- Buying second homes at auction is becoming a popular alternative to the traditional sales process.
- SVN Auctionworks saw an increase in second home buyers purchasing at auction last year.
- The Chicago auction house has listings at all price points.
Sperry Van Ness Auctionworks (SVN), a Chicago-based auction house, is doing a booming business in helping buyers find a perfect second home.
Diana Peterson, a licensed Realtor, attorney and president of the Chicago franchise, says that preconceived notions of auctions being just for distressed properties are no more.
“In the past,” she said, “auctions were often conducted for homes in Hawaii and places like Aspen, where people have their third, fourth or fifth home. The properties are extremely unique, and lend themselves to auction.”
And, the sellers usually wanted a level of privacy sometimes not found in the traditional sales process.
She added that that type of seller usually did not want to be bothered with the traditional real estate sales process, and instead wanted a quick sale. They also appreciate the global reach and marketing prowess of auction houses.
But that trend has now migrated out to the Midwest, where Peterson’s firm has most of it’s listings. While not the “trophy properties” that are found in more exotic locales, there are many facets of the auction process that makes it attractive to a new set of sellers.
In 2015, Peterson’s firm saw a big uptick in the vacation market, a trend she expects to continue in 2016.
The most prevalent type of buyers that she sees are people looking for a second home. In the Chicago area, many of those folks are looking for something that is close by where they work; most buyers, she said, are looking within a 90-mile radius of their primary residence.
They are not investment buyers. They want these homes for their own use. And, Peterson said, going through the traditional MLS might not get to the right target market.
Also, she added, these homes are usually of a much smaller scale than the mammoth properties out West. They are selling at all price points, but she says that they don’t see many that list for more than $2 million.
“We just sold a second home property on a lake in Michigan for $375,000,” she explained. “These buyers live in Chicago, where they work, and just wanted something close by for getaway purposes.”
Sellers enjoy special benefits from selling at auction, Peterson said. “Sellers come to us for auction for a variety of reasons. We can offer a fast deal, no contingencies on financing or inspections, and less hassle from things such as last-minute requests for open houses. We also provide, at no additional cost to the buyer, a global marketing strategy that can better target the right buyer for the property.”
In fact, she adds, the house that was just sold to the Chicago buyer used a local Realtor on the deal, as part of an arrangement that is made for some properties. When neighbors in the same development found out how quickly the deal was concluded, they looked into listing some of their homes for sale by auction.
The auction house’s services are paid for by charging a buyer’s premium on transaction. A buyer’s premium is a percentage of the winning bid that is added to the winning bid to establish a total purchase price.
Even though distressed properties still make up a big portion of auction house inventory, many are beginning to see the auction process as a quick, convenient and inexpensive solution to traditional real estate transactions.