In Philly, slum rentals face tough auction market

For anyone who ever sat through the bewildering circular twice-monthly mass foreclosure and tax auctions formerly mounted at First District Plaza in West Philly by ex-Philadelphia Sheriff John Green, where on any given day most of the properties remained unsold and a handful of lawyers always seemed to have the inside track, today's auction of 41 rental properties by private auctioneer Max Spann and his blue-jacketed team, at the same location, was a revelation.

After the past couple of years of delayed and complex foreclosures, "banks are hiring us to sell more of their inventory," Bob Dann, chief operating officer at auctioneer Max Spann, of Clinton, NJ, told me. 

"This is a 'bidders' choice' auction for 41 properties in low-income neighborhoods," Dann told two dozen bidders -- bald contractors, moonlighting city firemen, professional investors, and grizzled neighborhood residents from Frankford, Kensington, Southwest Phialdlephia and Point Breeze -- who lined a First District meeting room as two electric guitarists hired for the occasion played softly in the corner.

Bidders' choice means the person willing to pay the most money, for any property on the list, gets to choose which of the properties remaining on the list they can go home with. He didn't mention the source of the properties -- an investment group under pressure by its bank. Dann ran a similar sale, of foreclosed properties, for Beneficial Bank earlier this year; he has bigger ones planned for next year.

Old Max Spann himself, who's auctioned busted Phily and Wilmington condos, Chester County horse-country spreads, the Archdiocesan summer place in Ventnor, and much else in a long career, was on hand to praise rental real estate as "the only thing I know of that if you're in bed at night and you listen real carefully you can hear money dropping in the cup." 

His son Max Spann Jr. told bidders, "The smart investor is coming back to rental-income real estate," the best "hedge against inflation" because you can always raise the rent. Rents on the 41 inner city properties on offer ran from $595 a month to $750. "Most," said Spann, are occupied.

The Spanns warmed up the crowd with stretching exercizes. Then auctioneer Joe Bodner demonstrated how to say Yes -- wave your arm, nod emphatically -- did a short warm-up sale of sports gear to raise cash for St. Jude's Children's Hospital -- and it was off to the races with the first bid: "Thirty-five thousand," a bald unsmiling white man nods. "Forty-five," this time it's a slim serious Asian woman. "Fifty thousand, fifty, fifty, thinkingaboutit thinkingabout it. We're talking fifty thousand. Do I got forty-five, don't miss out, guaranteed to sell. All at forty-five. C'mon guys." The room was quiet. 

"How about forty-seven five. Let's try forty-six thousands and let's go. We were talking about forty-six, forty-six, last call. Sold for forty-five thousand." She picked 1728 S. 17th St. She wouldn't take Bodner's offer to buy a second for that price, so he started back again: "Fifty, fifty, talkingabouttalkingabout," but no sale, so he had to drop to "thirty thousand, thirty thousand," a white-bearded black man in a ball cap waves at forty. "Guaranteed to sell, four-oh, bid, going once, going twice, I'd buy them all at that price, you want to be in early, you're making money from Day One." The buyer wants two properties, each at that price: 2612 South Burbrow, 7013 Wheeler Street, both in Cobbs Creek.

The next round stalls in the mid-thirties. "Cheaper than most cars," says Bodner. The Spanns are still electric, stil walking the floor,l positive, but there are still 38 properties on the list, and the price isn't going any higher.

Two hours later Spann had disposed of 21 properties for as little as $25,000 each; the other 20 fetched no qualified bids. A larger sale of Beneficial Bank properties earlier this year fetched over $1 million. Spann plans bigger sales next year. "Auctions are always fun," the founder told me. "I've never been at one where I didn't have a good time."