it's as good as he thinks it is." (The lower end, he says, "is horrible.")
For Feldstein, a veteran of the buy-improve-sell school of residential real estate investing, questions of market health are less important today than his desire to move on as soon as possible. First and foremost is a personal consideration: This is the house that he shared with his late wife, and it holds too many memories for him. But then there's his experience with the last house he tried to unload through "a traditional brokerage service. In eight or nine months, three people saw it and there was not a single offer."
Following the suggestion of friends, he went "the auction route." The house sold in nine days, he says. What about the outcome without the hand-holding and salesmanship that a broker provides? "I don't care," says Feldstein. "The market is going to determine what the house is worth."
No House Is an Island
All the way across the country on the New England resort island of Nantucket, real estate attorney Stephen Meister is moving along a parallel path. He has hired the same auction house, Sheldon Good, to sell off three properties, two of which he developed and a third that his son bought and renovated.
Meister, who owns a residential development company on Nantucket and is a partner in a Manhattan law firm, says he chose to auction because "I want a definite timeline" -- and the flexibility to make his next moves. "I want to purchase other properties there and elsewhere, and I was attracted by that format."
Meister says he has set minimum bids for his properties "at least 15% to 20% below market value," at $7.65 million, $2.55 million and $1.15 million. The two lower-priced properties will be sold at an open-outcry auction, while the third will be handled through sealed bids.
Meister says he believes that "prices are still holding steady" on the island, despite "a slowdown in velocity in August." He cites the strong
Dow Jones Industrial Average
recent half-point cut in interest rates as evidence that the economy is on course. "Nantucket is not going out of style," he says.
Ryan Wagner, a vice president at Windwalker, a real estate broker and an executive at Scout Capital, a locally based real estate developer, says that "the market is fine." However, he adds, "I don't think anyone in their right mind would have hoped things would continue" at the pace that pulled the market forward in 2005 and 2006. Still, Nantucket's median home price, which rose 5% last year on sales volume of $920 million, is expected to rise at least that this year; sales through Sept. 30 totaled $620 million and are down about 12% from the same period last year, he says.
Is Meister pursuing the right course? Wagner said he recalled "two other instances where it's been tried, but I don't think in either the reserve price was met." However, he added of the reserves set for Meister's properties, "these seem more reasonable. It's an interesting way to go, and potentially a pretty effective way to move property. A lot of people will be watching with interest."
It's very much worth noting that both sellers say they are moving from positions of relative strength; these are not forced or foreclosure sales, and either seller can choose not to sell if his price isn't met. But both want to move quickly in a market that is doing anything but that. Says Feldstein about what's really underlying his auction decision: "I'm a New Yorker," he declares. From a timing standpoint, "today is okay, but yesterday is always better."
Peter Slatin was publishes the independent real estate newsletter theslatinreport.com. He has written extensively about real estate and architecture for publications ranging from Barron's to The New York Times, and is on the editorial board of Real Estate Portfolio, published by the National Association of Real Estate Investment Trusts. He was the founder and editor of Grid, an award-winning real estate business magazine.