-ACCESS- 11230788

-HEAD- SOLD!

Auctions are becoming more popular with the wealthy as a way to

quickly sell luxury homes

-BYLINE- ANDREA JARES

-DATE- Sun, 16 May 2004

-SECTION- Business

-PAGE- 1F

-CREDIT- Star-Telegram Staff Writer

-SUBJECT- REAL ESTATE

-TEXT- At a recent auction, the parking lot looked like a Lexus dealership. Prospective bidders noshed on catered stuffed tomatoes and chicken cordon bleu, and wine chilled nearby, ready to be uncorked at the final bang of the gavel.

There wasn't a desperate story behind the sale. It wasn't a foreclosure auction. It was more like a party, where the National Auction Group sold 13 residential lots on Lake Grapevine for more than $4 million.

As eager buyers swarmed the peninsula that bright afternoon, guards protected the $100,000 cashier's checks required of each of the 15 bidders for the top properties. The other 28 bidders brought proof of their funds to show that they were ready to strike a deal.

Auctioneers say they're seeing a rise in the number of luxury properties put up for bid. The wealthy see the auctions as a way to sell their luxury homes or sprawling ranches quickly. As a result, auctions are shedding their image as predominantly a way to get rid of ugly duckling properties.

The value of residential and commercial properties at auctions grew from $49.5 billion to $58.5 billion between 1998 and 2002, according to the National Association of Realtors. But the actual number of auction sales is hard to quantify because the large auction groups are privately held and are not required to report sales results to a central source.

Even with the growth, auctions still represent just a little more than 3 percent of the $1.8 trillion value of homes sold through the Multiple Listing Service in 2003, Realtors association spokesman Walt Malony said.

"It's a very small percentage," Malony said.

Properties without unique or unusual characteristics would fail to attract enough interested buyers for an auction, said Jim Fite, president of Century 21 Judge Fite, which has 16 locations across the Metroplex. "It's not for the typical home seller selling the typical home," said Fite. "That's not going to get your best value."

National Auction Group only takes properties with a value of at least a million and a half dollars. "If they have a $250,000 home, they don't need us," said William Bone, the company's president.

Culture change

Recent changes in American culture could make auctions a larger part of real estate sales, according to a report by the Gwent Group, a financial consulting company based in Indiana. Some baby boomers will inherit their parents' property in coming years and want to sell it quickly. And the rise of online auctions is making people more comfortable with auctions, according to a report by the Gwent Group.

"The personnel who have been attracted to the industry in recent years have significantly improved the stature of the industry as well as making it more acceptable to many real estate decision makers," the report says. Carlos Royal, a real estate investor of 40 years from San Diego, used an auction for the first time last month.

J.P. King, a luxury property auctioneers based in Alabama, sold his two properties -- 125 acres of residential-zoned land overlooking a golf course and 2,881 acres of California wilderness -- in two days for almost $3.3 million.

"It squeezes all of the marketing into a very short period of time," he said. "I'm sure that we had all the buyers that had an interest in this property show up at the auction."

Auctions can speed up the process of finding a buyer. Royal guessed that it would have taken perhaps three years to sell the property otherwise. In North Texas, a house priced at more than $1 million takes almost 19 months to sell, according to figures from the North Texas Real Estate Information Service.

The number of executive and luxury properties on the auction block has increased in the past 15 years, said Mike Jones, who heads a Dallas auction house that sells properties of all types. Also, the number of people conducting auctions is increasing. The National Auctioneers Association hit a record 6,500 members in July. Five years ago, there were 20 percent to 30 percent fewer members.

J. Craig King, chief executive of J.P. King, said he's seen growth in luxury listings, particularly in the last 18 months. For the first time, he said, the owners of most properties listed with his firm are trying the auction route before listing it on the Multiple Listing Service. Timing is a key reason, said King, who has been in the business for 27 years.

"They've grown frustrated with the ordinary sales process of putting it in [a Multiple Listing Service] or trying to sell it as an owner and waiting for an out-of-state buyer to come along and finally, ultimately selling the property," King said. "What they're finding is that there is a way they can take the property to the market and sell it on a day that they choose."

He said the 273-acre Seventy Oaks cutting horse ranch in Weatherford attracted ranchers from all over the country. The property eventually sold at auction in October for more than $2 million to buyers from Colorado and California. King credits the success of online auction site eBay with changing people's perceptions about traditional auctions.

"Our generation and our parents' generation, they see eBay as a way of marketing and selling property," King said.

Donald Peters of San Antonio, founder of Iwillsellyourstuff .com, has used eBay to help sell high-end and unusual pieces of property. His current stock includes a Canadian island off the coast of Michigan, defunct missile silos and 727 jets that can be converted into homes.

He said the Internet auctions bring more attention to the property. By listing the island among other exclusive properties, he is introducing a location that prospective buyers might not have considered.

"We're selling the type of property first and the location second," he said.

Auctions are catching on with the wealthy as more of them see their friends do it and recommend it, said Bone, whose company has sold homes for restaurateur Norman Brinker, former U.S. Sen. Lloyd Bentsen and the late cosmetics queen Mary Kay Ash. They also see auctions as a way to make a traditionally illiquid asset more quickly transferred into cash. That saves the costs of insurance, maintenance, upkeep and liability, Jones said.

Texas has been a strong market for all types of property auctions, national auction companies say. Late last year, J.P. King opened a branch office in Austin to handle auctions in Texas and nearby states. Texas has also been a good market for Florida-based Higgenbotham Auctioneers, auction manager John Haney said.

Knowing the risks

Selling property at auction comes with risk, especially when selling without a minimum bid. Auctions are only for those who know the market well and can make educated bids.

"It's not for the light of heart," said Fite, who said he enjoys going to auctions. "You really need to know your real estate."

Jones notes that if a seller sets an asking price, a buyer typically will not pay more than that. In an auction, participants usually ratchet up the price with each bid. Jones recently sold a piece of land in Dallas for an owner who did not think the land would bring more than $300,000. He said the property sold for $1,025,000 at auction.

Jones compares setting the price of real estate, which is inherently unique, to the way fine artwork and rare collections are sent to auction to get the best price and the way charitable groups use auctions to raise money. Property owners usually have trouble setting the right price for their property, King said.

"You overprice it, it lingers on the market," King said. "You underprice it, you sell it quick and wonder how much money you left on the table."

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Qualities of good auction property

Any property can be auctioned. But the National Association of Realtors says properties that make the best candidates are those in which:

* The seller needs immediate cash.

* The property is unique and difficult to appraise.

* There is enough interest to draw several buyers.

* The property is expensive to maintain.

* The owner has 25 percent or more equity.

* The property is vacant.

Upcoming sales Here's a sampling of properties up for auction in coming months.

* Mike Jones Auction Group of Dallas Upcoming sale: a 3-bedroom lakefront home in Mississippi

* Higgenbotham Auctioneers of Florida Upcoming sales: 59 home sites at a resort on Hilton Head Island, S.C.; 13 lakeside residential lots in Florida.

* J.P. King of Alabama Upcoming sales: 11,788 acres in Nevada; a six-bedroom estate on Lake Travis near Austin; a 273-acre coastal hay farm in Bastrop County; 62 home sites near Tyler.

* National Auction Group of Alabama Upcoming sales: a 40-room Victorian mansion in Washington; a 10-bedroom lodge in the Blue Ridge Mountains of South Carolina; a 375-acre ranch in Colorado.

* Iwillsellyourstuff.com Upcoming sales: 114 acres on a Canadian island; a former Titan II missile silo in Arizona.

* Great Estates Auction Co. of North Carolina Upcoming sale: a restored historic home in Charleston, S.C.

SOURCES: Auction companies

Tips for attending an auction

* Attend one or two auctions to get acquainted with what happens. Bid only when you feel comfortable.

* Make sure you understand all of the rules. Ask questions.

* Understand what land is worth and what it can be used for before bidding on it. Make sure the title is clear and understand what debts, if any, are owed on the property.

* The first thing to do after arriving at an auction site is register and get a bidder number.

* Many property auctions require a cashier's check for a certain amount of money or proof of funds before registering to bid. Make sure you find out the requirements before attending an auction.

* Hold up your bidder number to place a bid. Remove yourself from the bidding by shaking your head to imply "no." Correct any misinterpreted signals immediately.

* Understand that many times a buyer pays an additional amount, equal to a percentage of the sale price, to the auction company.

* Many times the property must be paid for in full at the time of the sale.

SOURCE: National Auctioneers Association

Andrea Jares, (817) 685-3851 ajares@star-telegram.com