Harcourts Canada, a newcomer to Metro Vancouver’s real estate scene, wants to make housing auctions a common and accepted way of buying and selling homes.
“It’s just an alternative option we want to make available to people,” said CEO Hayden Duncan.
Harcourts, a New Zealand company which set up its first Canadian office in North Vancouver’s Lower Lonsdale six months ago, has sold $10 billion worth of real estate around the world through property auctions, said Duncan.
In March, it will launch its first public auction in Canada with two properties on the auction block.
One is a 1,093-square foot luxury condo overlooking False Creek in downtown Vancouver with a starting bid of $1.5 million; the other, a two-bedroom unit in New Westminster with a starting bid of $400,000.
With auctions, “you’ll know you have a fair, transparent chance to purchase a property rather than what’s very common in Vancouver where people put bids or offers blind,” said Duncan.
Housing auctions are rare in British Columbia, but common in New Zealand and Australia, where about half of all property sales are sold through auctions.
The idea, said Duncan, is to “not focus on the price, but focus on what the property has to offer, and let (buyers) determine what they are willing to pay.”
Auctions would bring more transparency to the industry, especially in cases of bidding wars where buyers are left in the dark about the value of the competing bids. In Canada, realtors aren’t allowed to tell clients the amount of a rival bid, only that one is on the table.
Auctions also give buyers time to conduct due diligence, said Duncan. Information and documents about the property are available a few weeks before the auction date. Typically, several open houses are scheduled, allowing people to visit the unit, do their homework, and get their financing in order before the actual auction.
But auctions have a poor track record in B.C. Two auctions last summer — in Victoria and Burnaby — were flops.
One reason could be most people associate housing auctions with distressed properties which are under foreclosure or a short sale. But in Metro Vancouver’s competitive real estate market it’s more realistic to compare property auctions to auctions for art or high-end collectibles, said Duncan.
An auction can only be successful if both sellers and buyers are educated about the process and have all the information they need to feel confident to participate in the process, said Duncan.
Parties have to preregister with Harcourts and the auctions are subject to an undisclosed reserve price.
Sellers also retain the right to withdraw from the auction in case a buyer puts in a pre-auction bid that’s too good to turn down. About 60 per cent of Harcourts’ auctions in the U.S. sell before the auction — a sign, says Duncan, of a buoyant market.
Listing agent Theo Birkner said he has fielded a lot of interest about the two-bedroom unit in New Westminster. An open house will be held on Thursday, with another two scheduled this weekend, and two more next weekend.
“It’s a fantastic opportunity for the Vancouver marketplace to see an addition to the way homes are sold,” said Birkner. “Lots of people are excited about it after they wrap their minds around it.”
The Harcourts auction will be held March 2 at a downtown Vancouver location.
Greg Klemke of Macdonald Realty Westmar will be watching how the auctions go.
Klemke, the listing agent for the Burnaby home that went on auction last summer, believes Vancouver was ready for auctions and was baffled by the property’s failure to sell, despite tens of thousands of dollars spent on advertising by Able Auctions, which conducted the auction. It only got one bid, which failed to reach to reserve price.
“Maybe people weren’t ready for it,” he said. “It’s too aggressive. Or progressive.”
Klemke said he’d be open to doing it again, but would do some things differently. He’d require buyers to get pre-registered, hold it indoors instead of out on the lawn, and not allow media, which he speculated could have intimidated buyers, to attend. “We didn’t do it right because we didn’t sell it.”
Duncan, however, is confident Canadians are ready to embrace auctions as a new method of buying and selling property.
“Consumers are screaming out for transparency and real estate prices that are clear, concise and fair,” he said. “It’s something I think will resonate well with Canadians.”
Time, and the market, will tell.
Since the story was published, the downtown Vancouver property has been withdrawn from the market. Harcourts Canada CEO Hayden Duncan said the property was withdrawn from the sale late Wednesday “due to the owner’s instructions changing.”