The Process of Buying a Foreclosure at Auction

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
• Jade at Brickell Bay – BL45 – 2/3 – 1,730 SF (Brickell) – $735,000
• Murano Grande – Unit 805 – 2/2 – 1,400 SF (South Beach) – Withdrawn
• Neo Lofts – Unit 1006 – 2/2 – 1,109 SF (Miami River) – $185,000
• Ocean View – Unit 210 – 1/1.5 – 1,005 SF (Sunny Isles Beach) – $140,000
• Ocean View – Unit 909 – 1/1.5 – 1,005 SF (Sunny Isles Beach) – $160,000
• The Club at Brickell Bay – Unit 2114 – 1/1 – 818 SF (Brickell) – $180,000
• 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.

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
• The Club at Brickell Bay – Unit #1823 – 2 bedroom/2 bath – 1,105 SF – $392,500
• 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.

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:

1. 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.
2. 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.
3. 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”.
4. 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:

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.

Villa Regina Auction – A Much Better Result

The Villa Regina auction that I attended this afternoon had a much better turn out and active bidders than the Neo Vertika auction I attended yesterday morning.

Villa Regina is a very well known building residing on the southern end of Brickell Avenue. It was built in 1982 and recently had a special assessment to update the common areas and the marina behind the building. Much of the work recently started and should be completed in upcoming months. The modernization project will also restore the impeccable reputation that Villa Regina once had.

Villa Regina is well known for its spacious floor plans. The 2 bedroom/2 bath unit up for auction today has 1,895 square feet of living space and a large terrace. The condo also has a nice bay view from within the unit and the terrace. I posted the pictures here a few weeks ago. As you can see from the pictures, the condo is in need of about $100,000 to $120,000 worth of work to make it into an A+ unit. The condo can easily be converted into a 3 bedroom.

The bidding started at $100,000. I attended the auction with a client who was looking to fix it up and sell it one to two years down the road. The bidding quickly jumped to $200,000 and then $300,000. $400,000 was called out but no takers. Then $350,000 was called out and quickly taken. We were out once that bid was made. It slowly proceeded north from there.

The winning bid was $385,000. The guy got a great deal, in my opinion. A highly upgraded unit six floors higher is currently listed at $699,900. That condo will probably sell for around $620,000 to $650,000.

My client and I were both hoping for a turn out much closer to yesterday’s auction for the condo at Neo Vertika. But as my client said, “Brickell Avenue is Brickell Avenue, living on it has much value”. I couldn’t agree with her more.

Neo Vertika Auction – Going, Going…Not Gone?

A few weeks ago I mentioned that a 2 bedroom + den/2 bath unit at Neo Vertika would be auctioned on August 20, 2007. I attended the auction this morning.

A single family home in Palmetto Bay was auctioned first and about 5-6 people participated in that auction. There were probably about 35-45 people in the room but most were spectators. The highest bid for the Palmetto Bay house was $476,000. After that auction was over, the room pretty much cleared out.

Only 2 people participated in the Neo Vertika auction. It seemed as though they were unfamiliar with Neo Vertika but participated for a few rounds simply because no one else was bidding. I think it was a bad idea to have the auction in Palmetto Bay. The highest bid came in at $135,000.

Before everyone gets excited, let me tell you that it is almost certain that the bank will reject that bid. I spoke with the auctioneer afterwards and he told me that it is very, very likely that it will get rejected. He said that the bank is looking for something in the $300K’s.

The unit at Neo Vertika is a 2 bedroom + den/2 bath with 1,255 square feet of interior space and a balcony that spans the length of the unit. It has 20-foot ceilings with floor-to-ceiling windows. The unit is on the 29th and 30th floors, faces south with views of Biscayne Bay and comes “decorator-ready”. Neo Vertika was completed in August of last year.

It isn’t too late to grab this 2 bedroom condo at Neo Vertika. Give me a call if you’re interested in acquiring it.

Miami Condo Auction – Platinum Condominium – 20 Units Up for Auction in September

I was notified tonight that twenty condo units at Platinum Condominium will be auctioned off on September 20, 2007. Eight of those units will be auctioned “absolute”. This means that the condo(s) will be sold to the highest bidder. There are no minimums and no reserves.

This is major news! The 20 units up for auction at Platinum Condominium represent 16.8% of the overall units in the building. The are a total of 119 units in the building with 7 units per floor. I think 20%-30% default rates in other developments is not out of the question.

A few months ago, after Platinum Condominium began closings, I did a pictorial and video review of the building. You can view it by clicking on the following link: pictorial and video review of Platinum Condominium. Any information that you seek regarding this development will be found there. If for some chance, you have a question that isn’t answered there, then feel free to contact me.

For you Miami condo vultures, this might be a great opportunity to own a bulk of units at a really good price. If they can be acquired at a good price, you may even be able to rent them out with positive cash flow until the neighborhood turns around and sell them for a nice profit.

Those looking to buy a single condo at an auction at a good price, this may be your opportunity. I am very knowledgeable in the various floor plans at Platinum Condominium. My services are available to you to act as your representative at the auction. I will be attending the auction regardless. I will act in your best interests. If I walk out of that auction without one of my clients acquiring one condo then you can be assured that the prices offered were too high. I am completely comfortable walking away from that auction without one sale being made. The people who know me well know that I am not a tough or pushy salesman.

Contact me for more information regarding the Platinum Condominium auction.

• Unit 301 – 3 bedroom/3 bath
• Unit 501 – 3 bedroom/3 bath
• Unit 1001 – 2 bedroom + den/2 bath
• Unit 1101 – 2 bedroom + den/2 bath
• Unit 1201 – 2 bedroom + den/2 bath
• Unit 1404 – 1 bedroom/1.5 bath
• Unit 1602 – 1 bedroom/1.5 bath
• Unit 1802 – 1 bedroom/1.5 bath
• Unit 2002 – 1 bedroom/1.5 bath
• Unit 2102 – 1 bedroom/1.5 bath
• Unit 1705 – 2 bedroom/2 bath
• Unit 1905 – 2 bedroom/2 bath
• Unit 707 – 2 bedroom + den/2 bath
• Unit 1607 – 2 bedroom + den/2 bath
• Unit 1907 – 2 bedroom + den/2 bath
• Unit 2007 – 2 bedroom + den/2 bath
• Unit 2107 – 2 bedroom + den/2 bath
• Loft 103 – 2 bedroom/2 bath
• Loft 107 – 1 bedroom/1.5 bath