Bargain hunters score big at condo auction

A funny thing happened on the way to the local real estate market today. Condos that once listed for over $700,000 were sold for barely half that.

The absolute auction at The Landings at Sugar Creek drew a crowd ranging from real estate investors to the merely curious. At the height of the bidding, more than 100 people were in attendance.

The action started promptly at 1 p.m., preceded by several days of open house so potential bidders could kick the tires. By 2:30 PM, all 20 units had been snapped up and $4.8 million had changed hands.

Buyers, armed with clipboards and tracking charts, looked like football coaches plotting their next play as each unit was sold and another round of bidding began. Under the auction tent, casual handicappers were debating the next bid price and which unit would be spoken for.

Some bidders appeared to stick to their game plans, stubbornly refusing to offer even one thousand dollars more to recapture a trumped bid. Others buckled more easily under the charms of the auctioneers and the thrill of the bidding action.

The condominium project is on the sound side of U.S. 158 in Nags Head at Whalebone Junction. According to Dare County tax records, the original owners, North Avon Condo Group LLC and the note holder, Bank of America, which inherited the loan from LaSalle National Bank, transferred the note and property to Gray Eagle Partners LLC in January, 2010.

There was no evidence of pending foreclosure or distressed sales, and word on the street indicated the new owners wanted to jump start the project and establish price points for the remaining units. With the exception of a very few sales, The Landings have been mostly vacant for the past year. The balance of the remaining note and the terms of the transfer price were not clear from the records.

The bidding and the sales method were novel for this area. All 20 units, which ranged from 1,090 to 2,183 square feet and original pricing of $360,000 to $715,000, were offered at one time. The winners of each round were allowed to buy as many units as they wanted at the winning bid price. After those units were settled, the next round began under the same rules.

While no one purchased multiple units on one winning bid price, some did purchase multiple units in different rounds. The first winning bid was $352,000 — $320,000 sales price plus a 10 percent auction premium. The winner chose a third floor unit, a four-bedroom, 2,183-square-foot condo that originally listed for $715,000. The next round saw a same-sized second floor unit disappear for $330,000, substantially below the list price of $690,000.

Buyers exhibited differing motivations. One couple purchased a unit to give to their daughter who lives locally; another individual purchased at least three units.
It took 20 rounds to move all units, with the final condo, a two-bedroom 1,090-square-foot, first-floor offering selling for $159,500. That unit was originally listed for $360,000.

After the condo bidding, covered parking spaces below the building were auctioned in a separate exercise, although the complex offers plenty of outside parking for those who won bids and wanted to avoid the extra expense.

Absolute auctions have been touted as a superior method to move property quickly and establish floor pricing. This type of auction works best in a scenario similar to today’s event—a project not in foreclosure or short sale where the owners want to create a sense of excitement and move units quickly.

Most Realtors would also agree that it’s much easier to sell remaining units when half the project is already sold out and the complex is teeming with owners and seasonal renters. Many buyers are averse to purchases if they perceive there are few other units sold or occupied.

Lenders also view projects with significant existing sales more favorably. The downside, as one appraiser in attendance noted, is that this type of auction represents the purest expression of market price, and as a result, these sales prices will become “comps” for other projects in the area.

The idea appeared to work. Bidders who missed out on a purchase were already seeking out sales agents, inquiring after the remaining units.

Expect to see more of these sales locally as developers and lenders search for that elusive market price in a tumultuous real estate environment.