Foreclosure auction

[an]

Here’s a little update on the auction that went on today. I didn’t stay for the whole thing, only stayed for 2 hours. However, that’s long enough to get the general gist of the kind of price things are selling for. They all are between 20-30% lower than the “last known price”. I.E. the price that lender tried to sell at before but was unsuccessful. There is one house that have current tenant. I guess you have to kick them out yourself, but that property went for 40% below the last known price. All in all, it’s definitely not the kind of discount I was expecting. Here’s more detail on the property 11119 Morning Creek South, 92128. The house is 1800 sq-ft on a 12000 sq-ft lot. The last known price is $690k and the open bid is $350k. If it sell at the similar % off from the last known price, it would sell for somewhere between $480 and $550k. Considering there was a house that was 2000sq-ft with a 10k sq-ft lot, a couple blocks away that was listed and sold for around $599k. I think it’s definitely not where I would consider it a deal since you’re taking on a massive amount of risk since it’s an auction.

[cashflow]

My husband went to watch the circus today at this auction. He was quite surprised at how many people showed and how high people were bidding these properties up. Most properties needed lots of work. Also, the final bid price, plus the 5% commission the auction house was taking, ended up being at market or not much below market price. It was a great tactic for the banks. One other observation was many homes were being bid up and since the buyers weren’t prequalified-many winning bidders would go back to finalize the deal and then come up short, so many homes were having to be auctioned off for a 2nd time. So seems like many people there weren’t even aware of their limits and were just emotional.

He didn’t stay the entire time, but here are some results he had written down;

The house mentioned above Morning Creek South, in the Carmel Mtn. Ranch area, started bidding at $349k final winning bid was 585K plus the 5% commission the auction house takes. This house didn’t even have a stove or ac unit, and needed almost everything redone….also looked like one of the rooms had previous water damage.

4667 La Canada Rd. Fallbrook, on 2.5 acres-started bidding at 439K, final bid was $620k plus the 5%. We visited this home and it appeared to us that it was almost a teardown…needed absolutely everything and had a strange garage conversion with cement floors. The property was just weeds with little development.

4306 Morgan Creek Way, Oceanside-started bidding at $419k, final bid was 615K plus the 5%. This was a newer home with 3500 s.f.

16564 Gettysburg Dr, San Diego (in 4S Ranch)-started bidding at $339k, final bid was 525k plus the 5%. In addition by my calculations beforehand this home has nearly a 2% property tax rate due to high mello roos. This home is on a 0 lot line with a patio type ‘yard’.

We would love to hear from the original poster (REO investor that had emailed in) on their perspective.

[an]

thanks for the info on Morning Creek South cash flow. I agree with you on your assessment. That house probably need at least 10-20k to be livable. The carpet was totally messed up and the room you mentioned seems like it did have the ceiling redone badly. Kitchen and bathroom was in pretty bad shape. $585k + 5%= $614k. That’s higher than recently sold house in that neighborhood that was larger and didn’t need as much work. I guess this buyer is either a future FB or just the bank insider bidding up to the reserve. We’ll know soon enough.

[waitingtobuy]

Hi,I too attended the auction and was amazed at the sea of people there. This was my first ever experience with an auction event and It was an eye-opener. Most of the homes I was tracking sold for near or more than their current fair market value.

Example: 11178, Ivy Hill Dr.
The winning bid was $550k + 5%= 577500.
The current comp in that neighborhood for this size home is around $530k. A home of equal size, 11160, Ivy Hill drive sold for 530k in April-2007.

16564, Gettysburg Dr.
Winning bid =520k+5%=$546k.
The comp for this neighboorhood for same size home is 540k.
Simillar sized home in this neighborhood was listed for $519k in May. I am sure it got sold near or at that price.

So, where is the deal? I guess, barring few, everything else was a deal for the Bank.

( I must note that a nice home in Oceanside sold for way below it’s fair market value).

( Also, I saw one guy buying few condos. Seemed like an investor who intends to make them rental properties.)

[sdrealtor]

Quick and dirty analysis on one fo the homes.

Morgan Creek in Oceanside

3750 sq ft bland home with very little upgrades. Purchased in 2005 for 750K w/ 100% financing. On market for over 1 year starting at 820K. Last listed at 650 to 699K trying to get a short sale before end of 2006 then as an REO at 698K for the 1st 3 months in 2007.

There are currently 15 homes for sale in this tract which cant be bigger than 200 homes. There are 3 pending and 4 have closed in 2007. All the closed sales were 2300 to 2600 sq ft models at prices between 525K and 570K. There are 5 of the 3000 sq ft plus homes on the market at prices from 650K to 800K.

With the 5% added to 615K it’s a sale at $650K.

Verdict… No deal here! This house sold more or less at retail.

[waitingtobuy]

It’s also notable to see the clever marketing game this auction house used. All the homes had two numbers against them.

1. Starting Bid: A very low value which means nothing but generates buyer’s interest.
2. Previously valued at: A very high value which also means nothing. That was the comparable value of the home when market was at peak. Doesn’t necessarily reflect the current value.

Both these numbers tempted buyers to out-bid each other and eventually buy something which in most cases was higher than the retail price.

Was a good learning oppurtunity for me.

[an]

It was a definitely good learning opportunity for me as well. I can totally tell that if you don’t come in there with a max bid price in mind, the adrenaline that goes on during the bidding process can really make you overbid. Also, doesn’t seem like any of the winning bid is a deal. They all seem to be either market price or over market price. Which to me is horrible because you, as a buyer, take so much more risk buying at an auction than buying it through regular channel. So, my take is that, either all these bidders are just bank guys bidding it up to the reserve or these are your future FB. None of these properties are ready to move in. They all need some kind of work. At least the one i went to see.

For those you stayed around till near the end, do you know what the Rock Canyon Dr. sold for? This property have huge mold problem. It’s on every wall I can see. This house definitely need a complete overhauling before it’s even livable.

[no_such_reality]

Did anybody keep a list of the properties so we can track the recorder office to see how many actually were “sold”?

[recordsclerk]

Great info guys, thanks. Until the banks get more serious about selling, the outcomes for these auctions are going to remain the same. I doubt that half of these properties will show up as recorded sales. I’m sure that they will go back to the banks. Eventually if the market continues to spiral downward these banks will have to lower their expectations. Even though this auction looks like a failure to most of us, I think this was a lesson for the banks. In the future these auction houses (the auctioneer) may require fees from the banks even if there are no sales recorded. The auction houses are going to get frustrated with the banks for not selling.
I love these auctions, can’t wait for the next one.

[Troubled Loner]

Overall, it looks like there are still a few idiots left out there…

[SD Realtor]

AN thanks for posting this thread. This validates the stratedy that the lenders have been applying to short sales and foreclosures. I have been very curious as to why the lenders have been pretty much playing hardball with short sales and REo pricing and this answers the question.

What is sad is the boneheadedness of the buyers.

SD Realtor

[sdrealtor]

I see it another way. If you take a property and expose it to the market with top notch marketing you will be able to sell it at the current market value. I havent had a problem selling my listings the last two years employing this very strategy. It’s not rocket science. Folks who have been trying to take shortcuts whether it is a less than top notch marketing effort, an above market price or a little of both havent been quite as successful taken as a whole.

[SD Realtor]

As you know sdrealtor I don’t do much marketing at all in exchange for a lower commission. I find that pretty much every listing I have had in more desireable areas have sold. However listings that are not in desireable areas are much more difficult to sell. Also it is not just MY listings in less desireable areas that do not sell, many listings in those same areas had Coldwell Banker, Prudential, and other mainstream listing agents and they didn’t sell either.

So no it is not rocket science at all. I would absolutely agree with that. If your home is in good condition and it is priced correctly it will sell. Especially if you are in a place like Encinitas, Carlsbad, and other places. Lemon Grove and other similar neighborhoods may not have the same results.

SD Realtor

[sdrealtor]

I have also seen many properties poorly positioned on the market and completely mis-marketed by agents at companies large and small. It kinda sounds like your saying I’m hitting softballs. However, I’ve sold listings in undesireable areas too. One in particular had two major issues occur within 1 block of the house when it was on the market. I’m talking bout police, swat teams and riot gear on every news station and in every newspaper right before and during the short listing period. Mine sold very quickly while others languished on the market for over 1 year. Sorry but I don’t agree and think I can prove it.

There is absolutely nothing that price cant fix and it is best to fix it b4 you hit the market. That is perhaps my greatest strength. With a workable price out of the gate and top notch marketing you give yourself the best chance for success.

I have had the privilege of working with some of the greatest marketing minds in the world, yes the world including Sr Vp’s of marketing at Fortune 50 companies whose marketing has defined American Culture. They taught me many things I carry with me. First and foremost is that you only get one chance to be new. Don’t blow it!

I make sure all my clients understand this and many other vital marketing strategies. Feel free to use that one if you think it would help.

[an]

sdrealtor, I think your point is valid. Every house can and will sell quickly in ANY market if PRICED right. The issue comes into play with sub-prime areas and seller who don’t have the market to price it right. So, yes, I’m pretty sure you can sell the worse house in the worse neighborhood quickly if you priced it as so. The houses which are languishing around right now are the one who are not priced right. I don’t think pricing it right @ 0 DOM or 100 DOM matters. If you priced it completely wrong @ 0 DOM, but drastically decreased it to a very attractive price @ 100 DOM, you’ll sell it quickly after the price adjustment.

[Author]

Posts