I often receive emails and phone calls from people who would like to participate in a real estate auction but have little or no knowledge of how the auction process actually works. Paola Iuspa-Abbott, of the Daily Business Review, published a piece today entitled “Real Estate Auctions Can Help Homebuyers Gain Properties But There Are Pitfalls”. It’s a great read for anybody that wants to learn more about the auction process.
I also want to note that there is absolutely no cost to a potential bidder if they decide to work with a licensed real estate agent. The agent’s commission is paid for by the auction house from the buyer’s premium. The winning bidder must still pay the buyer’s premium regardless of whether or not they decide to use the services of a real estate agent.
Some Great Deals at Today’s Real Estate Auction!!!
I wasn’t able to attend this morning’s real estate auction, held at the Miami Beach Convention Center, but did learn the results of several condos that were auctioned. From what I’ve heard, there were more people in attendance at this auction than the Hudson & Marshall auction held on October 21, 2007, which I did attend. However, properties auctioned today sold for much less.
Below are the results of some of the condos that were auctioned this morning:
Courvoisier Courts – Unit 2312 – 3/2.5 – 1,655 SF (Brickell Key) – $540,000
Isola – Unit 1509 – 1/1 – 735 SF – (Brickell Key) – $185,000
Jade at Brickell Bay – Unit 502 – 2/2 – 1,460 SF – (Brickell) – $625,000
The Club at Brickell Bay – Unit 2603 – 1/1 – 825 SF (Brickell) – $175,000
The Club at Brickell Bay – Unit 3102 – 3/2 – 1,232 SF (Brickell) – $225,000
The Club at Brickell Bay – Unit 3202 – 3/2 – 1,232 SF (Brickell) – $270,000
The Cosmopolitan – Unit 2603 – 2/2 – 1,010 SF (South Beach) – $405,000
Vue at Brickell – Unit 811 – 1/1.5 – 796 SF (Brickell) – $180,000
Vue at Brickell – Unit 3606 – 3/2 – 1,551 SF (Brickell) – $290,000
It’s interesting to note that the units at The Club at Brickell Bay and Vue at Brickell sold in the range of $187-$226 per square foot. I think we’ll be seeing much more of this in the months to come. The high bidders of the units in these two buildings at the Hudson & Marshall auction simply overpaid.
The two units at Jade sold for around $425 per square foot. I think the BL45 unit is a terrific buy!
In June of this year, I submitted an offer of $440,000 for a client on unit 2603 at The Cosmopolitan when it was a short-sale. The bank rejected our offer. We were prepared to close within 30 days. It sold today for $405,000. This happens all the time! It really frustrates me which I why I rarely will deal with a short-sale. Banks just don’t get it yet! It’s a better use of my time to wait until the bank takes it back and have my client buy it for much less.
Avanti at The Villages of Normandy Isle – Another Developer Closeout Auction
Avanti at The Villages of Normandy Isle is a multi-story townhouse community located at 155-193 North Shore Drive in the neighborhood of Normandy Isle in Miami Beach. I’ve visited several condos at Avanti in the past and was very impressed. The layouts were great and most had a large rooftop terrace that would be an ideal place for a Jacuzzi hot tub.
Apparently, the developer still has six unsold units and has decided to auction them. Two of them will be sold “absolute” to the highest bidder. Five of the six units are 3 bedroom/3.5 bath units with 3,108-3,440 square feet. The sixth unit is a 2 bedroom/2.5 with 2,790 square feet. Avanti was completed at the end of 2005. Has the developer been holding onto these this whole time?
At present time, there are ten 3 bedroom/3.5 bath units that are listed in the MLS. They range in price from $700,000 to $1,155,000.
A cashier’s check in the amount of $10,000 is required to bid on the day of the auction. Any winning bids will be required to provide the balance of 10 percent of the total contract price in the form of a personal check. There will be a 10 percent buyer’s premium for units sold at this auction. Closings shall occur on or before 45 days following the auction. All units are sold “as-is” and without any contingencies.
The auction will be held Saturday, November 3, 2007 at 12pm at Avanti. Contact me if you have an interest in bidding at this auction and would like to view the units.
Hudson & Marshall Auction Results
Below you will find the results for the condos of interest that were auctioned this past Saturday:
Cite on the Bay – Unit #110 – 3 bedroom/2 bath – 1,475 SF – $300,000
Four Ambassadors – Unit #344 – 1 bedroom/1.5 bath – 940 SF – $169,500
Loft Downtown – Unit #204 – 1 bedroom/1 bath – 784 SF – $128,500
Vue at Brickell – Unit #1215 – 2 bedroom/2 bath – 1,116 SF – $340,000
Vue at Brickell – Unit #2307 – 1 bedroom/1.5 bath – 814 SF – $222,000
There were a large amount of people in attendance at the Hudson & Marshall auction on Saturday. There also seemed to be a higher percentage of active bidders in the crowd than I have seen at past auctions. Regardless, the first 20-30 properties that were auctioned all failed to crack the $100,000 mark. A condo in Homestead was auctioned for $56,000, which was the lowest that I saw a property go. This auction had a 5 percent buyer’s premium.
Slowly, throughout the rest of the day, properties began to garner higher and higher prices. With the exception of the 3 bedroom at Cite on the Bay and the one bedroom at Vue at Brickell, I was expecting the condos to go for less. I think the three bedroom at Cite on the Bay for $300,000 was the only great deal of the six condos above. The one bedroom at Vue at Brickell for $222,000 was a good deal but given the high number of short-sales and foreclosures in the building I think it went for the right amount.
I was shocked that the two bedrooms at the Vue at Brickell and The Club at Brickell Bay went for so much. I’m not sure about the unit at The Club at Brickell Bay, but I know that the one at Vue at Brickell needed some work. It had mold in the unit and the carpets needed to be replaced. In my opinion, the highest bidder of each of these units paid too much. That’s just my opinion though.
100+ Properties to be Auctioned This Saturday
Over 100 properties located throughout South Florida will be auctioned this Saturday in Fort Lauderdale. I’ve known about this auction for quite some time but wasn’t sure whether or not I should write a post about it for a couple of reasons. One, most of the properties are predominantly single family homes while my blog only discusses condominiums. Two, only a handful of the properties are located in Miami and Miami Beach, which is where I focus most of my energy.
I decided to go ahead and inform everybody about it though because a few of the condos reside in developments that I’ve previously mentioned. For example, two condos from Vue at Brickell will be auctioned on Saturday while The Club at Brickell Bay will have one. No surprise there!
Here is a list of some of the condos in some of the more well known developments that will be auctioned:
Vue at Brickell – Unit #2307 – 1 bedroom/1.5 bath – 814 SF
None of these developments are particularly exceptional but it’ll still be interesting to see at what price they will be auctioned. I think the unit at the Loft Downtown has a good chance to go for around $100,000 or less.
Check out the Hudson & Marshall website for more information about this auction.
By the way, I did noticed that Deutsche Bank is now in possession of a large number of the properties that will be auctioned on Saturday.
Jorge of the Jungle
A few months ago I wrote a post entitled, “Advice to Miami Condo Sellers“. It was a highly read piece because of the inventory figures that were provided. I highly recommend that you read it if you recently discovered this blog and are curious about the developments that are scheduled to close within the next two years in Miami.
Of the 6,951 condos scheduled to be delivered within the next 17 months in Brickell, the new inventory represented by The Related Group of Florida roughly amounts to 50 percent. Matt Allen, chief operating officer and executive VP of The Related Group, indicated in yesterday’s Miami Herald article about the Platinum Condominium auction that The Related Group would never resort to utilizing the auction system to sell defaulted condo units.
This statement is neither inaccurate nor misleading for a number of reasons:
The Related Group is known to leave money on the table for investors. Their preconstruction prices are, for the most part, well below those that were offered at comparable developments in the area. Some developers sell their preconstruction inventory in batches, with each subsequent group of condos sold at a higher price per square foot than the preceding batch. The Related Group, however, sells out in one day and moves on to their next development.
The Related Group is a highly reputable developer. Reputation goes a long way in this business. Many investors made a lot of money by investing in developments that were tagged with The Related Group name. Thereafter, investors blindly endorsed deposit checks to them for preconstruction condo units solely based on their reputation. Their reputation would be highly damaged if they ever sold their unsold inventory via an auction.
The Related Group is well connected. They will never utilize the auction system because they have strong ties to the investment community. George can make one to two phone calls and have the excess inventory from his developments disappear at much higher prices than what can be obtained through the auction system. As Matt Allen stated in the Miami Herald article, “When you have an auction, the bottom feeders come out”.
My high school pitching coach taught me that pitching is just like real estate. It’s all about location, location, location. The Related Group has an uncanny knack of choosing the best locations upon which to develop.
It is inevitable that even a developer as highly regarded as The Related Group will have a high number of defaults. However, their excess inventory will likely be swallowed by investment groups looking to buy at a discount. It will happen so fast that the public won’t know about it until months after.
Video of the Platinum Condominium Auction
Today, I finally had a chance to edit, render and upload the video that I shot of the Platinum Condominium auction last Thursday. I split it up into three separate video files which highlight key points of the auction. You can read my analysis of the Platinum Condominium auction.
An explanation of how the auction would work:
Kicking off the auction with the condos in Pool B:
Changing the rules and moving to Pool A:
Star Lofts on the Bay – The Next Condo Development up for Auction?
Star Lofts on the Bay looks to me to be a prime candidate to have a developer closeout sale in the near future. Closings for units at Star Lofts on the Bay began towards the beginning of July. As of today, there have been a total of 18 recorded closings with the last one being recorded on August 14, 2007. Not one other unit has been recorded in over a month. I think it is safe to say that closings have slowed to a halt.
Star Lofts on the Bay is a boutique building with only 48 units in the entire building. The 18 recorded closings, however, indicates that 62.5 percent of the building has not closed. That is incredibly shocking!
There are currently a total of 14 units at Star Lofts on the Bay listed for sale in the MLS. Six of the units listed in the MLS, however, do not correspond with the units numbers of the ones that have closed. This means that either the units have closed but the records have not been updated to reflect this fact or these units were listed on the MLS without actually having closed on them. It is not uncommon to see condos listed on the MLS for sale prior to the contract holder closing on them. It’s not supposed to happen but it does. It can take up to three weeks for closings to be recorded so perhaps a few of these units closed within the past three weeks.
Below you will see the 18 units that have closed at Star Lofts on the Bay. Next to each unit number you will see the number of bedrooms for that unit, the purchase price and the current list price of the unit on the MLS.
As you can see, the preconstruction prices for units at Star Lofts on the Bay were very high and the price of units currently listed for sale are even higher. The average price per square foot of condos currently listed is over $540. Good luck getting that! If these units were to be auctioned, I don’t think anyone would pay more than $270 per square foot. The studio units might go for around $300 per square foot but that’s the only exception, in my opinion. The 2 bedrooms aren’t true two bedrooms. Because it is a loft building, the units are open without any walls to separate the bedrooms.
Star Lofts on the Bay is a waterfront building situated along Biscayne Bay at 700 NE 25 Street. It is located exactly five blocks south of Platinum Condominium. As is the case with Platinum Condominium, the neighborhood is the biggest deterrent for Star Lofts on the Bay. Most of the buildings in the area are old and run-down. You never want to build a mansion on a street full of average-sized single family homes. That is basically what happened here. Onyx on the Bay, which is the building next to Star Lofts on the Bay in the picture below, will also have this problem.
The picture slideshow below will show you some images that I found on the MLS of various units and the common areas of the building.
Miami Condo Auction a Big Disappointment
(The video that I shot of tonight’s auction is at the bottom of this post.)
The Platinum Condominium auction has come and passed. The big talk of the town packed the house with auction participants, brokers, reporters and spectators. If tonight was any indication of what lies ahead, then the Miami condo market is in for a rude awakening. Miami condo developers are in for a sleepless night if word about tonight’s auction reaches them before bedtime.
It was apparent from the first round of bidding that the developer of Platinum Condominium had high expectations and high prices in mind tonight. Many people realized that the rules of the auction were quickly changed once the first round of bidding was over. A HUGE mistake on the part of the developer, if you ask me. The auction house, or maybe the developer, decided to start the auction with Group B. A colossal mistake in itself, in my opinion. Group B was comprised of 2 bedroom + den/2 bath condos; the best batch of condos of the three groups. This should have been left for last. Anyone looking to bid on a one bedroom, and sit this round out, would be in a favorable position if the high bids on the units in group B came in low. That is exactly what happened.
The first round of bidding ended with a high bid of $295,000, considerably lower than the prices that people recently closed on condos through preconstruction contracts in 2004. The recent closing prices for 01 line units ranged from $422,000 to $515,000 while the 07 line units ranged from $407,000 to $555,000. The developer must have been shocked at the outcome of the first round. The likely choice for the highest bidder was to select either unit 2107 or 1201. However, the highest bidder was convinced to select an absolute unit since any other choice would not be approved by the developer immediately, if at all. That announcement wasn’t made publicly but sitting in the front row has its advantages. The bidder selected unit 1001.
The second round of bidding began and once again ended with a high bid of $295,000. The highest bidder also wanted one of the non-absolute units but was likewise steered towards an absolute unit. That bidder selected unit 1907. The same result occurred with the third highest bidder which amounted to $295,000 as well. That person selected $295,000.
The third round of bidding ended with the same result. The auctioneer made an announcement before proceeding with the fourth round of bidding. It was then publicly known that only absolute units would be auctioned at this time. The disappointment in the crowd was felt throughout the room. Two words seemed to form on the lips of people in attendance: “marketing ploy”. The crowd thinned-out thereafter.
The results of the first eight rounds of the auction are below:
1st Round: Unit 1001 – $295,000
2nd Round: Unit 1907 – $295,000
3rd Round: Unit 1607 – $295,000
4th Round: Unit 1602 – $200,000
5th Round: Unit 1806 – $175,000
6th Round: Loft-107 – $160,000
7th Round: Unit 301 – $320,000
8th Round: Unit 707 – $295,000
The 02 line had recent closings from preconstruction contracts that ranged from $235,000 to $345,000 while the 06 line ranged from $242,000 to $390,000. Two small lofts, equivalent to Loft-107, recently closed: one for $260,000 and the other for $267,500.
I think most still in attendance anticipated the auction to end after the 8th round. However, Group A was selected and another round of bidding began. It was quickly announced that the next unit chosen would also be absolute. Once again interest was restored by the crowd but failed to bring any noteworthy bids. The round ended with a high bid of $245,000. The highest bidder selected unit 1905, a 2 bedroom/2 bath condo.
The bidding commenced once again but it was announced that any high bids from thereon out would be subject to developer approval. Below you will find the results of the 9th through 16th rounds:
9th Round: Unit 1905 – $245,000 (Absolute)
10th Round: Unit 1705 – $230,000 (*)
11th Round: Unit 2102 – $185,000 (*)
12th Round: Unit 1201 – $300,000 (*)
13th Round: Unit 1101 – $300,000 (*)
14th Round: Unit 2107 – $265,000 (*)
15th Round: Unit 2007 – $265,000 (*)
16th Round: Unit 501 – $300,000 (*)
The asterisk (*) above indicates that those units were subject to approval from the developer. In other words, those weren’t officially sold.
9 condos sold tonight. 9 out of 20. Maybe a few others will sell once someone gives the developer a good kick in the noggin, but only 9 were officially approved tonight by the developer. I posted a poll along the side of my site a couple of nights ago to ask visitors how many condos they thought would get auctioned at tonight’s auction. The highest response was that all 20 of the units would get sold. What a huge disappointment.
The developer not only did a huge disservice to himself, but to the Miami condo market as well, by not allowing the condo auction to run its planned course. There were two stories that could have possibly emerged as a result of tonight’s event: (1) the auction was a tremendous success and confidence in the Miami condo market has been restored at a downwardly revised level, or (2) the auction was a disappointing failure and Miami condo developers should soon be seeing brown stains appear in their underpants. I can assure you that other Miami condo developers were keeping a close eye on tonight’s event. I think many of them saw the auction system as a last resort. But with their last resort being extinguished as a result of tonight’s disappointing outcome, what more can they count on?
The answer is simple, the banks. The Miami condo developers are not sitting alone in the condo glut that we are experiencing here in South Florida. The banks, and their shareholders, are ultimately the ones who will feel the brunt of the pain. If banks can’t rely on developers to utilize the auction system to successfully liquidate unsold or defaulted units then their only alternative is to take possession of the units that represent the portion of the building that has not closed. Ultimately, these properties will get sold for 50 cents on the dollar, or less, to large investment funds that can buy in blocks of $10M+.
My prediction is that the Miami condo market will have a holiday close-out sale in the winter months. It will “coincidentally” coincide with our peak-season when thousands of snow birds will flock to our tropical climes. More demand, but also extra inventory.
I am very curious to read what the reporters that attended tonight’s auction write about tonight’s event within the next couple of days. Will they have an optimistic perspective, a pessimistic take or an honest-to-goodness report like you’ve read here at the Miami Condo Investments Blog? We shall see.
The following video explains how the auction would work:
Kicking off the auction with Pool B:
Changing the rules and moving to Pool A:
The Results of Today’s Auction
Six properties were auctioned this afternoon. Five of them were condos and one was a single family home. A couple of weeks ago I wrote about four of the condos.
The auction was held in the back yard of the single family home that was being auctioned, located at 5900 NW 13 Avenue. The single family home was the first property to be auctioned and sold for $53,500. It was a 2 bedroom/1 bath with 622 square feet of interior space. The house was in pretty bad shape but it resides on a large corner lot with .149 acres.
The auctioneers decided that since the remaining properties to be auctioned were all condos they would make it “buyer’s choice”. This meant that the highest bidder got to choose from the remaining available condos. He or she also had the opportunity to buy multiple condos at the same purchase price.
The highest bid for the first round was $496,000. As expected, the bidder selected the 3 bedroom/2 bath townhouse in South Beach. I think the person paid fair market value for the property. I personally visited the townhouse this past weekend and it is in need of a lot of work to make it into a nice residence.
The second round of bidding ended with a high bid amount of $272,000. The bidder selected the one bedroom condo located at The Club at Brickell Bay. I was surprised that bidding went this high.
The highest bid for the third round was $230,500. The bidder selected the 1 bedroom/1 bath condo at Venetia Condo.
The 2 bedroom/1 bath condo at Blue Lagoon Condominiums was selected fourth with a high bid amount of $195,750.
The final condo to be selected was a 2 bedroom/2 bath at Grandview Palace located in North Bay Village. The high bid amount was $190,500.
