Monday, March 31, 2008

Florida Property Auction Disaster

I want to thank The Housing Bubble Blog for bringing this article to my attention. I thought it was a good follow up as to why this is a good time to avoid foreclosure sales.

There was a Sotheby's property auction of 99 "luxury" properties in the Ft. Lauderdale area. So how did things go?
Well lets look at some excerpts from the article and see how the bidding went:

"The first property out of the gate was not a good omen: the auctioneer tried opening the bidding for 1850 South Treasure Drive in Miami Beach, a waterfront lot, at $1 million.
There was no response.
He then tried to get something started at $500,000, but again, no dice. $250,000? Still dead air. $100,000? Silence
. At that point, DeCaro threw in the towel and passed the property by."

"And so it went for the majority of the properties on the block.
A six-bedroom, six-bath home in Fort Lauderdale's Coral Ridge County Club previously listed at $5.9 million couldn't fetch a bid for $3.5 million. A 3,100-square-foot penthouse on Williams Island in Aventura was listed for $5.6 million and did not even get anyone willing to start bidding at $2.5 million.
A riverfront property with deep water and 255 feet of contiguous waterfront had been priced at $2.5 million; it heard crickets at $1 million before being passed by."

"What started out as a packed house gradually diminished as the event went on. About half the seats were empty after about an hour, and the crowd had whittled down to about a quarter of its original size as the event came to a close."

In the end 67 of the 99 properties failed to be sold. Some condo's went for 250,000k that were originallly priced at 600k.

What was one brokers conclusion?

"This was a disaster," said Fort Lauderdale broker Paul Merlesena as he stood near the door following the auction. "They're basically going to have to give them away now."

I think this is a perfect example as to why you need to stay away from these auction/REO type sales for now. Who knows what the market price is for these properties when they could not even get bids with price reductions as high as 90 PERCENT!

Until market prices have been established in an area it would be crazy to try and set the bottom yourself. Remeber the Detroit example from yesterday. Who knows how low these prices will go. There still is no established bottom.

Use Florida as a prelude of what is to come in the other bubble areas.

Florida is a distressed market where prices are finally capitulating. California, Nevada, and Arizona are not as distressed YET but will end up in similiar situations. This is why those bus tours in California showing foreclosed properties at 10-25% price drops are a joke. Let these other markets get as distressed as Florida and you will start hearing the crickets at the auctions just like they did this weekend in Ft. Lauderdale.

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