More developers want to auction off new units
February 20, 2010
<i>Editor’s Note: This story has been changed. The article contained incorrect information about the sale price of the Silver Strike Lodge condos auctioned in January. The auctioneer has clarified that, on average, the units sold for 45 percent off the previous asking price. </i>
On Dec. 26, The Park Record reported that developers of the Silver Strike Lodge at Empire Pass would auction off eight brand-new units. The developers thought this may have been a first for Park City. In essence, it was a kind of experiment, and response to the article indicated some wished them well, others thought it was a charade.
As a result of the auction on Jan. 17, all but one of the units in the lodge have now been sold, and two other Park City developers have signed up with the same auction company – Accelerated Marketing Partners.
Developer Matt Mullin said in December he wanted to put Silver Strike Lodge units on the auction block because willing buyers are out there, they just aren’t buying because they’re worried about overpaying.
An auction allows the buyers to come forward and together establish the true market value of a unit without any suspicion of someone getting a better deal. It also allows for a quick disposal once the agreed-upon value is established.
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Mark Waltrip, chief operating officer for Westgate Resorts will offer 44 condominium residences at The Lodge at Westgate Park City Resort & Spa on March 28. Located at The Canyons, these condominiums are much smaller than those at Silver Strike Lodge (they average at about 750 square feet) a but have much better amenity packages, Waltrip said.
Because the units are smaller, at a good location and fully furnished, he expects them to sell quickly. And like Matt Mullin, that’s part of the appeal of the process. Westgate manages timeshares and wants to be rid of the unsold whole-ownership condos at the Park City resort, he explained.
"This is a good approach to sell off balance of our inventory," he added. "This is not a company in trouble… You’re dealing with a 42-year-old company servicing (this resort) to the same level we’re servicing all other resorts."
The other developer, Henry Sigg, will auction off seven "homes" in the development Lookout close to the Silver Lake Village on March 27. They’re all "condos" he said, but some are attached, some detached ranging from 4,317 to 5,866 square feet.
Sigg, too, said he’s perfectly fine letting the units go for less than market price. It’s about moving inventory, he said. The market has gone through a correction, and in order for stability to return, inventory levels need to go down.
"You’ve got to remember, prices in the heyday were too high to begin with," he said.
When auctions dispose of units quickly it spurs demand. The same number of units it takes a whole season to sell can find buyers in a single day. They also attract a variety of bidders, which drives up the winning bid.
There’s a need for transparency in real estate, he said.
"People have trepidation. They don’t want to overpay… People are comfortable when they know what the guy next door paid, they like knowing they got the same deal everyone else is getting," he said.
Could the popularity of the method drive down prices too far? Ken Stevens of Accelerated Marketing Partners said not with this kind of uniqueness in each development.
When similar properties are auctioned en masse, that might happen, but there are no other seven homes like the ones at Lookout and no other vacation condos with the amenities offered by Westgate.
Also, buyers come in and go out of the market every four to six months so it’s always changing. But there’s a finite amount of product to be sold, he said. These quick sales will speed the day when buyers are all confident the market has hit bottom and price pressures will resume.
"The folks we’re selling to are very, very smart," he said. "They’re buying now below replacement costs, and sooner or later that’s not going to happen anymore, we’ll run out of supply first."