Saturday, June 23, 2007

Deal or No Deal?

From the Sacramento Bee:

With a high-energy show of rock music, auctioneer chatter and free coffee for all, an Irvine-based foreclosure liquidator sold more than 100 Sacramento-area bank-reposed homes Saturday to the highest bidders.
...
The spectacle showed a regional housing market in distress with mounting foreclosures.
...
Winning bids Saturday ranged from $105,000 for a Sacramento house to $810,000 in El Dorado Hills for a property once valued at more than $1 million.

Winners, many of them real estate investors throughout Northern California, said they were happy with their bargains.

"I was going for $275,000 and I ended up bidding $300,000," said Bill Weldon...a retired English teacher who dabbles in real estate, ...who bought a 1,770 square-foot foreclosed home in Galt. "I figure instead of saving $100,000 I saved $75,000. It's still a good deal."
From the updated article:
Bob Somal and his real estate broker father, Narinder Somal, bought two houses, paying $240,000 for one in Stockton and $400,000 for another in Elk Grove. "We were going to go to $350,000," said Bob Somal. "We decided to go to $380,000. And our winning bid was $400,000."...The Somals plan to resell both houses.

Investor Heman Lee of Sacramento bid $350,000 for an 1,844-square-foot house in Elk Grove and plans to rent it. He called it a "good price.
...
[S]ome overpaid, said watchful real estate agents. Seeing one Stockton house sell for $460,000, veteran Stockton agent J. Richard Sabbatini shook his head and said the house was not worth that much.

Some came to watch for practice, assuming there will be more auctions and better prices later this year or next. Others said they decided not to bid after seeing heavy traffic at open houses and such a large crowd.

"I just figured it was going to be prices higher than I'd like to pay," said Mesut Koch of Rocklin. Watching the frenzy, Koch said: "I don't think I would do well here. I'm not coming back." He said it looked easy for people to lose themselves and go $10,000 too far.
From News10 (also video):
Many homes valued at nearly $500,000 opened to bidders at just $250,000. But it didn't take long for the hot homebuyer competition to quickly drive many of those prices up. "I haven't heard of that many steals here," said Andy Adams, who drove to the auction from South Lake Tahoe.

But there were some bargains to be found. Pat and Satya Chaterjee won their bidding war for a Roseville home, paying about $15,000 under market value.
From KCRA (also video):
Auctions have become more prevalent as banks struggle with foreclosed homes. In the past year, homes in foreclosure jumped 212 percent in Sacramento County, 198 percent in Stanislaus County, and 192 percent in San Joaquin County.
...
Alexis McGee, president of foreclosures.com, gives a warning to buyers. She said auctioneers have been known to put shills in the audience whose only purpose is to bid up the price of foreclosed homes.
CBS 13 video here.

From the Fresno Bee:
On steep courthouse steps partially shaded by 100-foot elms, a public auction crier called for bids Friday on Laci and Scott Peterson's former home. No one but the the local newspaper showed up.

So Julie Grimm, a foreclosure auctioneer with Dual Arch International, closed the bidding, closed her binder and walked away. And Modesto's most notorious piece of real estate became the property of a Simi Valley bank. The lender is owed more than the house is worth, documents suggest.

What a change from July 2005, when Gerry Roberts proudly announced to the world his triumph in steep competition for the rather humble cottage-bungalow...Roberts, a single father and real estate agent, bid $10,000 more than the asking price of $380,000 and declared he had just purchased "probably the most controversial home in the world" and moved in.

Roberts soon found himself out of a job and put the three-bedroom, two-bath home on the market, asking $479,900.

A few weeks later, Roberts tried hawking the home on eBay with full reference to the Peterson drama. An unidentified couple working with another broker later agreed to buy it for nearly $350,000 for their college-aged daughter and her friends, but backed out 35 days into escrow.

Countrywide Financial served Roberts a notice of default in October and set a February foreclosure date, postponed until Friday's public auction. Roberts filed for bankruptcy protection in February, listing $340,000 owed to the lender as his largest debt.

19 comments:

smf said...

"But there were some bargains to be found. Pat and Satya Chaterjee won their bidding war for a Roseville home, paying about $15,000 under market value."

$15,000 under current market value is not a bargain, and the SacBee article stated:

"Winners, many of them real estate investors throughout Northern California..."

Note that 'investors' are still in the market.

That's probably why a $15K cut is considered to be a 'bargain' in their books.

Diggin Deeper said...

"She said auctioneers have been known to put shills in the audience whose only purpose is to bid up the price of foreclosed homes"

How many of these homes are now off the books? I doubt that many if shill tactics were used. I've been to many auctions and its all about the "buzz". I wouldn't doubt this story get a revist if these "sold" homes end up back on the street in the near future.

HappyinSF said...

I find it a bit surprising that 100 of the 250 homes sold, and at current market. What's the point of paying full price with a selection of 250 when you can pay full price with a selection of 20,000?

Cmyst said...

I'm thinking the same way. 15k under current market values is nothing -- and didn't they have to pay a percentage to the auction house?
It seems like they could've done as well (or better) by just shopping the MLS.

Perfect Storm said...

Well according to realtytrac.com they have 7000 houses left to auction. Major ARM resets are still to come, this housing implosion is getting worse day by day.

Housing/Mortage Doom 2007

Were right on track for a 50% decline by 2009.

citykitty said...

From the Sac Bee:

"Tuxedo-clad runners worked the large crowd and attractive young women staffers heartily applauded opening bids as homes, condominiums and mountain cabins from eight area counties went on the auction block. Loud, rapid auctioneer babble, rock music and free coffee..."

Sounds more like a casino. Like a casino, the bank always wins: homes valued at $500,000 should have FINISHED near $250,000, not started at that price. Good luck with that "investing."

Next time they will have to comp the "investors" something stronger than coffee.

Perfect Storm said...

But some overpaid, said watchful real estate agents.

At least people did not have to pay a useless real estate agent/broker any commission. Some good came out of this.

smf said...

There are less sales than before, and apparently a good chunk of these sales are going to speculators still.

Talk about a 'perfect storm' brewing

Perfect Storm said...

From a comment on the Sac Bee,

Based upon the picture shown on this news, the auction booklet, and Sacbee's data base, I believe the previous owner of Mr. Weldon's house paid $310,250 three months ago. Thank Sacbee for providing recent sales data and MLS listing. I have been using them a lot to watch the housing market.

alba said...

There was a 5% fee for all sales....more than any RE broker should get.

norcaljeff said...

This shows you there's still stupid buyers, even at auctions. These prices still seem very high, and later this year these buyers will be kicking themselves for putting up such high bids on low value RE. This goes back to some of my previous comments in this blog: Stupid people still paying stupid prices which is protracting this market down turn.

smf said...

If memory serves me right, after the dot.com collapse, we kept hearing stories of how investors took the opportunities of lower stock prices to buy low.

Take a look at the Nasdaq chart after the bust to see what happened.

So stocks would tank 10%, investors would buy 'bargains', and the market would rise 7%, before tanking again and repeating the cycle.

In all the mentions of the drops and falls, even I missed the overall picture of just how much value the Nasdaq lost from its high, 75%, since the drops were incremental in number.

But they add up quickly.

Housing moves slower, but I get the feeling this is dot.com dejavu, as any slight drop in price brings out 'investors' ready to cash in when the prices go up again.

Of course, Nasdaq is still 50% below its high, 7 years after it happened, but the chart shows that its value now is a good example of 'return to mean (value)'.

Happy Sam said...

If this follows the pattern of the auctions of the early 1990's, the first few auctions will have the best "deals". Once they become commonplace the auctions have to have REAL deals to get bonna fide bidders to compete otherwide, they just see th eprices slide abd realize there is no sense of urgency.

Perfect Storm said...

These auctions are a big joke and the biggest joke is on that fool who purchased that home in Galt. He was taken to the cleaners and will lose a $100K in a years time.

AgentBubble said...

I'm working on a post that will show the final sales price for each "sold" property in Sac County for the auction. Might take a few weeks to a month to allow for closing and recording. Should be some interesting info...

Patient Renter said...

"a retired English teacher who dabbles in real estate, ...who bought a 1,770 square-foot foreclosed home in Galt"

Wow. Galt, eh?

Diggin Deeper said...

"a retired English teacher who dabbles in real estate, ...who bought a 1,770 square-foot foreclosed home in Galt"

If I were him I'd be sitting on Calper's doorstep wanting to know what the hell they thought they were doing buying Saca out of the dream tower.

AgentBubble said...

1245 LAKE PARK AVENUE, GALT

Previous owner bought it for $319K on 12/03. Refi'd it up to about $450K. Bank bought it for $309K on 3/07.

We'll soon see if the English teacher took classes in math.

Gwynster said...

You know, I thank my lucky stars (and green clovers and purple hearts etc) that UC has it's own retirement fund. I think I'd have had a coronary already if I was depending on CalPers.