What happened to real estate auctions during the COVID-19 pandemic?

0
35

[ad_1]

Justin Manning

When people think about real estate auctions, they very often think first about the plight and stigma associated with foreclosures. However, real estate auctions do take place for many other reasons that are not of concern. We run auctions to help settle the estate, help with a divorce, meet the tax deadline, or simply sell quickly and without contingencies. But the foreclosure auction segment has come to a standstill in 2020 due to state and federal moratoriums imposed to combat the fallout from COVID-19. Because of this indulgence, 2020 has been a landmark year for those of us who conduct private real estate auctions for volunteer sellers (estates, individuals, companies, banks, etc.). Voluntary / private auctions benefited from a large number of bidders who were no longer eligible for foreclosures.

In the last couple of decades, a successful and well-attended auction could be considered an auction in which 5 to 8 registered / qualified bidders were present with their revolving bank checks. In addition, at each auction there are always the same or more curious observers, consisting of neighbors, investors and other persons interested in the property, but who cannot fulfill the conditions of the auction sale. COVID created the perfect storm that spawned the most powerful war machine in our real estate auctions. We started seeing 15, 20 and even 30 registered and qualified bidders ready to bid. It was not only the lack of foreclosure that poured fuel on the fire, but low interest rates and record low housing supply in recent years have catapulted the process to unprecedented levels.

This war machine for conducting auctions allowed the market to set the price of real estate. People often wonder how to properly value their property. Owners these days browse Zestimate and Realtor.com, as well as any other online listing sites, and then select the highest one as their rating. Interestingly, in a hot real estate market with low rates and high demand and low supply, the real estate auction actually becomes the ideal vehicle for real estate appraisal. Real estate costs exactly what someone is willing to pay. Real estate auctions, although fewer in volume during the pandemic, certainly generated what could be considered the market price of any property or higher.

When a property is sold at an auction, we usually see a situation where half of the participants think that the property has been given away, while the other half cannot believe the final bid amount. At the end of a properly sold and professionally conducted auction, the quantity sold becomes the market price. All the essential goods in the world have their prices at auctions, be it gold, cotton, fish, textiles, etc. Real estate auctions, especially in a market as hot as the last year and a half, do pretty much the same thing … they set the market real estate.

Many new real estate brokers who did not experience the cyclical nature of the economy during COVID saw themselves in scenarios where the situation almost mimicked a real estate auction. Open house days turned into crowded events with lines of masked shoppers. A lot of bids came in at the same time, forcing the broker to set a date and time for each best and last bid … “Ladies and gentlemen, this is an auction!” The biggest difference is that in the auction, prospective buyers make their bids by picking up their bidder’s plate, and the winning bidder makes a large deposit and signs the P&S right away, no contingency. COVID and the circumstances surrounding COVID have shown real estate brokers the power of trade wars and made them feel what we, private real estate auctioneers, get in all the auctions we conduct in all markets, whether it is about growth or falling prices.

In the end, as in many other industries and businesses, this unprecedented time has made us wonder if our respective businesses will survive this unique event. I told myself that this year we might have zero sales, but 2020 is the same or better year for JJManning Auctioneers than the previous 10 years. Thus, COVID created winners and losers during its terror, but real estate auctions and especially private real estate auctions really flourished at the time. It will be extremely interesting to see how the new tax codes, if introduced, will affect inflation, interest rates and the possibility of larger securities auctions or foreclosures in the coming years. In my 29 years in the auction business, I have never seen a time when our private property auctions created such a buzz and such a competitive forum. Once, twice, three times … SOLD OUT!

Justin Manning, CAI, AARE, President / Owner, JJManning Auctioneers, Boston, MA.

[ad_2]

Source link