Phoenix Builders Resort To Selling Homes At Auctions
February 22nd, 2008 Posted in Did You Know?, Real Estate News
Phoenix Builders Resort To Selling Homes At Auctions
Opening bid for a $349,900 home: $190,000. Bring Cash!
Home builders in Arizona, whose lavish incentives haven’t attracted buyers in the slumping market, are turning to the auction block as a last resort to sell empty houses.
Scottsdale-based Cachet Homes is auctioning 28 of its luxury homes on Sunday in the West Valley, some once priced at more than $750,000.
Bids start at about half of the homes’ original prices. Most properties will have no minimum reserve. The developer is following a national trend of builders’ letting home buyers set their own prices. advertisement
The sale is the first live auction in Maricopa County by a home builder, said Diane Byrne, Cachet Homes vice president of marketing. Online auctions and sales of foreclosed or individual homeowner properties also are gaining traction, she said.
Late last year, Lennar Homes sold 16 new homes in Litchfield Park through RealityBid.com, an online home-auction service.
In March, 24 condominiums at Dobson Bay Club in Mesa will be sold in an auction by Accelerated Marketing Group. Promotional materials for the event say eight of them will be sold regardless of price.
In Arizona and nationally, home builders are faced with a glut of unsold homes and canceled contracts, as well as less traffic and fewer offers at their developments. Potential customers are fighting suddenly stiffer credit hurdles and often the challenge of selling their existing homes.
Cachet has faced similar problems with its homes at Verrado, a DMB master-planned community in Buckeye.
“We’re tired of being landlords; we’d rather be builders,” Byrne said.
Recent marketing strategies, such as promising two-year Lexus leases with home sales last fall, failed to unload enough inventory, she said.
“We would like to see those homes filled up with families,” Byrne said.
Such low prices show how eager the developer is to get homes off its hands, said RL Brown, publisher of the Phoenix Housing Market Letter.
“Not only is it a cost drag every month to keep (inventory) on hand and fresh,” he said, “as long as a builder has inventory, his lenders are likely not going to allow him to build more houses.”
Similar new-home auctions have taken place in Florida, California and Colorado, said Rhett Winchell, president of the Kennedy Wilson Auction Group, which is conducting Sunday’s sale.
“Most sellers don’t think about auction-marketing programs when the market is hot,” he said.
But when the market is slow and previous incentives haven’t worked, sellers rely on auctions to get rid of one to two years’ worth of homes in a day, Winchell said.
In Cachet Homes’ case, about $21 million in property will be on the auction block.
“There has been a tremendous amount of interest in the auction,” Winchell said, declining to give information on the number of registrants.
However, current Cachet Homes property owners visiting the auction office Thursday said they had paid “royally” a year ago to live in Verrado and were concerned about the auction’s low starting bids.
Cachet is offering 15 townhomes and 13 single-family homes at Verrado, as well as 16 condos at Flagstaff Ranch in Flagstaff. The prices just cover Cachet’s costs to build, Byrne said.
The cheapest in the Verrado collection is a 1,975-square-foot townhome with three bedrooms and two baths starting at $190,000. Original price tag: $349,900.
The highest-priced house, at almost 5,000 square feet, features four bedrooms, a game room and 3.5 baths. It’s going for $375,000, a markdown of 55 percent.
Realtor James Lee of Jess and Associates in Phoenix said he is taking a client to the auction “looking for her dream retirement home.”
The minimum bids starting “really, really low” caught his client’s attention, he said. “She really likes the neighborhood. She wants something newer than her home in Avondale. And her husband likes to golf.”
Cachet Homes’ properties have access to Verrado’s Raven Golf Course, plus features such as granite countertops, courtyards, pools and views of the White Tank Mountains.
Despite current residents’ worries about pricing, marketing agents said sales could reach original listing prices with enough competition among bidders.
Brown said the strategy could create a “mini-market frenzy,” driving up prices through bidding even better than other methods of sale.
“If this auction has success,” he said, “you’re going to see auctions galore.”
When going to a new home auction, be sure to have your Realtor too help pricing, negotiating and contract explanations. Remember, you need cash only when buying at an auction. Call Bette Zerba for assistance today. 602-791-1766 www.centralphoenixliving.com - www.freephoenixmls.com
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