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Sunday, July 03, 2005

Auctions For Condos

When a new real estate development pops up, demand for the units often exceeds supply. So, the units have to be "rationed" using some mechanism. The most typical setup is that the units go for a set price, and they're allocated on a "first come, first served" basis.

Unfortunately for the developer, if it's an attractive community, the price of the units increases rapidly, so the speculators sell the units in the aftermarket. This means that the developer leaves money on the table (he could have set the price higher at the start.

Here's an alternate setup - an auction. In this condo development (on the Florida Gulf Coast), condos go to the highest bidders in a sealed bid auction. The developer has a website that lists the number of bids (but not the amount of the bids) for each parcel.

Hat tip to Market Week for the link.

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