Two high-end realtors in New York's tony Hamptons community are tackling the moribund market head-on by putting 16 of their most extravagant properties up for auction online at a fraction of their original list prices.
"The deals we have right now are better than anything else on the market," said Enzo Morabito, a 28-year industry veteran who is a broker at Prudential Douglas Elliman Real Estate in Southampton.
Morabito and his business partner, fellow Elliman broker Vincent Horcasitas, said they developed the HamptonsAuctions.com Web site to garner attention for owners who they say are looking to cash out during the tough economic times, but have so far been unsuccessful.
"This has nothing to do with foreclosures," said Morabito.
"The sellers have equity in these properties so they're trying to make money off of them," he said. "None of the homes are distressed or foreclosed, it's just that everyone's portfolio is decimated and so people are thinking, 'What do I own that could make me money?'"
Morabito said that many of the homes on the auction block had simply fallen victim to the "overpriced" Hampton's market.
"Everyone got caught up in these extraordinary prices and we finally said to the sellers that they have to reduce their prices or they will just sit on the market," said Morabito.
Buyers who are interested in any of the properties in the auction have to register on the Web site and, if they wish to bid, must provide a letter of credit. Morabito says that he has also screened many of the potential buyers through phone interviews and Google searches.
Once they are approved, each buyer is given an ID number that allows them to bid. Bidding began last week, said Morabito, and will end on Sunday at 7 p.m. The bidding times will be staggered between 6 p.m. and 7 p.m. ET to accommodate those people who may want to bid on more than one property.
The minimum price of the home, which is pre-determined between the seller and Morabito, is posted on the home's listing on the site, and users can tell when someone has already bid on a property but not the amount. If another user wants to bid on the same house but their bid is below that of another bidder, the Web site will inform them that they must make their offer higher to register their bid.
The highest bidder has two weeks from when the auction ends to turn around a contract, according to Morabito, and if he fails to do so the second-highest bidder will be awarded the property.
There are 11 residential homes, one commercial property – a motel – and four pieces of land up for auction, but Morabito expects more to be added.
When asking buyers how much they're willing to spend on a home, Morabito said that he's increasingly finding customers who are looking to spend an average of $1.5 million, even if they could afford a home for millions more.
"People are saying I'm going to buy what I can but I'm not going to put myself on the line," he said. "I've never heard people say that before."
Marabito said that he expects the majority of bids to come in at the last minute on Sunday evening, and said that the decision to put the auction online has paid off in terms of reaching the greatest number of clients.
"We're reaching the world," he said. "I've had inquiries from England, Germany and even Australia."
"The real buyers right now are between 30 and 50 years old," said Marabito. "And all of them have been brought up on computers, so this online auction is not alien to them."
Marabito said that most of the buyers are not necessarily celebrity clientele but are actually individuals who still work in finance.