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Auctions achieve market value via focused marketing.

A few years ago, just the novelty of a residential auction was enough to attract buyers.

In 1992, however - with auctions being conducted more frequently, and a general decline of public confidence seen in the long-term appreciation of real estate - developers and sponsors must do much more than simply announce they are having an auction. Success for the sales technique in these tough times requires focused marketing and packaging programs targeted to obtain market value for the housing being auctioned.

Real estate auctions that have been successful in 1992 for the most part incorporated two essential characteristics: * The units being auctioned were a quality product in stable communities * The housing was presented in the vital pre-auction period through well-researched and targeted marketing programs that created excitement by promoting value and savings opportunities as well as lower prices.

When these two criteria are satisfied, achieving market value through the auction process can yield dramatic results. Two auctions conducted by USAuction this spring are ideal illustrations: * At Hamilton Heights, a new-construction enclave of 20 condominium buildings in the Dyker Heights section of Brooklyn, 47 two-bedroom residences sold at auction in a little more than two hours at an average selling price of $160,000. Seven additional homes closed conventionally before, during and after the pre-auction marketing period. In almost every case, the auction sales matched the market value of the units being sold conventionally. * At Bridge Harbor Heights, a resorted 100-year-old landmark condominium in Brooklyn Heights, all 45 residences offered at auction sold in nearly two-and-a-half hours at an average price of $158,000. An additional 68 apartments closed conventionally before, during and after the marketing period at an average $171,000.

Furthermore, our pre-auction efforts attracted more than 1,500 people to the Hamilton Heights auction, with 500 of them actively bidding. More than 13,000 people visited the site during the four-week pre-auction period - enticed by well prepared ads and articles in relevant newspapers offering bargain prices and quality housing.

Simply put, these auctions were marketed and packaged with as much creativity and excitement as any Madison Avenue effort. The sponsor in each case agreed with us that an auction in and of itself cannot succeed.

Putting the 'sizzle' back in the project by vigorously marketing the auction approach through an effective advertising and public relations effort and a strong direct mail campaign is important so that the property is not considered a "distress sale." In fact, convincing developers and sponsors that the auction process is not a liquidation, but rather an acceleration approach which can achieve fair market value, is still one of the toughest obstacles for auction marketers to overcome.

However, our experience at Hamilton Heights and Bridge Harbor Heights provides fresh evidence of the viability of the auction method when used properly. What we are able to accomplish for the sponsors in both cases would have taken at least two years to do through the conventional method.

With little improvement in the residential market forecast for the balance of the year, aggressive, creative auction marketing programs will continue to serve as a viable alternative to the constraints of today's real estate market.
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Review and Forecast, Section V; real estate auctions
Author:Hannah, Donald C.
Publication:Real Estate Weekly
Date:Jun 24, 1992
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