Two hundred prospective buyers had trooped through 15 condominiums for sale in the Towers of Cathedral Avenue, but instead of meeting quietly with a broker to discuss price and terms, they crowded together nervously one night this week in a Washington hotel auditorium.
With a whack of a wooden gavel, auctioneer David M. Kaufman, his voice rolling in a familiar sing-song, started bidding on the first unit off at $25,000.
"This is real now," he told his tittering audience, many of whom sported mink, pearls and silk ties. "Bid now or you'll be sorry when you go home and sober up."
A little over an hour later, all 15 units had been sold at prices ranging from $57,000 for a studio to $134,750 for a two-bedroom in the condominium near Rock Creek Park.
Auctions, once the trademark of antique and cattle markets, are catching on in the world of real estate because they can move a lot of property very quickly at a price that suits both seller and buyer, auctioneers and building owners said this week.
Property in the District has been auctioned for back taxes and in bankruptcy sales for years, but the Cathedral Towers building is believed to be the first residential real estate auction of its kind in the city.
Not all of them are so successful. In a separate auction held in New York last week, an entire 10-unit condominium on Capitol Hill was offered for sale, but the owner rejected the high bid of $1.3 million.
Nevertheless, the would-be seller was not discouraged. "I never even heard of real estate auctions five years ago, but in the last year it's all I hear about," said Beau Bogan, owner the building at 308 East Capitol St. NE. "I went through with this auction out of curiosity, but I can certainly see the benefits, and I won't hesitate to try it again."
Kaufman, who runs his real estate auction service out of Chicago, said business has been booming in the past five years. He has sold entire subdivisions of single-family houses in the Midwest and once sold 85 properties in one night.
"A house every two minutes," he said.
Because of the District's stringent condominium and tenants' rights laws, the two separate auctions in the past two weeks had to allow the tenants right of first refusal to buy the units in which they are living.
The tenants in all 10 condominiums in Bogan's Capitol Hill building declined to purchase their units when he converted the building in May of 1980, he said. However, under D.C. law, he cannot sell the building or the separate units for less than the price he offered to the existing tenants.
Thus, the building had a minimum price that was not met at the auction. Bogan refused to reveal this price.
Several of the 15 Cathedral Towers units auctioned this week are occupied by tenants. These tenants will be offered the chance to buy their units at the price it sold for at the auction. If the tenant does choose to buy the unit, the highest bidder will be given $5,000 in consolation money by the owners of the building, the Towers Limited Partnership, said Kaufman.
Bidders at the Wednesday night auction were undaunted, however, until Kaufman announced that the last one-bedroom unit was occupied by an 85-year-old woman without a lease who was sick. A collective groan went through the audience and initial bids were reluctant, but as the pitch mounted, the pace picked up and the unit sold in the $80,000 range.
Jay Mulford and Mary Ann Puglisi came with a stack of floor plans and a brochure but were quickly outbid for the one-bedroom apartments they were interested in.
"We thought if we got a 30 percent discount then it would be worth it," said Mulford. "But most of these are selling pretty much at their comparable value. Good deals, but still out of our range."
Shirly Jacobs bought a two-bedroom unit with a bid of $115,000. She and her husband have attended real estate auctions before and already own three units in the Cathedral Towers building. She said they consider the new unit an investment and hope to sell it at a later date at a profit.
"Auctions can be great deals, although as an investor, we have to be doubly careful because we hope to make a profit on this," she said.
Kaufman said sellers like auctions because they can unload their property quickly.
"In a large property like a condo, the developer made a profit a long time ago but still may have some unsold units," he said. "They cost him. So it's in his advantage to get rid of them quickly."
Kaufman said auctioned property usually sells below, but sometimes above, the original asking price.
"But, what's an asking price if no one will pay it," he said. "It's not the value of the property. The value of the property is determined by the highest amount someone will pay as compared to what other people will pay. That's all out in the open at an auction."