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Development to be auctioned this week

July 23, 2007|By JENNIFER FITCH

ZULLINGER, Pa. - On Wednesday morning, 89 building lots will be sold in Washington Township, Pa., quite possibly becoming the first residential development in the municipality's history to be sold at auction as a whole.

"I can't recall that a subdivision has gone to auction in this form," said Mike Christopher, who recently marked his 30th anniversary as Washington Township manager.

The Pheasant Run development, off Tick Ridge Road, was advertised as "approved building lots" on 33 acres. However, the township supervisors delayed final approval of the plans because engineering concerns hadn't been fully addressed and bonding isn't secured.

A condition of sale likely will be that final approval is granted before settlement, auctioneer Matt Hurley said.

"When we sell it, we're selling it as 89 guaranteed building lots," he said. "It'll be ready to go when they settle."

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"It's an interesting situation. It's unusual it would go to auction without the final plan," Christopher said at a public meeting July 11.

The plans are essentially set for approval, "as long as we have legitimate bonding" for the water and sewer infrastructure, Christopher said at the meeting. The bonding could be $2 million to $3 million, he said.

Bonding serves as financial security for the municipality. The developer is required to put aside money that is later refunded when he completes infrastructure like roads and water and sewer lines.

The single-family houses proposed by Kylea and Associates were first submitted to the township for review in August 2005. Now the property, which Hurley called a "builder closeout," has been scheduled for an 11 a.m. sale.

"The auction method is becoming more viable," Hurley said. "Years ago, auctions were thought of as a liquidation sale or last resort."

Entire developments have been going to auction in Florida and California, and the trend has moved into the Midwest, said William Sheridan, chairman of the National Auctioneers Association board of directors.

Two years ago, Sheridan sold 36 lots together in Michigan. He remembers a 100-lot subdivision sold by an auctioneer in Florida last year.

Hurley said he sold 200 lots last summer in Chambersburg, Pa.

Sheridan cautioned that the value of an auctioned development is typically 60 cents for every dollar it would bring through retail sale.

"People have to realize things might not bring what they used to," Hurley said.

He said he has marketed the Pheasant Run sale through newspaper, Internet and direct-contact advertising.

"It's just a different method of marketing ,and it's become very popular," Hurley said.

"The auctioneer needs to analyze the target he wants to hit. He needs to get in front of builders," Sheridan said.

The reason to go to auction is that a property owner can "get his asset converted into cash in a time-sensitive method," Sheridan said.

"It is becoming a more popular option for developers. As the market slows down, there are more and more developers who want to avoid the carrying costs and sell the thing quickly," Sheridan said.

Frequently, residential developments in Washington Township are "flipped" as a whole or in parts when they change ownership from builder to builder, Christopher said.

"With each progressive step, generally the price of the ground goes up accordingly," he said.

"In the auction industry, we've sold about $16 billion worth of real estate" in 2006, said Chris Longly, public affairs manager for the National Auctioneers Association. The group of professional auctioneers doesn't specifically track the single sale of multiple lots, he said.

The Pheasant Run sale has a $13,000 per lot minimum, totaling $1.16 million, Hurley said.

A representative of Kylea and Associates did not return calls seeking comment.

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