San Diego condo auction closed to press

We had a coach in high school who often followed up his criticisms by saying, "The truth hurts, doesn't it?" Yes, sometimes the truth does hurt. But there are ways to avoid the hurt, aren't there? As D.R. Horton is doing today in San Diego, you can keep the press out of your condo auction.

News item from the Union-Tribune: "D.R. Horton, the nation's largest builder, is limiting attendance at its planned auction Saturday of condominiums at two local developments, according to the firm it hired to run the event. Late Friday afternoon, Real Estate Disposition Corp. (REDC) said that only registered bidders with $5,000 in cash or cashier's check would be permitted to attend.

More: “'We are going to be closing the auction to the press tomorrow,' said Michael Schack, senior vice president of REDC. 'We are only allowing registered bidders in. We are not allowing cameras, photography, press, media. It is not our choice.'"

Our take: If we ran a large homebuilding company, and had overbuilt to the extent we had to resort to auctions, we'd probably close the auctions to the press too. How does coverage of the auction help D.R. Horton? They don't want potential buyers in Des Moines and San Antonio holding out for the "San Diego Discount."

But if we ran a blog about housing -- and oddly enough we do -- we would report every scrap of information we could get about the auction, so we again ask for your tips and feedback today.

Hat tip: "sandiegan"

Comments

[Mark]

Here ya go:

http://www.redchomeauction.com/auction_details.php?
auctionID=D-003

San Diego condos for less than half the original asking prices.

[Nacho]

Fasten your seat belts folks.....we're going for a ride...DOWNHILL!

You know the sad turth..I know somebody who bought in that complex less than a year ago with money down. They're great people....they just felt the were "missing the train" and decided to take the plunge--so to speak..

The San Diego discount is coming to a neighborhood near you!

[RichW]

I wonder if this is a "real" auction or if they are putting a ridiculous reserve price on the condos. Either way I would love to hear what the selling prices turn out to be.

[Charles Wilson]

Even before I read that they'd barred the press, I was skeptical about that so-called auction. What assurance does anyone have that this "REDC" outfit won't salt the crowd with employees who drive bids upward to some unstated minimum? Yes, it would be fraudulent, but it's California real estate.

It's even more suspicious now. What is REDC trying to hide? It would be nice if, say, the local district attorney's office would have a representative there to insure that all bids were genuine, but I won't be holding my breath. After all, it's California real estate and old habits die hard.

[Robert S. Hoover]

"Pssst! Wanna buy a condo?"

(From a blue-haired lady in a shabby raincoat lurking outside the 19th hole.)

[andre]

look at bidding price, opening price is as real as it will get. I am hopeful that some people will be sensible not to out bid each other. This will be mega event and lot of people who knew there will be time when market price will be right, will be proud owners.

[sandiegan]

The auction is going on right now. I wonder if some certified bidder is feverishly texting someone on the outside with the gory details like some student in a third world dictatorship trying to get out the news of a military crackdown.

DR did not think this through.

These units were not the pick of the litter. I saw them. One was very nice. A few were good. Most just so-so. A number were very, very strange. We looked at one "loft". I saw no loft. Ah. The loft was...downstairs.

BTW: I think prices can fall much, much faster than any of the pundits predict because everyone is so tightly and quickly connected to market fluxes now.

The speed of communications in 2007 really is a new paradigm in that respect.

[Jax]

If they sell any condos, they can't hide the selling prices for very long because they will be recorded with the city once the escrow closes. They are dirt-bags for not opening the auction to the public (unless they come with a $5k check) but it will bite them in the butt because it may cause some potential buyers to stay away altogether.
I lived in San Diego for 30 years and the units are not bad but the area where they are located is a real crap hole. I would never walk down the street at night anywhere in this neighborhood without a real fear of being mugged.

[Charles Wilson]

If they sell any condos, they can't hide the selling prices for very long because they will be recorded with the city once the escrow closes.

---------------

If the auction is a fraud, here's how it will go: They will have phantom reserve prices. Ringers will bid up to the reserves. The sales will never close. In the unlikely event that any authority looks into it, the auctioneer will claim that the sales fell through for lack of financing. There will be no proof of fraud, and nothing will happen. Remember, it's California real estate.

[Dominic Smith]

Hey relax the hysteria about a sales event being open to buyers and not camera crews and reporters not there to buy, you are making fools of yourselves. They want a sales event, not a media event. They are markeing, not monstering.
Front $5K for a bidders number if you have to know how it is playing out as it happens, it's not like you don't get it back if you don't win an auction.
As someone else posted, the data will be publically available soon too.

[Charles Wilson]

As someone else posted, the data will be publically available soon too.

---------------

We shall see. I'll be looking to know what the winning bids were, for confirmation that these sales close at those prices, and for confirmation that the buyers are not employees or relatives of the developer or the seller. I consider it highly suspicious that "REDC" kept the news media out of its event. I consider the press to be my eyes and ears, and when someone keep them out then I start with the presumption that they have something to hide.

I hope that the San Diego County prosecutor will keep a close watch on this "auction" to insure that it is on the up-and-up. There has been too much fraud in California real estate to simply assume that this is an honest event, especially when the seller requires that it be held behind closed doors. Something doesn't smell right.

[investorguy]

You people are insane.. and paranoid. It's a private event, and the builder has every right to close it to the media.

But if you would take off your tinfoil hats and think it through, you'd realize that there will be plenty of other people there, and they'll tell what went on if anything odd happens.

And all sales are public record anyway.

Switch to decaf and relax.

[Charles Wilson]

I'm not disputing the auctioneer's right to close the event. I am saying that it raises my suspicions higher than they were already raised.

The public record nature of the sales insures nothing. It is entirely possible that, by placing ringers in the crowd, the auctioneer can manipulate the prices upward. It's also possible that "successful bids" will never close as sales, by design. The only way to verify that this auction was fair would be for the auctioneer to open its records to inspection by a neutral third party.

A certified public accountant with no ties to the real estate industry would be acceptable. So would the L.A. Times or the San Diego Union Leader. So would the San Diego County prosecutor's office. The closing of this auction to the public stinks to high heaven. We've all seen plenty of tricks in real estate. Is this one more?

[Jeff]

Millions of Homeowners Only Have Three Choices.
http://thegreatloanblog.blogspot.com

[Pat]

Pay no attention to the man behind the curtain!

[topher]

In the early 90’s I worked for a SC auction company, all of my employers auctions were on the level and the bid prices announced were the actual prices. As part of my job I would shop all of the other auctions, at the time there were as many as 2 to 3 every weekend, including the ones conducted by REDC's predecessor organization. In my research I found that the prices achieved at auction (regardless of the auction company) represented about a 25% discount over the last asking price. Additionally, without fail, the first property offered always achieved the highest selling price.

Without exception at every REDC auction I attended they would have representatives pointing to the crowd and announcing phantom offer prices, because everyone is facing the auctioneer actual bidders had no idea that they were bidding against a non-existent bidder, essentially bidding against themselves. If the actual bidder dropped out, the auctioneer was forced to accept the phantom bid. In these cases the auctioneer would ask the audience to be patient "because sometimes the sales fall out of escrow", and sure enough, after the bidding was completed on all of the other offerings, the auctioneer would announce that several had fallen out of escrow and would be re-offered, over the course of a year I must have attended 10 REDC auctions and they pulled this stunt every time, my advice to potential bidders, .....stand at the back of the room so you can observe for yourself if the bidding is for real. If you are presenting a bid, the auction handlers will find you.

[srla]

So anyone who is skeptical of such drastically secretive auction techniques is "insane" and "paranoid"?

Seems to me that a more apt analogue for belief in the protective powers of tinfoil hats is blind faith in the "sunshine tax". "Fear not, our property values will never decline like they have elsewhere, for we have more sunshine! Market fundamentals are no match for warmer winters! The sun will protect us!"

Who needs rational market analysis when you have faith?

[sunsetbeachguy]

Reports from the SD Auction....

http://www.sdlookup.com/tabid/57/forumid/617/view/topic/postid/3552/afsort/DESC/Default.aspx

The media ban was bad form and ineffective, who's managing these things. Obviously, C students.

[Inland Empire]

For Sunsetbeachguy - thanks for the update. Looks like most had 30 something percent off. But the sky really didn't fall. The buyers got starter homes and the builder got rid of cheap condos in a bad area and can now move on to other projects.

[longdriver]

I bet the people that bought at the original prices would say that the sky fell on them! 30% to 40% off is a big hit for the original owners who now find themselves very upside down. Still, that's more than I thought they would go for after seeing that Florida auction where the condos went at 50% of the original prices.

[Charles Wilson]

Medians have been justifiably scorned as a measure of housing price trends, but in this situation it's an appropriate measure. According to the one blog the median reported "discount" from original asking price was 31%. Of course those are REPORTED numbers, including the asking prices.

Given that these so-called auctions are likely to be a growing sales tool, I think it would be useful for both the news media and state legal authorities to take a close look at these things and how they are conducted.

1. How real are the original asking prices, or are they marked-up sales prices that never had much meaning to begin with?

2. How many of the winning "bids" actually close?

3. Who are the successful "bidders?"

If the actions are authentic, I have no objection whatsoever. In fact, I'm all for them. But they MUST be real. As I've written a number of times in this thread, California real estate is rife with fraud. People have every reason to mistrust "auctions." I hope the L.A. Times, the San Diego Union Tribune, and California legal authorities are paying attention.

[sunsetbeachguy]

Inland Empire:

Nice Macro perspective, it works as long as YOU aren't the one that cannot take a better job out of town due to the boat anchor (underwater mortgage) around your neck.

[Toby]

You know what? Even at a 30% discount, those condos are still way, Way, WAY over priced.

2,000 dollars a square foot is more than enough for a new condo in a "nice" area. Unless it's ON the Beach, then 3,000 a SF is fair (and maybe more depending on how sweet it is).

But 300,000 dollars for a Condo that's most likely not on the beach? Again, who's their market? Retired couples? Single people? Gay couples? Gays?

I don't see any of those paying that kind of money to live in San Diego.

[Inland Empire]

Nice Macro perspective, it works as long as YOU aren't the one that cannot take a better job out of town due to the boat anchor (underwater mortgage) around your neck.

People who don't do their homework and are not prepared sometimes end up like that. But they are the exception and not the rule for most homeowners.

[zippo]

Having attended an REDC auction recently I must say that the way it is operated is a little suspicious, many of the properties that are completed come back because the buyer did not qualify or chose not to go through with the contract.

The contract's appear to bind the buyer, while giving the seller 15 days to accept the final bid price. I'm not even sure if the contract is legal.

I was informed recently by a real estate agent that most of the contract's are voided by the sellers.