My previous article explained the benefits of online real estate auctions for consumers. Developers are also starting to discover the value of online auctions. Still, many developers are wary of putting their property on the market this way. Why should a developer consider using an online auction? What are the advantages in doing so?
- Moving Your Assets. In a soft market, it can take a long time for property to sell or be rented. Developers who hold out for the long dollar (holding an asset instead of settling for a lower price) are bleeding their profit margin, and don't have that capital available for new projects. Selling at auction may feel like less money, but often the “net” is more, and money can be turned over and reinvested quickly.
- Starting a development. Sales breed sales. When filling a condominium, or building a subdivision, developers need people there to attract more people. An empty high rise or lonely street is not very inviting. Auctioning some property can help populate a project, and get it off the ground.
In many urban centres there are fears that the condo market is being overdeveloped, and that a slump is on the way. For those developers building now there is no knowing what the market will look like when their construction is finished. In Toronto in particular, condo sales are starting to fall, with record numbers of units slated for completion in 2013.
The market has changed. Besides being a soft market, consumers are becoming more and more savvy at using the internet for research and price comparisons. There is no sure way for a developer to perfectly estimate the market value of a project upon completion. When the market shifts and value goes down, it's tempting to keep the price high and hope. That's a losing strategy. An auction is a great way to get the real market value for real estate right now!