As housing market slows, anxious sellers turn to auctioneers

by Robert E. Thomas

May 5,2007

With a slowdown in the Columbia area home sales market, some sellers are looking to auctioneers to move their property. But as one auctioneer warily put it: "We're not magicians."

Newcomer Rod Perry is trying an unconventional approach to auctioning homes, but it doesn't appear to be catching on.

Recent auctions around the city demonstrate that in a buyers' market, sales are tough for everyone, including established auctioneers.

Larry Atterberry Jr. of Atterberry Auction & Realty Co. and Chuck Price of Jacobs & Kemper Auction Realty said their sales volume is about the same as in previous years.

"I have not seen a whole lot of difference in our business," Price said.

"Foreclosure doesn't really affect us. If a house is being foreclosed, they probably owe more against it than we get for it. We're not magicians. We can't wave a magic wand."

Price said he believes the housing market downswing is temporary, but it is having an impact on his business.

"When we have auction activity, there just isn't as much interest in it as there has been," he said. "There are a lot of builders who are hurting right now. They have homes empty and nobody looking at them."

Atterberry said, "We are looking at a lot more properties, but we are not taking a lot of them to auction. We have to tell the seller what we think the property is worth, and if they are not happy with that, we do not do an auction."

"We've had about a 95 percent success rate. We want the seller and buyer to both be happy," he said.

But things don't always work out that way.Atterberry conducted a May 1 auction of a 35-year-old, 2,800 square foot home on scenic Lynnwood Drive, owned by William Kassman, of Kassman Insurance Agency.

Atterberry said he thought the home might bring a bid of $225,000 to $250,000, consistent with the neighborhood. Seven bidders signed in. With disappointed neighbors looking on, the high bid was $160,000. "We had some concerns going into that one," Atterberry said.

"We will likely auction 15 to 20 homes in the next two to three months," he said. "Our future business looks good. As long as the property is desirable, there will be buyers there to buy."

Across town on the new Stratford Chase Parkway, Troy Chadwick, a manager at Stony Creek Inn, had some concerns of his own.

He hired a general contractor to build an exceptionally well-appointed 2,500-square-foot new home now on the market since last August—intending not to occupy it but to sell on speculation.

He contracted with Perry Auction Services in an attempt to sell the home.
The home, priced now at $279,000, down from $292,000, still sits empty, and Chadwick has decided to lease it until the market improves, said listing real estate agent Russell Boyt of Show-Me Realty.

"The housing market in Columbia for homes under $200,000 is moving steady," said Boyt. "The problem is with a surplus of higher-price homes."

Chadwick ran into a perfect storm: suddenly a sellers' market in that price range went soft, and interest rates edged up. There are now about 70 homes in his price range. In addition, the home was overbuilt, with extras such as double-insulated windows, hardwood floors and upgraded kitchen appliances pushing up the price by about $20,000, Boyt said.

Other same-size spec houses located nearby and equipped with fewer quality features sell for $259,000, and some owners are bringing lawsuits against some builders for construction problems, Boyt said.

Boyt said Rod Perry has a "very unique type of auction." In addition to auctioning property, Perry uses a real estate license to sell homes like any other real estate agent.

More specifically, Perry solicits offers for the home prior to the auction. If the seller does not accept any such contract offers, Perry's contract calls for Perry to auction the home within four weeks for a flat $1,000 fee. If sellers do not accept a bid at Perry's auction, the home goes back onto the market as a general listing.

Atterberry Auction operates on a more conventional auction basis and does not seek prior sales contracts on homes but negotiates a percentage for their services, said Larry Atterberry Jr.

"We don't sign contracts with any buyers before we auction the house," Atterberry said. "You can get into legal problems."

Perry attempted to auction the Chadwick home, after telling those present that he had one offer by phone for $250,000. No bidders arrived, and no others participated.

"I am one of the few auctioneers who offer the option of purchasing the home prior to auction. Most auctioneers discourage it," said Perry.

"I list homes in the conventional way. Instead of a 6 percent commission, I do it for 5 [percent]. If a customer writes a contract the conventional way and it meets the minimum the seller needs, the auction is called off," Perry said.

Boyt said of the last four Perry auctions he has seen, none of the homes sold by auction, and none, to his knowledge, has sold since.

"The Chadwicks started the project when the market was hot. The market fell out last fall and just died," Perry said.

"It was a matter of bad luck and poor timing," said Chadwick. He said if the house had been sold by auction for a flat $1,000 fee, he might have saved $17,000 in the conventional 6 percent real estate fees.

"I guess everybody thought there was money to be made, and anybody who owned a hammer felt that they were a builder. That created just as much problem with the overload of homes for sale as anything else," said Perry.

"If you are not a builder and in the loop, you are going to pay more for construction, so you don't have as much wiggle room and the type of connection a builder would have. Everything worked against him (Chadwick)," he said.

"It did draw a lot of attention having an auction sign in the yard," said Boyt. "We had several phone calls. A lot more people were interested. It generates an auction mentality in people expecting to get a better deal."

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