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A narrow three-story house at 537 Hancock Street in Bed Stuy, pictured above, with a foreclosure judgement against it of $334,279, sold for $900,000 at auction in December.

A three-story three-family house at 284 Schaefer Street in Bushwick, closed for $910,000 that month. Close to the cemetery and apparently built in the early 20th century, the house had a lien of $10,702.

Townhouses in Bed Stuy, Crown Heights, Bushwick that would have sold for $200,000 or $300,000 in 2011 are now going for $600,000 to $900,000 at auction — tripling in four years. (That is for average houses, usually three stories and about 3,000 square feet.) The prices of large commercial properties have also risen.

Prices started to skyrocket at the end of 2012. By 2014, auction prices of many properties drew close to market rate prices, with little to no discount.

One reason, according to one auction veteran we spoke with, is the pool of buyers is increasing, because online info makes the auctions easier to find.

“New investors plus end buyers coupled with the recent steep increase in Brooklyn property values has made getting something cheap at the auction almost impossible,” Mordy Getz of Transition Acquisitions told us. The Williamsburg-based company specializes in acquiring and improving distressed residential and retail buildings in New York City.

“Once upon a time, auctions were a place for sophisticated investors,” he said. “Investors had to physically go down to the county clerk and search newspapers for upcoming auctions. There are two asset classes at auctions: Townhouses and investment properties. The fact that only sophisticated investors attended caused the price of both assets to be very cheap at auctions. With the Internet age more and more people easily find the info thereby increasing the pool of buyers. That in itself is pushing up the prices.”

He continued: “This public info has even brought some end buyers into the game for townhouses. End buyers always pay a premium, more than investors/flippers. That has caused townhouses to go for full price lately. Investment properties have also become more expensive due to the large pool of investors.”

Considering the properties are purchased blind, with no site visit or tenant info available, “it’s crazy that auction prices became so high,” he said. “Add the adrenaline rush one gets from bidding — and you have a bunch of drunk bidders,” he said, speaking metaphorically.

Photo by Christopher Bride for PropertyShark


What's Your Take? Leave a Comment

  1. The old auction system in Brooklyn at least, was never that “sophisticated”. It was a shambles of court house step scams and back handed deals.
    At least now the properties that do get to auction are properly called and all bidders are called up to the front to bid as well as checking ID’s and that they have the certified funds etc to actually bid.
    The prices at auctions have always gone up & down with the market.
    But what is more horrendous is the cons and scams of property in foreclosure, where the old time scam artists and back handers are hounding and literally stealing peoples houses by fraudulent signatures on contracts followed by litigation forcing sales etc. Sometimes not even property in foreclosure, just long time senior citizens taken advantage of due to the lack of “sophistication” of the market and old fashioned trust of “professionals”..
    IE: I just heard over the weekend of a house on Park Place that is in contract for $375,000. OK not prime Crown Heights but still worth at least $800,000. The elderly woman who owns the house does not remember signing a contract, never went to an Attorneys office and the “buyer” is now telling her son, that he will file for specific performance. They now have to hire an attorney to get her own house back, at what cost? And maybe loose their house because that is her signature on the contract of sale.
    The old Court House investors are out on the street, instead of being on the Court House Steps.

  2. I don’t think I would spend 900K for “average” Bed Stuy Brownstone at auction. You have no idea what you’re dealing with in terms of renovation costs. There are still properties for under a million that you can go look through and get a realistic renovation budget.

  3. It doesn’t have to make sense to you or to me. People are content to pay at the top of the market, the houses come in at modest discounts given the amount of work that’s needed to be done, and these are buyers that aren’t worried about running a business. Example: They budget for a 1.2m dollar house, find one for 900k and then put 300k of reno into it. As long as it stays under 1.2 number they’re happy.

    The vibrancy of the marketplace is pretty reassuring since it means there isn’t enough inventory.

    I spoke with one developer when I was buying last year and we briefly touched on his portfolio of undeveloped properties, he had “between 60-80” and was only working on the worst houses because he said “I know you want these other ones, and other people do too – the longer I sit on them the more I get for doing nothing”. Spoken like a pro.

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