August 07, 2011
By Christine Dunn
PROVIDENCE -- Selling to the highest bidder, regardless of price, is the simple description of the "absolute auction," a device rarely used to sell real estate in Rhode Island.
But it will be used on Sept. 21, when a Cape Cod auction house plans to sell five Providence-area properties to the highest bidder. Three more properties will be available at the auction, but not in an "absolute" format.
Since the housing bubble burst, the most common types of house auctions in Rhode Island have been foreclosure auctions. These are not true auctions in the conventional sense, because bidders must typically meet or exceed the outstanding debt on the property, which can often be higher than the current value.
But a small number of home sellers have opted to use auctions as an alternative marketing tool. Most of these voluntary auctions held in Rhode Island in recent years have been reserve auctions, not absolute auctions.
In reserve auctions, bidders have to meet a certain pre-set price -- the "reserve" -- to make a successful bid. This reserve price is known to the seller and the auctioneer, but it is usually kept secret from the bidding public. In some Rhode Island auctions, reserve prices have been set high above what bidders are willing to pay.
In March 2008, no deals were sealed at a 24-property reserve auction held at the Atlantic Beach Club in Middletown. The event, held by Counts Realty & Auction Group of Lynchburg, Va., included a mix of moderate- and higher-priced real estate. Although the auction attracted a crowd of 150 to 200, none of the bids met any of the reserve prices.
A reserve auction held in April this year at Vistas on the Trail, a luxury condominium complex at 1404 South County Trail in East Greenwich, was more successful. According to records from the Warren Group of Boston, 16 units at the complex have sold since the auction was held, at prices ranging from $237,000 to $355,000. The auction had minimum bids of $180,000 to $295,000 for each unit. Prices had previously started in the mid-300s.
In 2009, the Wrentham House, an 1891 stone mansion on Ocean Avenue in Newport, was sold for $6.51 million after an online auction by the listing agency, Lila Delman Real Estate. The historic property, designed by Richard Morris Hunt and landscape architect Frederick Law Olmsted, had been on the market for more than four years, and had once been priced at $14.4 million.
Absolute auctions are riskier for the seller, because the high bid, whatever it is, is the winning bid. The upside is that the property often gets sold.
A rare absolute auction of high-end real estate was held in September 2006 in Jamestown. A 15.46-acre parcel on Beavertail Road was auctioned for $1,012,000, close to the previous list price for the land, $1.2 million.
The Sept. 21 auction in Providence will be held at noon at the Providence Marriott Downtown, 1 Orms St.
The properties to be sold are all owned by the same investors, Venizio and Elena Capaldi, of Providence, or companies controlled by them. The Capaldis could not be reached for comment.
According to a spokesman for the auction house, J.J. Manning Auctioneers, of Yarmouthport, Mass., at least five of the eight properties will be sold at "absolute" auction.
The properties in the "absolute" part of the auction include:
" 1295 Douglas Ave., North Providence, a two-family house built in 1919, assessed value, $165,900
" 8 Santomarco Drive, Providence, a split level built in 1989, assessed value, $237,900
" 474 Woodward Rd., North Providence, a mixed-use building on a 0.19-acre parcel, assessed value, $310,500
" A separate 0.09-acre parcel on Woodward Road, North Providence, assessed value, $30,400
" 182-184 9th St., Providence, a two-family house, assessed value, $322,900
Three more properties owned by the Capaldis will be auctioned the same day, but there will be reserve prices set for them. They are:
" 23 Rosner Ave., North Providence, a three-family house, assessed value, $226,900
" 447 Morris Ave., Providence (two-family house), assessed value, $412,700
" 236 Water St., Warren, an historic four-family house, assessed value, $299,300.
According to the J.J. Manning website, www.jjmanning.com, open houses will be held at all the properties before the auction, but the open-house dates have not been scheduled.