Historically, real estate auctions

The public reaction: “Oh look, they’re jumping ship, they must have screwed up, big time.” It looked bad, because usually it WAS bad.

Those days are long over. In our current market, auctions have new meaning. It’s not always a last ditch effort – it can be an aggressive first strike. An auction doesn’t always mean trouble.

An auction means you have a plan. You’re trying to establish value and kick-start and/or monetize your project. It can take place at any time during the life of a project and it doesn’t mean you’re throwing in the towel.

The Grand Opening…Auction? A grand opening auction establishes momentum for projects that could otherwise have been D.O.A. And when sales centers come up against ominous silence, mid-project auctions can work wonders.

Case in point, Vetro: A Chicago South Loop/Printers Row condo development. The market was falling and nobody knew how far. Buyer paralysis set in. To revive sales, they aggressively established market values with a one-day auction.

They sold $11 Million worth of real estate in one hour. With 248 people bidding on homes, there was no doubt where the bottom was, and plenty of people wanted in.

The new prices became the benchmark for future sales. It removed unknowns and restored buyers’ confidence that they were paying fair market value or better.

After that they sold ten homes a month at Vetro. After six months they were SOLD OUT. In this case, the auction wasn’t a last ditch effort. It was a first ditch effort. Sure, they lost some revenue when they dropped prices, but they made it up in volume and a quicker sell-out.

Auctions are powerful stuff. Dropping 35-40% from last asking price turns buyer apathy into urgency within the space of five minutes. Applied correctly, auctions defibrillate your project and give you a new lease on life in the face of any number of challenges.

For instance, if a project is not meeting pre-sale requirements of 31% to qualify for FHA financing, an auction can quickly bring the project to pre-sale level.

Here’s another: if you’re facing the choice of retiring debt or closing up shop, an auction can unload a year of inventory in one day. The velocity makes up for the price adjustments and you live another day. It’s smart business.

Some people will always be reluctant to go to auction, even when it’s the best move. Denial, wishful thinking and unrealistic expectations are facts of life in residential real estate, even at the top levels.

That’s why it’s important to choose a partner willing and able to help you execute advanced moves like auctions, with the kind of timing and effectiveness that will help you overcome today’s unique challenges. (You know where to find us.)

We’re following up from our post on March 11

The hope was there would be a surge, and there was. Home sales were up 6.8%, thanks to the looming tax credit expiration. It didn’t hurt that we also had unseasonably warm weather and slumping home prices.

Bottom line: people are buying homes. That’s a good thing – the housing market is finally stabilizing! Or is it?

The real test will be what happens later this year, when the closings associated with the tax credit start to wane. (People who have written agreements by April 30 can still close as late as June 30.)

Time to take off the training wheels and see how our post-apocalyptic real estate industry can ride on its own.

Will it be wobbly? Yes. Will it be interesting? You bet. We’ll be keeping you posted, right here. And if you need a real estate consultant or marketer during these interesting times, you know where to find us.

We’re free to listen and bounce ideas around any time. Tell us your story. You’re not alone. We can help. This year, the spoils go to the victor. We want that victor to be YOU.

Garrison Insider

Last Wednesday, Ben Bernanke

The speech caused a stock market rally of 50 points within one hour. Billions of dollars transacted in under sixty minutes, over a few choice words. Wow.

Words influence the world – a five-minute speech with carefully-chosen words can be the difference between buy and sell. We all know this.

But the ultimate question is: how will the “extended period,” comment influence the struggling residential real estate market?

It should build urgency into the equation. (I said “should,” not “will.” After all, this post is about carefully-chosen words.)

Potential buyers have just been granted about six more months to expect low rates. This should matter to them.

Six months takes us to September. If buyers wait for the Fall buying season, they MIGHT miss out on locking in a low rate this Spring – a low rate that was just assured by Bernanke’s speech.

Potential buyers who see it this way should be marking their calendars for house hunting next month.

Factor in the April 30th deadline for certain homebuyer tax credits and you have even MORE urgency.

It’s starting to feel like “fear of loss,” the magic element that fuels real estate sales. The fear that if you don’t ink the deal NOW, another buyer will snap up your dream home before you do.

Fear of loss can also apply to unique interest rates and tax credits that might slip away if you don’t buy soon. At least that’s the message we HOPE buyers are getting right now.

If a five-minute speech with a few choice words can spur billions of dollars worth of transactions, maybe a 300-word blog post with a few choice words can do the same for the real estate industry.

Okay, that’s a bit of an “extended,” fantasy, to say the least. Heck, if this post results in one sale, it’d pay for itself a million times over. I’ll let you know how it goes.

GB

LakeBluffCondos.com had been featuring the same pictures – both interior and exterior – for two years. The site’s color scheme had been changed in an attempt to give the project a fresher feel, but it wasn’t enough to improve the low registration count.

Finally, action was taken, the website was given a complete overhaul with a new layout, and most importantly, new photos. Registrations soared.

Constant updates have constant upside. In real estate, the story is always changing. Prices and trends change. The weather changes, the atmosphere changes, the competition changes.

A living, breathing site reflects these changes and tells a more relevant story about a given product. At the very least, start with the product – package it as today’s product, not something from two years ago.

Start with seasonal updates. Don’t show snow on the ground in summer. Let viewers regard the project, and the team marketing it, as vibrant and current.

Exploit your updates by spreading the word via Twitter, email and your blog. Call it out loud and clear on your home page. Write a press release. Give everyone an exciting new reason to take another look.

Budget is no excuse. Take new pictures with your phone if you have to. Today, the importance of immediacy trumps the importance of gloss. It’s a Facebook world.

Give your website the facelift it needs. It’s one of the simplest ways to give your sales board the lift it needs.

– Garrison Insider

Two weeks ago I hazarded those same powder-keg words in a very public forum – a Crain’s article. But I based my observation on HARD FACTS and observations after witnessing 43 units (over $11 million dollars worth of real estate at about $278 per square foot) sell in 90 minutes. 90 minutes!

Yes, it was an auction. And yes the average purchase was 25% below last asking price. But the sheer momentum indicates something exciting is afoot. Namely that SOME people are very interested in buying real estate again.

Garry Benson: Are You Insane? That was the question posed on the Crain’s comment board by one Ryan C, arguing that I sound like a “snake-oil salesman,” as if I had some sinister ulterior motive, as if we in the industry are all in cahoots trying to hypnotize the buying public with disingenuous bullishness.

My answer to you Ryan is if I’m insane, it’s the good kind of insane…insane for loving this topsy-turvy industry, even the downturn, because the challenges energize the hell out of me. I don’t make my declarations lightly. If there’s a “buy now!” conspiracy going on, I’m not part of it. In fact, half my day is spent advising certain clients NOT to buy, at any discount.

And stop focusing on the deep discount, Ryan. It’s the fact that people bought at all. A good old-fashioned buying frenzy. That speaks volumes about that particular market, and other related markets, in my opinion.

My opinion doesn’t matter? Fine. But look at the CASE-SHILLER Home Price Indices that have shown an upturn in most major markets. Does it mean we’re in for sunny skies in Detroit? No. (Let me know if you want a link to the study, I’ll email it to you.)

FINAL ANALYSIS The auction is merely proof of this: some people are buying up real estate AGAIN, with a hunger and urgency I haven’t seen in a while. These are our SAVVIEST buyers and they are not waiting. I’m clearly not alone in thinking things have stopped going down, Ryan. I’m joined by a mob of people who put their money where there mouth is to the tune of 11 mil.

Ryan and other detractors, let me know your objections to my logic, if any, and I’ll be happy to continue this conversation right here.

Best,

Garry

For more information about our services, please visit our main website at www.GarrisonPartners.com or call our corporate office at (312)750-1610.

To read the entire article at Crain’s Real Estate Daily, click here.

I’ve got some bad news and good news

The bad news: we’re seeing lots of hysteria among bankers and developers right now.

The good news: we’re seeing lots of hysteria among bankers and developers right now.

Yes, hysteria can be a GOOD thing. It sure beats the paralysis, denial and blaming we saw so much of in the first half of the year.

HYSTERIA breeds ACTION, because hysteria doesn’t mess around. Hysteria knows that doing nothing spells disaster.

The action to take right now is to actively KNOW THYSELF. Hold up a new mirror. Forget your stories, biases and pre-conceived ideas of what your property is and what it’s capable of doing. Throw away your old pro forma. Everything is different now.

Deals today either have hope or they don’t. If you’re still living with a wait-and-see attitude, now is the time to step up and say no more.

You have three options:

1. Stay the course while making adjustments. Look at your property as if it’s new. Rethink your product and your market and make it work. The buying base is out there and it’s so damn narrow. Look at it with a microscope, because like an uber-virus it keeps changing and morphing. Who’s actually buying? Do we have the right amenities? What should our pricing be?

2. Radical adaptation: a condo becomes a rental building. A hotel becomes a condo. Take a fresh look at what you have to work with. What efforts and infrastructure can you  SALVAGE and parlay into a new kind of property?

3. Cut your losses. Unleash this puppy and move on. It’s sad, but it’s better than doing nothing. The earlier you accept defeat, the easier it is to minimize the damage. You’ll be happier afterwards, like a weight has been lifted and you can plot a new course, having maximized your outcome.

Your product is either a 1, 2 or a 3. If you don’t know which, you’re not alone. We’ve been all over – projects from the South Loop to the Gold Coast, from Boston to Idaho both downtown and burbs – helping people discover if their project is a one, two or three, and helping them plot a course. They’re sick of being in the dark. “Know thyself,” is becoming very popular.

Find a third party to hold up a mirror. My partners and I used to work on the development side of the deal with big companies with huge portfolios. That’s where we learned the business. WE GET IT. We’re wired to make your problems our problems.

If you can’t use us, find someone like us – seasoned site advocates, not a mere brokerage with broad listings and a sales-only mindset. If you have a question or just want some clarity, post a comment or contact me. That’s what this blog is all about.

Embrace the hysteria, folks. ’09 is coming to a close. The future of real estate belongs to those who dare to be self-aware RIGHT NOW and perform the proper analysis and diagnostics needed to move boldly forward.

Good luck and Godspeed,

Garry

For more information on Garrison Partners’ services, please visit www.GarrisonPartners.com

www.youtube.com/watch?v=lvPyaEYkGG0

For more information on Garrison Partners’ services, please visit our website at www.garrisonpartners.com