Regional homes head to the highest bidder

Long Island Business News, Apr 4, 2008 by David Winzelberg

The gavel seems to be coming down on Long Island real estate.

Desperate homeowners, facing the threat of foreclosure, are asking auctioneers to sell their property for them.

And banks are also using the auction method to get rid of property they own, thanks to the foreclosure mess.

There are currently 1,250 bank-owned properties in Nassau and Suffolk counties, with another 12,652 in pre-foreclosure, waiting in the wings, according to statistics from realtytrac.com.

Auction firms are concentrating on homeowners who are 90 days behind in their mortgage payments, according to Richard Maltz, vice president of Plainview-based David R. Maltz and Co.

Auctions provided a lift to Maltz, who started a private auction unit two years ago and now has 17 full-time employees. Last year, Maltz's company sold about $100 million of real estate through its auction process, half of which was unloaded from private owners and half from banks, courts and government.

The National Association of Realtors predicted that auctions will account for 30 percent of all real estate transactions by 2010.

Chicago-based Sheldon Good & Co. has sold $9 billion in property via auction since the company was formed in 1973. Its Manhattan office has handled several Long Island sales, from individual homes to unsold inventory of new housing developments.

Sheldon Good auctioned off the remaining 21 condos in a 92-unit building in Rockaway Park for Long Island developer Engel Burman Group in one day last year.

Jeff Hubert, of Sheldon Good's Manhattan office, said his company doesn't participate in the foreclosure process, but it does auction properties for banks and other institutions, as well as for individual owners and developers.

"It's mostly for non-distressed sellers who want to speed up the sale of their properties," Hubert said. "It passes savings on to the buyer. The seller avoids carrying costs and gets his money out."

Hubert claims an 80 to 85 percent success rate in finding buyers for his company's auctioned properties. Maltz, who said his company is "very selective" in the properties it will take on, boasted a 97 percent success rate.

For some properties, especially unique, higher-end homes and estate parcels, the auction process can yield better results for sellers than listing them with a traditional broker. Diane Saatchi, a vice president for the Corcoran Group in East Hampton, said she's had success with auctions in the past but failed to make a sale last summer when bids fell far short of acceptable for a nearly five- acre property on Sagaponack Pond in Bridgehampton.

The advantage of an auction, Saatchi said, is the immediacy of the sale. Bidders are pre-qualified and much of the transaction's due diligence is done in advance. And buyers are required to have a check for the down payment ready at auction.

As for sales of estate-owned properties, auctions are very public and provide transparency for heirs suspicious of the process, Saatchi said. Property auction companies charge somewhere between 5 and 8 percent to the buyer, and sometimes charge the seller for marketing costs.

And in a declining market, Maltz said, auctions are the best way to determine the true fair market value of real estate.

"A property is only worth what someone is willing to pay for it," Maltz said.