Most people buy a few souvenirs when they spend a day at the New Jersey shore; Robert Cariola picked up a house. Cariola and his wife were taking a Sunday drive in August 2001 when they saw a sign in front of a two-story Colonial cottage, blocks from the ocean in Wildwood, announcing that the house would be auctioned that afternoon. Out of curiosity, they went inside and found an elegant, century-old fisherman's boardinghouse that had fallen into disrepair. On a lark, Cariola stuck around for the bidding — and the gavel came down on his $48,000 offer.
"Including the purchase price, I've put about $110,000 into the house. Since I bought it, it's become a mad market down there, so I'm more than in the money on the place," says Cariola, a Philadelphia traffic cop. But he never would have purchased it if not for the auction. "Buying a house was the last thing on my mind that day. It was the bidding that made it exciting."
While nobody recommends buying a house as an impulse purchase, it is precisely that exhilaration — driven by the allure of competition and the tantalizing prospect of picking up a bargain — that has made residential auctions a hot ticket in real estate. Buyers spent $55 billion at commercial and residential real estate auctions in the U.S. in 2001, according to the National Association of Realtors. That represents nearly 7 percent of the value of all real estate transactions.
Every type of property, from new construction to historic homes to handyman specials, is available on the auction block. The key advantages for buyers: As long as the house isn't in foreclosure, auction purchases tend to be clean and quick, closing in about half the time of a typical real estate sale; everybody interested in the house has an equal chance to get it; and if bidders don't get carried away, the auction process can provide some reassurance that they're not overpaying for the property.
"Auctions are transparent," says Dorothy Nicklus, who has conducted hundreds of them as owner of 24/7 Auctioneer (www.
247auctioneer.com), in Guttenberg, New Jersey. "When there are twenty people openly bidding, buyers can see what value others are putting on the property, something that they can never be certain of when they blindly put in an offer without an auction."
That doesn't mean, however, that you should expect to get a house on the cheap. The high bid on most auctions is between 90 and 110 percent of what the property would fetch if traditional selling methods were used, according to industry estimates.
