The day of the auction dawned overcast and humid, with rain falling intermittently.
But the weather didn`t stop some 700 prospective buyers from turning out at the O`Hare Westin Hotel in Rosemont on Aug. 2, hoping to make a deal on any of the 45 Chicago-area residential and commercial properties to be auctioned under the auspices of Chicago-based Sheldon Good & Co., the largest real estate auctioneer in the country.
Steven L. Good, 35, president of the company that his father, Sheldon, founded in 1965, stood unobtrusively in the back of the hotel ballroom where the auction was to be held.
Learning at his dad`s knee about the fierce competition of the bidding process, Good has witnessed and participated in countless auctions since he joined the company in 1978, he said.
But something about this one, he admitted, was different.
That`s because Good`s own home-at 1831 N. Bissell St. in Chicago-was among the properties to be auctioned.
But Good was certain that the three-story De Paul home he and his wife, Jami, purchased in 1985 was not only in good company but in the right place at the right time. ”I have a lot of faith in the auction process as an accurate and fair barometer of the real estate market,” Good said.
No fire sale
”The last five years, especially, have seen the real estate auction move into the mainstream of the marketplace, abandoning for good its fire sale mentality,” he added.
According to Good, auctions of residential and commercial properties grossed more than $165.7 million in the Midwest during the first half of this year. ”In the Chicago area alone, the company`s year-to-date sales topped $110 million, an increase of 59 percent over last year,” he said.
But Good confessed that putting his home on the auction block took more than a leap of faith. His action held an element of urgency he was quick to attribute to the state of the marketplace.
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”If you look around you, it`s impossible to miss the evidence of a buyer`s market,” said Good, noting the proliferation of ”For Sale” signs dotting the residential landscape. ”The market is so soft that no one knows how much is too much to offer for any property. And that translates into a lack of connection between inclination and ability. Those who can afford to buy, don`t, and the end result is a dearth of buyers.”
Although Good believes the auction provides a viable alternative to the real estate brokerage community, when he decided to sell his home around the first of the year, he initially marketed it through Realtors.
”I have always had a lot of faith in them (real estate brokers),” he said, ”and they still represent the more conventional way to market and sell a home.”
But even his faith in Realtors couldn`t alter the state of the market. And after four months without a viable buyer for his home, Good changed his tune: ”Not one person was willing to meet my price (of $630,000), and those who came close had strings attached. It was time for a new strategy.”
Complicating matters further was Good`s purchase of a new home. ”We had been searching for a six-bedroom home in a six-bedroom community, which limited our options. When we found one-an English Tudor estate in Highland Park-we didn`t wait to see if our old house would sell before buying it. We snatched it up,” he said.
As a result, practically overnight Good found himself in the unenviable position of owning two homes and two mortgages.
”The carrying costs-like (mortgage) payments, taxes and security costs-
(of owning two homes) are incredibly high. I estimated that I was losing anywhere from $5,000 to $10,000 every month my house didn`t sell,” he said.
”The bottom line became this: I wanted to sell my old home fast and still get the best deal the market would offer.
”And the auction process provided me with both options. It is timely, competitive in market terms . . . ,” explained Good.
Residential property, for example, is typically marketed during the 45 to 60 days preceding an auction. During that period, blocks of time for showing a property to potential buyers are set aside on several predetermined dates.
Sale by auction offers the seller the option of framing the terms of the agreement, according to Good. ”Potential buyers know the owner`s terms of agreement going in, so there are no surprises and no last-minute negotiations. The only risk that the seller assumes is that associated with cost,” he said. And Good said he was able to control his own cost risk by setting a minimum bid on his property of $350,000. (In another type of auction, termed absolute, there is no minimum bid and the seller assumes total risk.)
The minimum bid auction not only limits the seller`s risk, but by setting a price floor, it also screens potential buyers, who must show up at auction with a cashier`s check that is a percentage of the minimum bid. In Good`s case, that check would be $35,000.
Show time
It was almost the moment for the auction to begin, and Good approached the front of the room, putting on his figurative auctioneer`s hat to introduce the properties to be bid on that day.
Then the auctioneer who was to call the auction took the podium and explained the process to the crowd, about three-fourths of whom indicated they were first-timers. He requested they indicate their bids by calling them out or raising their hands in response to the auctioneer`s call of a dollar amount.
As he spoke, Good, the auctioneer and company president, had stepped off the stage and been transformed into Good, the property owner.
And then it began. Around 1:30 p.m. the auctioneer opened bidding on Good`s property by calling for the minimum bid of $350,000.
For a moment or two there was a timid, awkward silence. Then, a rapid succession of half a dozen cries rang out, until the bidding stalled at $455,000.
Although the auctioneer tried to coax a higher bid from the audience, there were no takers. ”Going once, going twice, sold,” he cried reluctantly, drawing out each syllable.
The satisfied couple was whisked away to sign the real estate sales contract and look into preliminary mortgage arrangements on a house they had bought for well under its original asking price of $630,000.
As for Good, he said he got what he wanted, too. He was the relieved owner of one home and had just sold a second for better than his minimum asking price. ”It was very gratifying to see the market react,” he explained.
And to have his faith in his livelihood reaffirmed.