When 15 luxury residential condominiums in downtown Charleston were offered at auction Monday, the sale provided a look at an exciting but uncommon method of selling real estate.
Private auctions are seen as a way of prompting a quick sale, by raising interest in a property and forcing multiple buyers to compete.
By some estimates, auctions account for less than 1 percent of real estate sales in the Charleston area. That’s not counting government auctions of foreclosed-upon property.
“Most people, when they hear the word ‘auction,’ think of desperation, but that’s not the case,” said Carolina One auction professional Gregg Napier of the Gregg Napier Auction Group.
“It’s more for the individual who wants to move the property now, needs it gone, because maybe they have other plans,” he said.
The 15 units at Anson House that just went on the block, for example, had mostly been sitting unsold since they were built, just before the housing bubble burst. Two condos in the 32-unit building had sold since September 2009, Charleston County records show. The rest are the subject of a foreclosure lawsuit filed by Bank of America.
The sales event, run by The National Auction Group of Gadsden, Ala., stirred up lots of interest with pre-auction marketing.
William Bone, the company’s president, said more than 200 groups of people toured the condos in advance of the sale, and while no units were actually sold at the auction, deals were closed on four units during the week.
At the auction, there was plenty of bidding, but the apparently winning bids were then all rejected as being too low. That left some bidders frustrated.
Bert Golinski, founder of Rebel Capital Advisors LLC, attended the auction and said it was a big waste of his time.
“I spent two hours looking at the units pre-auction and another two hours at the auction yesterday,” he said Tuesday.
But for the sellers, the interest generated by the auction resulting in four condos being sold at prices ranging from $580,000 to $1.5 million. Those are greatly reduced prices, less than half the original asking prices at Anson House, but also more sales in one week than the building had seen in three years.
National Auction Group remains at the building, at 2 Laurens St., and Bone said they hope to sell the remaining units as well.
“It just takes an event sometimes to sell condos,” Bone said. “Why would you just buy a condo when you can come down to something like this (auction) and compete.
“It’s rich people having fun,” he said.
Indeed, an auction of condos priced above a half-million dollars is not for most people. And buyers at a private auction are typically required to put 10 percent down on the spot if their bids are accepted, and close the deal within 30 days.
Napier said auctions can serve different purposes depending on real estate market conditions.
When the market is booming like it was five years ago, with buyers driving up the prices in traditional real estate sales, an auction can put potential buyers in the same room and send a price up more in the heated environment of bidding.
“If they’re standing in a venue watching the other fellow bid against them, it creates urgency and competition,” Napier said. “I had one on Folly Beach about four years ago where we had so many people the police were directing traffic.”
When the market is down, as it’s been in recent years, an auction might not bring the highest price for a property, but could keep it from sitting on the market for months or years.
Napier said auctions can be particularly attractive to people who inherit a property and want to sell it quickly.
“Maybe the family is out of state and they don’t want to sit around and wait for someone to buy the real estate,” he said.
Auctions have been used to sell everything from multi-million-dollar trophy homes on Kiawah Island to modest fixer-uppers in the Charleston suburbs.
Back in 2003, National Auction Group handled the auction of empty units in the landmark Peoples Building on Broad Street in downtown Charleston.
Three dozen bidders participated in the three-hour event, and the buyers ended up spending about $5 million to acquire two vacant residences, including a penthouse unit, and 28,600 square feet of office space.
Napier’s company, which has auctioned a number of high-end properties, last year auctioned a 1,000-square-foot home across from a public housing project in Mount Pleasant’s Old Village. It attracted multiple bidders, and county records show that it fetched $195,800.
In 2010, deep in the housing meltdown, Grand Estates Auction Company auctioned off a group of four condos on Folly Beach, bringing in $3.2 million.
“All four units sold in less than 30 minutes,” the company said in an online recap of the sale. “The bidding was fierce and a lot of bidders left that day surprised at the values the properties sold for.”
Napier is hoping his company will attract that kind of interest when they auction about 54 acres of waterfront property on James Island on June 23. The property is owned by a group of heirs, he said.
Auctioneers typically launch a marketing effort in advance of the auction date, with advertisements and website. They also typically reach out to local real estate professionals.
Napier said his firm would usually spend an amount on marketing that’s roughly 1.5 percent or more of the expected price the property will fetch.
Buyers typically pay a 10 percent premium on top of their winning bid, which pays the auction company and real estate agent fees. That’s in contrast to a traditional property sale, where commissions are subtracted from the proceeds.
At the Anson House auction, held at Charleston’s waterfront Maritime Center, National Auction Group provided drinks, food and live entertainment prior to the selling, and perhaps a dozen employees of the company were on hand.
Some of them worked the crowd during the auction, encouraging bidders to jump in or bid more.
“This is a $3 million condo,” one of the auction house employees told a potential buyer, when bidding stalled at $1.2 million for a three-bedroom condo.
That unit was sold some time after the auction for $1.5 million, according to Bone.
Jerry Mann of Handsome Properties in Charleston was showing Anson House condos to clients later the same week. He said the auction and the sales it generated helped establish a price range, which is useful for real estate agents.
“It helps give us a base for our clients,” he said.
Reach David Slade at 937-5552 or Twitter @DSladeNews.
Earlier versions of this story contained an error. Prior to the auction, two units in Anson House had sold since September 2009, according to Charleston County records. The Post and Courier regrets the error.