I am a frequent visitor of local auctions – partially looking for a bargain on some real estate and in some ways for curiousity, entertainment, and getting a better feel for the real estate market.
Recently, I have attended auctions by various companies including Furrow Auction Company for some beautiful commercial land in Wears Valley - where my family ended up purchasing 2.6 acres for what we feel was a good bargain (approximately $85,000 less than the current tax appraised value of the land).
Other auctions included some large land parcels for sale by Thompson Carr (180+ acres off Henrytown Rd.) and McCarter Auction (70 acres off Thomas Cross Rd. in New Center). In both of these auctions the large parcels of land sold for shockingly low figures in comparison to what most people are used to seeing for acreage in Sevier County. I even attended an auction for a lot where nobody showed up. We had our eye on Lot 32 E. Harvest Moon Rd. in The Homestead for a while and noticed it was to be auctioned off by Jax Auctions. Much to our surprise my dad and I were the only people to show up – including the auctioneer! As soon as we arrived and saw nobody else was on-site we quickly called the auction company and were told Mr. Jax (the auctioneer) had become sick and was unable to conduct the auction. We also attended the auction of the James Lee Fox farm with prime frontage on Veterans Parkway (by Marty Loveday) and the large Commercial Motorcycle shop with living quarters above off Wears Valley Rd. (auctioned by Kennedy Auction). Needless to say, I enjoy going to auctions!
I had learned about the auction of the 3 bank owned cabins in Lones Branch Resort by driving by the development on Jayell Road. Personally, I am not a big fan of the development because the area is primarily a permanent resident neighborhood and to me the cabins stacked on top of each other in the PUD sticks out like a sore thumb. But, I wasnt ready to write the properties off just yet. I did my research of the past selling prices of all the cabins and the current cabins on the market. The development only had 3 different models built in the community, so finding comparable properties was very easy. The lowest priced sold cabin with the same floor plan (1,008 square feet) was $130,000, but this cabin was unfurnished. Current similar properties were listed in the $170,000 range with one pending contract at $154,900.
After more research, I learned of the horrible mess the development encountered in its past. The developer, Dan Stetson of Stetson & Associates out of Florida, created Deer Path Vacations. The development company solicited money from ministers and other religious leaders across the nation for investment cabins promised to perform well and be excellent investments. Title deeds were never recorded, the developer placed cabins over the lot lines, and in the case of Douglas Lake Resort managed to place septic, water lines, and cabins on the wrong property. Banks had to end up buying all the properties at auction in the developments. The situation had become such a disaster the Douglas Lake Resort development’s owners are now forced to pay a $50,000 special assessment for the roads, water, and sewer lines to be brought onto site. The develpoments facing the problems are Douglas Lake Resort and to a lesser extent Lones Branch Resort. This dropped my enthusiasm even more for attending the auction, but I thought with a non-local auction company, Cole Auctions is out of Morristown and operate in 4 different states, there might be a chance not many people would show up. I had not seen any other form of advertisement for the absolute auction.
Doing my due dilligence, I called the owner of Cole Auctions, David Cole, submitted by Broker Participation form (to get my 2% Commission if I were to buy a property as a Realtor – which was another interesting ordeal in itself from Mr. Cole) and asked him if he had the financials of the Home Owner’s Association. He told me over the phone that he did not have them, but could contact the bank (who owned the cabins) and have them look into it and he would “let me know if there was anything adverse in the HOA financials”.
By the time Saturday had rolled around, I had to juggle two different clients over the weekend and attend the auction, so I knew I would be busy fitting the auction into my schedules. I arrived at the auction site just in time and registered. I was bidder #20 and I would estimate I was one of the last 2 people registering. So, I was thinking, this was a little more of a turnout than I had expected, but there is still a chance for a deal depending on who shows up.
Of the three cabins the one I had the most interest in was located on Lones Branch Creek. The auction company had binders of information in the cabin prior to the auction for inspection. When I viewed the survey for the cabin, I noticed a large portion of the cabin sat over the lot line and actually into the road. I asked an assistant of the auctioneer about this and he assured me they filed a variance and got it approved by the proper authorities.
The auction was about to begin and the auctioneer, opened up by answering any questions by the bidders. There was an attorney on-site and he provided an answer about the cabin encroaching over the lot line and into the road. Mr. Cole, the auctioneer, then asked for other questions. I spoke up and asked if he had ever obtained the financial of the HOA. He looked at me puzzled and asked me to ask the question again. So, I said “about 3 days ago I called you and asked about the financials of the HOA”. He then sharply replied “I never talked to anybody about that”. Which was absolutely 100% untrue and really upset me because not only was he not being honest, but it made me look like a fool in front of all of the other people. At this time, I wondered why he would say such a thing about the financials of the HOA. The attorney then stepped in and said the HOA was scheduled for their meeting next week. Something seemed fishy to me, so at this point, I had decided I would not bid no matter how low the property was going to end up going for.
I wanted to get up in front of everyone and tell them of the past issues with the develpment because very few of the people attending seemed aware of the past situations. To make a long story even longer, the cabins began being auctioned as buyers choice (the winning bidder could choose the cabin they wanted at that price or a combination of cabins at the final bid price). The cabin on the creek sold first for $140,00 (with a 10% buyers premium for a total of $154,000). The lady who won the bid was not even sure which cabin she was going to decide upon after winning the bid – she finally selected the cabin on the creek after hesitation.
The rest of the auction was conducted in a more normal manner, with the other identical cabins selling for $135,000 (+ 10% buyers premium for a total of $148,500) and $122,500 (+ 10% buyers premium for a total of $134,750). The last buyer received a pretty decent deal considering the lowest price a cabin has sold in the development was $130,000 and that was unfurnished. The other bidders paid close to market value in my opinion.
The auction ended up being a total waste of my time (as some are, you never know going in) and quite frustrating to have an auctioneer flat out make false statements regarding our previous conversation in front of the crowd. It will be interesting to see what happens in that HOA meeting in the next week. I know there was a special assessment of $50,000 per property owner in the Douglas Lake Resort community for the mess the developer created. I hope for the sake of the people who won the property in the auction, this is not the case for Lones Branch Resort.
I have had relatively positive experiences with McCarter Auction, Furrow Auction Company, Marty Loveday, and Thompson Carr, but my experiences with Cole Auctions is what gives the auction industry a bad name in certain circles.