Investment propertyNew Home Auctions Tempt Buyers
New home auctions often, but not always, result in savings
Consumers thinking about buying newly-built homes are seeing their options expanded through the Internet and a number of home auction sites.
Although precise statistics are difficult to find, industry observers believe many consumers going the auction route are saving as much as 12 to 15 percent off the suggested price of a home. In very hot markets, however, bidders may pay as much as 5 percent above the listed price.
Since the first auction sites went up (and yes, some have crashed back down), the concept has been refined to make the sites more consumer friendly. Today, probably every major home building company is either developing or experimenting with auctions, and some -- such as Ryland Homes, the seventh-largest builder -- already have carried out successful online sales events.
"It really results in a win-win-win," says Chris Albrick, president and CEO of iBidCo, whose site coordinated the Ryland event and is currently is coordinating a sales event for Beazer Homes.
"The consumer wins because they are able to buy a home at what many times will be a discount price. The builder wins because he sells the home, but the builder also wins because he is able to move on to his next project quicker."
The biggest win may be for the consumer, however, says Albrick.
"In some markets, especially really hot markets, you see people camping out for days outside the sales office of a new development just so they can get a chance to buy a new home. That"s not "home buying." That"s playing "Survivor."
"In other markets, some builders have developed lottery systems. I don"t think buying a home should be gambling."
Albrick says ibidCo"s "bid-sales" process (they prefer not to use the word "auction") helps level the playing field.
"Instead of being subjected to the uncertainty of a campout or a lottery for a chance at buying one of these homes, buyers have an equal opportunity -- a level playing field on which they have access to all information, and they control the outcome of their search for a new home."
For home buyers nervous about the auction process or simply worried they might lose a bidding war, iBidCo.com also gives buyers a "buy it now" option that allows them to take a property out of the auction by agreeing to purchase it at the price listed by the builder.
Albrick declined to give figures on how many buyers use that option.
To enter into the bidding process, home buyers go to the iBidCo site, search through the various properties available, pre-qualify for a mortgage and then register on the site. The site then returns a PIN number for the consumer to use in bidding process.
IBidCo auctions are set on specific dates (though the "buy it now" option is available well in advance of the auction date). Buyers are able to go out to the development and walk through the models before submitting a bid.
At one recent Ryland event, 14 homes were sold online. There were 50 bidders. The average asking price for the homes was $747,083 and the average purchase price was $771,300 - a 4 percent premium.