January 11, 2006
By Mary K Pratt, Special to the Journal
As seen in The Boston Business Journal
If you're in the market for a distinctive home, mark down Nov. 30 and Dec. 1. Those could be your lucky days. Jerome J. Manning & Co. Inc. will auction a country retreat in Acton and three new homes in Wellesley as part of the DeWolfe Premier Property Auction program.
Although far from common, auctions are gaining ground in the real estate market. However, while some promote auctions as a viable way to sell real estate, others question whether auctions can really deliver.
"It's a neat idea, and its' a way to get rid of distressed property in a quick fashion when some sort of institution doesn't care about that last $20,000 or $30,000, buyer beware and seller beware," said Tom Marquis, owner of Boston-based Marquis Real Estate/GMAC, an auctioneer and past president of both the Massachusetts Association of Realtors and the Greater Boston Real Estate Board.
Despite such trepidation, the value of real estate changing hands at auctions grew from $10 billion in 1981 to $52 billion in 1999, said Jan Tarnow, manager with the National Association of Realtors. NAR used the Gwent Group to gather the statistics.
The figures include all real estate sold at auction, Tarnow said, so there's no way to know how much is distressed property vs. nondistressed. She also attributed part of the rise to inflation. But Tarnow also said there's no question that more and more owners are using auctions to sell their properties.
"The number of people going to auction has increased. The new generation, if you will, they've grown up with auctions, so there's not so much stigma, which is a good thing," Tarnow said. "The new generation goes to eBay all the time."
As a, matter of fact, there are about 1,400 pieces of real estate for auction on the online site, said Kevin Pursglove, senior director of corporate communications for eBay Inc. The San Jose, Calif.-based company first noticed users listing real estate under eBay's "miscellaneous" category in spring 2000. "Slowly, but surely, we noticed more and more bids being placed on those items," Pursglove said. So eBay launched the real estate category in August of that year.
Here in Massachusetts, Jerry Manning of Jerome J. Manning & Co. specializes in auctioning nondistressed property. An auctioneer who has had the Yarmouthport-based company for 26 years, Manning has seen the public grow increasingly comfortable with auctions.
"One of the good things that came out of the downturn in the late 1980s and early 1990s was that the public became very familiar with auctions, because they were everywhere," he said. Manning said he sees several major benefits to selling real estate by auction.
"The main thing that auctions offer is speed. Even in the softest market, we're six to eight weeks to sale," he said. Plus, auctions give buyers and sellers "the ultimate appraisal," he said. "It's only worth what someone is willing to pay for it. That's what determines market value. An auction is the absolute truest test of that premise," he said.
Some brokers, however, aren't sold on the benefits of auctions. They said auctions don't allow time for sellers to get the best price or buyers to do their homework. "It lacks a key ingredient in selling real estate-and that's time," Marquis said. "What you do at an auction, you pick a date and on that day, whoever comes to the auction, bids. I don't believe on a regular basis, or at all, you'll produce market value.
Others pointed out that there's still a stigma attached to the word "auction." Many buyers still associate auctions with foreclosures and property in disrepair. "People don't usually go to an auction or a home for sale by owner to pay the highest price," said Helen Babcock, a Realtor with Carlson GMAC Real Estate in Winchester and president of the Greater Boston Association of Realtors. "I think, traditionally, we think of an auction as a last resort."
Buyers also tend to shy away from auctions because they can't incorporate mortgage and home-inspection contingency clauses into the deal, she said. But Manning dismissed those criticisms. He pointed out that auction companies such as his market properties thoroughly with targeted ads, color brochures and notices to prospective buyers and real estate agents.
He acknowledged that buyers can't have protective clauses, but he said his company does all the due diligence, including a home inspection, in advance. Buyers can prequalify for mortgages, and they can tour homes during open houses, he added.
Manning also pointed out his company shares commissions with brokers who bring buyers or listings. "We're not trying to replace them, we're trying to work with them" he said. Manning & Co. recently teamed up with the DeWolfe Cos. Inc. of Lexington to sell several distinctive homes.
DeWolfe president Rick Loughlin acknowledged that it took some education to get the company's agents, sellers and prospective buyers to understand the process. He also said DeWolfe is still testing the program to see if it can satisfy clients' needs.
Still, he said, he thinks auctions have their place. "We're looking at it as another method of sale," said "We wouldn't be doing our job if we didn't look at all avenues of selling property."