Home Builders Turn to Real Estate Auctions to Move Inventory and Make Margins

April 8th, 2007 by PA - Bloger

It’s no secret that new housing sales suffer from the same difficulties challenging the real estate industry in all categories. Long drawn out transactions make both seller and buyer suffer needlessly. Alternatives exist with tangible financial benefits for buyers and new home sellers alike.  Real estate property auctions offer satisfaction for both sides. We predict builders and buyers will increase their use of real estate property auctions as they experience the results and value of this service.

According to an Associated Press article at MSNBC,  D.R. Horton, CEO, Donald J. Tomnitz, reported that his company will build 35 percent fewer homes this year and will struggle to find buyers for much of their inventory.

The U.S. Department of Housing and Urban Development issued a February press release covering new residential sales estimates for January 2007,  20.1 percent lower than January 2006 sales estimates. They go on to say that the current inventory, “… represents a supply of 6.8 months at the current sales rate”. Their prediction makes for a long wait for sellers to hang on for market adjustments.

Auctioneer, David V. Johnston, President of the Fort Lauderdale area Hammersmiths Auctioneers Inc., sounds optimistic about the role that real estate property auctions will play in the future for home builders. He features a new construction offering that languished on the market with a broker for over three months. He says this well respected new home builder holds additional inventory that he expects to auction if the April 14th auction goes well.

Johnston feels that there maybe enough new housing in his market area to meet the need for several years with construction of townhouses and condominiums still going strong. As a result, Johnston sees more interest from builders and feels that auctions offer builders “good margins for their efforts”, even in a slow real estate market.

We asked Mr. Johnston if he expected the seller to offer any special concessions due to the slow market and he replied, “No, not yet although there is always room at the auction to include incentives from the seller. Due to the local situation buyer discounts are possible”.
He still sees new home builder real estate property auctions as a growing trend in his area. “Yes, absolutely things are going to get better and better for auctioneers”, according to Johnston.

Builders are increasingly turning to real estate property auctions across the country and their ability to turn inventory into cash quickly. With Hammersmiths Auctioneer’s new home auction just weeks away, Johnston said the paint was drying, “as we speak”. Good construction planning matched with a well timed real estate property auction adds one more reason to check into this increasingly popular way to clinch the deal and leave buyers and sellers smiling at the end.

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One Response

  1. John Montauk says:

    I fix and flip older houses. Will this trend about new home builders effect my market?

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