Auctions have become popular in Hawaii’s residential real estate market this year as developers, lenders, investors and owner-occupants turn to the practice as a different tack0 in a market struggling with recovery.

Properties put up for auction is varied, including undeveloped lots, inexpensive rural neighbor island residences, midpriced houses in urban areas and luxury resort real estate.

Auctions aim to create urgency and competition among buyers with an expectation the sale price will go up to more than it would under conventional sale methods.

Many real estate agents contend that auctions often don’t lead to better results for sellers, though other local brokerage firms have embraced the method as an option for sellers.

For buyers, auctions present a variety of conditions that differ from conventional sales. Such conditions can include auction fees in addition to broker commissions, and minimum sale prices that may or may not be disclosed by sellers.

Real estate industry observers note that home auctions aren’t new to Hawaii, and that such events typically become popular at the bottom of market cycles in an attempt to boost sales and prices during sluggish periods.

This year, which could mark a bottom for Hawaii’s real estate market, a flurry of auctions are taking place.

The largest home builder in the state, Castle & Cooke Homes Hawaii, announced plans to auction 11 homes and three lots on Lanai next month.

Kennedy Wilson, a California-based investment firm, held an auction in July for 47 properties comprising mostly residential and agricultural lots marketed as potential home sites on Hawaii island and Oahu. The firm also will auction six luxury homes on Kauai on Dec. 28.

One of the most active auction companies this year has been Concierge Auctions, a New York-based company specializing in luxury property. Concierge auctioned a new house built by singer and actress Cher at Hualalai Resort on the Big Island for $8.7 million in January, and since then has brought more than a dozen local properties to auction.

Laura Brady, co-founder and marketing vice president of Concierge, said Hawaii has been the company’s top market this year in terms of sale proceed volume, which has reached $50 million since the company’s first in August 2009.

Results, however, for Concierge and other auctioneers have been mixed.

In October, Concierge sold two homes and three lots on Kauai at auction after the properties had languished on the market for 16 months with conventional sale and marketing efforts. Three buyers, who were among 19 bidders, bought the properties for a combined $3.7 million.

"Although we exposed this listing with all of the traditional marketing tools available, we had not generated significant interest," Neal Norman, an agent with Kauai real estate firm Koa Properties, said in a statement announcing the sales. "After partnering with Concierge Auctions, the properties had 60 showings in five weeks — six times the amount they had received in the entire 16 months prior."

A Concierge auction in July, however, didn’t go as planned. That one involved a 5,122-square-foot home at Hualalai. The seller committed to sell the home at or above $5.9 million, and Concierge estimated the property would sell for $6.5 million to $7.8 million. But on July 2, a day after the scheduled auction date, Concierge announced that it had rescheduled the auction for Aug. 24 because some prospective bidders didn’t have enough time to visit the property or formulate their bid. The home didn’t sell at the rescheduled auction.

Another Concierge auction involved a 2,598-square-foot home on Kauai and an adjacent lot slated for bidding on Aug. 23. But after reporting that the auction marketing generated more than 200 showings and 128 qualified buyer prospects in less than six weeks, Concierge said the seller accepted a $4.65 million pre-auction offer for both properties — significantly below "suggested opening bids" for the properties that totaled $5.3 million.

Kennedy Wilson’s July multi-property auction resulted in sales for three of the 47 parcels, according to property records.

Michael Schmidt, principal broker of Coldwell Banker Bali Hai Realty on Kauai, has seen Hawaii auctions that disappointed sellers, but believes the sale tool has a place under the right circumstances. Schmidt’s firm plans to conduct its first auction soon. "We’re going to give it a try," he said.

Bud Norwood, principal broker of Coldwell Banker Maryl Realty on the Big Island, said auctions are not a superior method to sell homes that are attractively priced and marketed through traditional means.

"If you price it right, it will sell today," he said. "That’s the No. 1 rule. If it doesn’t move, walk, talk, feel like a deal — it doesn’t get sold. Even in a bidding situation, people are bargain shopping."

Norwood’s firm recently received a full-price offer for a 960-square-foot home in Ocean View listed for $77,000. The home previously went up for auction in May through California-based auction firm Real Estate Disposition LLC with a starting bid of $25,000. No sale resulted from the auction attempt.

How sellers price their property is a big factor in selling homes through traditional sales or auctions. But for auctions, buyers often have little indication from sellers as to what price is acceptable.

Terms mentioned in connection with auction pricing can include reserve price, minimum bid, opening bid, suggested opening bid, pre-sale estimate and absolute auction.

Typically a reserve price, sometimes also referred to as a minimum bid, is the minimum a seller will accept. Sometimes a reserve price is disclosed, and other times it isn’t. The latter case can result in an auction at which the high bid doesn’t result in a sale.

An absolute auction is one in which a seller has agreed to accept the high bid no matter what it is. Relatively few sellers are willing to gamble with an absolute auction. "It’s kind of a risky game," Norwood said.

The other terms — opening bid, suggested opening bid and pre-sale estimate — are often not well defined, and can be mistaken for a minimum acceptable price.

For instance, "opening bid" prices for Castle & Cooke’s Lanai properties range form $435,000 to $845,000. The developer’s California-based auction partner, Accelerated Marketing Partners, advertises that the opening bids are up to 68 percent below previous asking prices. But the opening bid isn’t the minimum price Castle & Cooke will accept. That amount isn’t being disclosed.

Bruce Barrett, executive vice president of residential operations for Castle & Cooke, said the Lanai auction will be the first in Hawaii residential property for the company. He said the company turned to the auction in hopes that it will result in a quick sale, allowing development of new homes to resume sooner.

"This is an opportunity to accelerate sales," Barrett said, adding that selling all the inventory at a high-enough price will be better than taking longer to sell the inventory in a soft home market at full prices that ranged from $750,000 to $2.7 million.

The potential for quick sales driven by auctions can be more advantageous for million-dollar homes, which tend to spend much longer on the market than mid-priced property. But costs associated with auctions also can be higher for buyers and sellers.

For instance, it is not uncommon for auctioneers to charge the winning bidder a premium, often called a buyers premium. At one Real Estate Disposition auction the premium was 5 percent of the purchase price. At one Concierge auction it was 10 percent. The premiums typically are in addition to broker co- mmissions.

Marketing for auctions is typically a short and intense process, often with advertising, open houses, seminars and partnering with real estate agents.

For Castle & Cooke’s Lanai auction, Accelerated Marketing is holding three presentation events at California hotels in Beverly Hills, Laguna Beach and San Francisco.

"We look forward to results of the auction marketing efforts," said Harry Saunders, Castle & Cooke Hawaii president.

As for the Royal Kunia home that the owner recently listed for $578,900, the auction by Real Estate Disposition began on Tuesday with a set minimum bid of $269,000. As of Friday, the high bid was $475,000, but that had not met the owner’s undisclosed "reserve price," so the auction was to continue yesterday. The results from that were not available for this story.