Over 500 people piled into a hotel ballroom in New York City this past weekend, hoping to snag a luxury condominium for a bargain price at a public auction, but prices were not as low as some attendees had expected.
The real estate auction—the first of its kind in the city—was for the Solaria, a new luxury, high-rise building in the Riverdale neighborhood of what's known as The Bronx section of New York.
When the building first opened, only 10 apartments had closed, leading developer Arc Developments to try and sell the remaining 54 units at an auction.
Condo auctions such as the Solaria have become more popular in cities around the country as developers look for a quicker way to sell empty apartments.
The developer is calling the auction a success, saying contracts have been signed on at least 21 of the 54 properties shown at auction, but wouldn’t specify which apartments were sold and at what prices.
Over $17 million was made at the auction overall, which was conducted by California-based Real Estate Disposition. The developer, per the auction rules, had the right to refuse a bid and all sales were subject to its approval. The auctioneer says interest from buyers is still coming in, and more apartments are expected to be sold over the next month.
One of the buyers, Michele Christon from Queens, N.Y., picked up a two-bedroom, two-bath apartment for $790,000, an almost 30 percent discount from the original listing price of $1.1 million. The 1,400 square-foot unit had a starting bid of $449,000.
“I thought it was a good price,” she says, although she admits to planning on spending a bit less—around $750,000.
Others who were interviewed as they left the auction say they came hoping to get a huge bargain, only to see that prices shot up quickly during bidding. Starting bids were about 50 percent below original listing prices.
“They went for higher then I expected,” said one auction attendee who left a little over an hour into the event.
Whether other developers in New York City will follow Solaria’s lead in selling condominiums through auctions remains to be seen, but some experts say it could happen.
“I think it will be a natural trend, there’s just too many units,” says Jonathan Miller, president and CEO of real estate appraisal firm Miller Samuel.
Around the country, luxury condo auctions have become common, but New York has been a laggard.
“New York has been one of the last metro areas to enter this arena,” said Miller. In California, for example, developers have been using auctions to sell new condos for the past two years.
Another auction was held in Nashville, Tenn. this past weekend, conducted by a different auction house, Accelerated Marketing Partners. Twenty-seven of the 30 units units available were sold.
The auctioneers projected that the condos, in a development called the Terrazzo, would sell for an average price of $250 a square foot, but instead went for a $235 average.
Earlier this month, Accelerated auctioned off $13 million worth of property at Michigan Avenue Tower II in Chicago.
Accelerated CEO Jon Gollinger recently told CNBC.com that the firm has conducted 65 auctions of new developments in the past 18 months, generating about $750 million in sales in cities like Boston, Chicago and Philadelphia.
“It’s extraordinary really,” says Gollinger. “In the 1990’s cycle, it was nothing like this.”