As far as condo auctions, everyone has seen three types of auctions go down in the post-boom real estate market: There's the Intellimarket auction process (transparent, deliberate, slow and plodding as a baseball game), the Kennedy Wilson approach (squawky, thrilling, full of pitfalls due to the hidden reserves), and the Sold2U auction process used by Concerto (frenetic, elusive, and despite the bad reviews, pretty successful). So how is the upcoming Little Tokyo Lofts auction going to play out? Run by East Coast-based firm Sheldon Good & Company, the auction, which will try and sell the last 23 units in the Little Tokyo building on November 21, is completely different. Basically, it works like this: Like a normal auction, everyone is in the same room, and they all bid at once. But buyers bid on a pool of units, not a single unit. And whoever bids highest gets to pick the unit they want, and then that unit gets removed from the pool.
So, say the auctioneer starts the bidding at $75,000 (that's the cheapest opening bid), and the bidding gets up to $400,000. The winning bidder takes what unit he/she wants. Then the auctioneer starts again, starting the bidding at the lowest priced unit still available. From the buyer's point of view, the advantage is that it's a transparent process; the disadvantage is you have to sit through the whole auction, and you are competing with the whole room.
The terms of the auction dictate that the first eight units offered will be accepted at the minimum bid price or higher. This ensures that at least some people will actually get a unit (unlike the hidden reserve auctions), but it also ensures that the bank can stop the auction (if it's not going well for them) after those eight units sell. And after those first eight units sell, the bank can re-negotiate prices on "sold" units if they want (so this is like a hidden reserve).
There is more to know about this type of auction and the advantages and disadvantages for bidders, but this is just the initial look at how it will operate.
Here's the list price below. Note the dramatic price fall of unit 608, originally priced at $1.2 million, now with a starting bid of $170,000.
· Auction Process Not Dead, Little Tokyo Looking to Unload [Curbed LA]