Builder explores auctions to move homes
As the real estate market continues to stagnate, builders are trying new ways to sell homes.
One of the latest trends is one-day auctions, where a block of homes is put up for sale with no set minimum price.
The unusual sales technique has grown in popularity during these tough economic times. Auction sales of new homes increased by more than 5 percent last year.
One month from now, seven western Wisconsin homes will be included in an auction sale being conducted by MW Johnson. The homes will be sold to the highest bidders at a public auction in Minneapolis.
The homes are all located in new neighborhoods in area communities, including Baldwin, Hammond, Hudson, New Richmond, Prescott, River Falls and Roberts.
All of the properties are ready for immediate occupancy, according to officials with MW Johnson.
"I think this is going to be the wave of the future," said Bill Johnson, owner and president of MW Johnson Construction. "It gives people the opportunity to get a great buy, and it's an opportunity for us to move some inventory."
Johnson said some of the homes being auctioned off have been on the market for quite a while, but the builder is far from being in panic mode.
Even if the new homes don't bring bids close to their original asking price, the immediate cash flow will allow MW Johnson to continue construction of houses.
"We want to keep busy," he said.
The auction trend is exciting, Johnson said, because many firstime homebuyers are able to get a new home at a lower-than-market-value price.
Buyers like the fact that they don't have to negotiate the final price, and the sale is completed in one day.
There are a couple requirements that buyers must meet. Successful bidders must bring a cashier's check for the down payment, and they must be pre-approved by a lender. The down payment is lower if buyers use MW Johnson's preferred lender.
Johnson said he's convinced that the auction wave is more than just a passing fad. Even if the market picks up, Johnson suggests that auctions with no minimum price will continue to grow.
"We're looking forward to doing more of this kind of thing from now on," he said. "And we're looking at building new stuff just for the auction."
MW Johnson conducted an auction in January and 1,000 people attended. A total of 18 homes were sold at that event.
Bill Johnson said he expects more bidders at the March 29 auction because homebuyers are starting to learn more about the current auction trend. A total of 26 homes will be auctioned off that day, including the Wisconsin homes.
The new marketing wave has caught the attention of home builders nationwide. "Fox Business" aired a story on its America's Nightly Scoreboard program a couple weeks ago, with Bill Johnson as one of the experts. The growing press coverage is helping to spread the word, Johnson said.
Ritchie Bros. Auctioneers will conduct the auction at the Minneapolis Convention Center.
MW Johnson and Ritchie Bros. are contractually forbidden from offering bids, eliminating concerns that a builder will artificially bid up the price of a home.
"Ritchie Bros. is one of the few auction companies that conducts completely unreserved real estate auctions," said Kieran Holm, Ritchie Bros. regional manager. "Interested homebuyers can bid in confidence at Ritchie Bros. auctions knowing there are no hidden reserves and no artificial price manipulation."
The following homes in Wisconsin will be sold in the auction:
Baldwin: 1,644-square-foot, three-bedroom home (296 Birch St.).
Hammond: 1,118-square-foot, two-bedroom home (260 Pintail Drive).
Hudson: 2,350-square-foot, three-bedroom home (46 Windsor Wood).
New Richmond: 1,468-square-foot, two-bedroom townhome (1203 W. Ninth St.)
Prescott: 1,947-square-foot, three-bedroom home (1503 River Terrace).
River Falls: 1,996-square-foot, three-bedroom home (624 Dundee Ave.).
Roberts: 2,010-square-foot, three-bedroom home (357 Dakota Ave.).
Prospective buyers can inspect the properties before the auction and decide what they are willing to pay.
The unreserved auction starts at 1 p.m. March 29. Interested bidders must register before bidding; registration is free.
Established in 1971, MW Johnson Construction is one of Minnesota's largest privately held homebuilders. The company builds hundreds of new homes every year in Minnesota, Wisconsin and Florida.