Gallery Auction: One Peril We Didn’t Expect
When Urban Living posted about the perils of condo auctions on Wednesday, it never entered our heads that the auction might not happen. And yet here we are with one day to go, the Gallery auction canceled, and converted to a Buy-Now One Day Sales Event.
From this surprising news, there’s only one thing we can say for sure: The Gallery still has remaining inventory to sell. What we can’t say with any certainty is what truly compelled Accelerated Marketing Partner (AMP) and Gallery Condominium LLC to switch formats at the final hour. A move that has the potential to alienate buyers in tomorrow’s sales because – no matter how off-balance and knocked around everyone is by the news – the registered, prospective buyers must be feeling it 10 times more.
To help shed some light on the why, we turned to Paul Thomas, partner at Seattle-based Northwest Auctions, for his thoughts (we asked about the more obvious motivations, and he answered).
Could this be a bait-and-switch?
I highly doubt that this is some sort of pre-meditated bait-and-switch where they get folks to pay attention through auction marketing, and then ask them to pay retail in a one-day event instead. The risks are just too high that it will backfire.
Besides, it is not uncommon to offer a Buy-Now component throughout the auction marketing campaign where an interested party can purchase the unit they want at the posted Buy It Now price to avoid the risk of not winning it at auction. Northwest Auctions has done this with good success and buyers appreciated the option. The unfortunate thing is that a Buy-Now option was not part of the marketing of this auction, which can only serve to surprise when the game changes completely, 24 hours before the auction.
Did the Gallery lose FHA approval?
I thought of that as a possibility because if they lost FHA approval for some reason, AMP would have to void any auction registrations that were based on the seller’s assurance that the building was FHA-approved. However, I checked, and the FHA site still lists Gallery as FHA-approved, as of early January.
What about not enough registered, qualified participants?
The e-mail about the cancelation does point in that direction. Part of the change is that they’re now offering a 7-day financing contingency to allow more buyers to obtain financing approval. However, there is no reason they couldn’t have announced a modification of the terms on auction day (or sent out an e-mail beforehand) and continued with the original auction format. AMP would have saved themselves a lot of trouble (not to mention avoiding forfeiture of the $5-10K ballroom cost and a whole lot of other auction day expenses).
Was expected turnout just too low then?
My gut instinct is that the pre-auction registrations were far below projections and either the auction company or the project’s construction lender (or both) didn’t like the numbers. Early registrations are usually about 60-70% of the total registrations that will come in, so the auction company can predict with some certainty up to a week out what total turnout will look like.
The one-day event will make it much easier to ‘hide’ a dismal auction turnout by cycling folks through an open house, then keeping them isolated from each other while the closing team does their best to sell units individually – as it appears they’ll do tomorrow. But to make the decision to change formats at the very last second has a number of serious repercussions, any one of which could affect Gallery’s continuing sales efforts.
As for effect on sales, we’ll just have to wait and see what come out of tomorrow’s event. For now, it appears AMP and the Gallery Condominiums LLC are betting that any disruption caused by the sudden switch is not enough to deter registered participants from taking a chance at a great deal. Ultimately, that chance still exists because (as AMP stated in their e-mail) for one day only the remaining inventory is being offered at:
…prices far less than previously publicized, including sales from our prior auction. This represents the lowest prices ever made available in Gallery’s history.