Is an Auction an Option?
Is an Auction an Option?
One of the strongest reasons for an auction, or accelerated sale, is to relieve a property owner of the enormous expense of holding costs on an under-performing asset. Many people believe an auction is only for distressed assets, but this is not necessarily the case. Many properties are in good condition and are still financially viable. Those properties hold their value at the market, even though the owner may be subisdizing it financially. An auction allows owners to shorten the hold time that would be required to sell a property in the open market, which reduce out-of-pocket expenses, i.e. real estate taxes, insurance, association dues, the cost of money and/or vacancy. A property can become distressed due to losses that accumulate over time, and waiting for a market sale can be costly for that very reason. Distressed properties may not recover there value for the owner for 10-15 years, even if a strong economic recovery occurs. An auction creates a competitive market situation where a property can, and some do, bring prices of 85-100% of the market value. This ‘accelerated marketing’ comes with potential losses, but they must be balanced with the losses by time and erosion of the asset.
In short, if you own a property that is a drain on your capital, an auction may be the answer for you. Please feel free to contact Kevin or Olivia to discuss your options.
Filed under: Real Estate