Real estate auctions are all the rage these days as banks and developers need to unload property fast. But William Stevenson, a former executive at the Beverly Hills-based real estate auction house Kennedy Wilson and Charles Plott, a professor of economics at the California Institute of Technology in Pasadena, Calif., think they’ve found a better way to hammer down such sales. They’re putting technology Plott developed to use at an auction at the Rowan building, new lofts in downtown Los Angeles on Feb. 8.
At traditional auctions, properties are sold one at a time. That’s a problem if a buyer really likes one unit, but would settle for another one that’s being auctioned off first. Plott and Stevenson’s solution is to auction all the properties simultaneously. Prices at the Rowan lofts start at $195,000. Bids for all of the 79 units to be sold will be displayed on a screen. Would-be buyers submit their offers either online or in person at the building on the day of the auction. The auction ends when five minutes go by with no one submitting a bid.
Plott’s specialty is using laboratory research to study how people’s behavior influences economic decisions such has how much to charge for emissions permits in California or space on a natural gas pipeline. He’s helped design auctions of wireless spectrum for the Federal Communications Commission, but the Rowan auction will be his largest residential real estate sale.
The simultaneous auction has benefits to sellers, who often see lower prices late in the day when the crowd has dwindled and enthusiasm wanes. It gives at least five minutes of contemplative time to buyers who traditionally have just seconds to make a decision with screaming auctioneers in their face. But some industry players don’t think the simultaneous method will catch on. “We’ve tested everything,” says Rob Friedman, chairman of Real Estate Disposition Corp. of Irvine, Calif., the largest seller of foreclosed homes. “There’s nothing like an old-fashioned auction.”