Notes from a foreclosure auction

I buzzed out to the Fairplex in Pomona on Saturday for the DoveBid/CataList Homes auction of 75 foreclosed homes.  It was my first foreclosure auction and it was an interesting scene. It is the making of a market.

Many of the houses up for auction had sat on the market for months. Now we know what they're worth.

We shot some video that I hope you will see next week on the LATimes website. I know many of you are curious about selling prices, so I took careful notes on the first 10 houses.

1) 12233 Mountain Ash Court, Rancho Cucamonga. Last listed for $693K, opening bid was $346K. Sold for $565K.

2) 25341 Bani Ave., Lomita.[[note: corrected from Bain Ave.]] Last listed for $529K, opening bid was $349K. Sold for $505K.

3) 43958 Moonlighting Drive, Hemet. Last listed for $199K, opening bid was $99K. Did not sell.

4) 1865 Kingsford Drive, Corona. Last listed at $393K, opening bid was $196K. Sold for $240K. I ran the numbers on this one last week; it sold for $490,000 in 2005, so the decline from peak pricing on this house is 51%. That's a lot.

5) 8856 Gentle Wind Drive, Corona. Last listed at $608K, opening bid was $304K. Sold for $425K.

6) 4350 Duskywing Road, Hemet (pictured). Last listed at $339K, opening bid was $169K. Sold for $220K. (I also ran the numbers on this one last week; it sold for $382,000 in 2005, so the decline from peak pricing on this house is 42%.

Click below to see more sales results from the auction.

7) 9646 53rd St., Riverside. Last listed at $329K, opening bid was $175K. Highest bid was $205K, which failed to meet the reserve; the house did not sell.

8) 31225 Felecita Road, Temecula. Last listed at $598K, opening bid was $299K. Sold for $370K.

9) 624 Mariposa Drive, Rialto. Last listed at $209K, opening bid was $100K. Sold for $100K.

10) 3 Magnolia Drive, Ladera Ranch. Last listed at $915K. Opening bid was $429K. Sold for $705K.

Two very important notes: Buyers agree to pay an extra 5% as a "buyer's premium" to the auction companies. Also, the high bidder does not necessarily get the house. The owners of the homes -- the banks -- reserve the right to reject the winning auction bid as too low.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com

Comments

[msprompt]

Interesting, Peter. Does this mean decent locations seem to be holding their value or at least dropping more slowly than less desirable places like Hemet? A friend worked several months on a construction project in Hemet and after day one, he re-christened the place "hell met."

Tried to Zillow and Googlemap Bain Ave. Lomita - no luck. I'd like to see exactly where that place is. Location in Lomita means a lot. Part of it is great. The other part, not so much.

[anon]

Houes selling for 6 times yearly minimum wage

Looks like we've got what everyone has been clamoring for in CA:

Affordable housing.

[Mike S]

Peter,

Do you have an admin asst or intern that can really investigate this auction and follow it over time?

1) Compare these sales to nearby REO's and recent solds? I suspect some paid more at auction than listed or recently sold REOs within a couple blocks of these properties.

2) Track the properties and buyers through to actual close with an article in a couple months on the efficacy of this auction. Instead of 'clean sales' I suspect the months ahead for these buyers will be filled with some real shenanigans like bank counter-offers, rejections and relistings.

[Rick]

Hey Peter, what was the required escrow period set by the banks? Perhaps we can check the property records in a few weeks to see what sold.

[Joe]

Why bother if the banks can reject it? What a waste of time, you either over pay or the bid is rejected. The same problem with short sales....people listing prices low to get bids then the banks reject it. Let the banks sit on them as the prices continue to drop 1-2% a month. The only way banks will stop the drop and the bleeding is to make deals with people who can show an ability to pay and finance with a slow graduated but fixed rate mortgage.

[CD]

Hemet is a hell hole, why, oh why, anyone would live there, no jobs, gangs, it's an oven on a slab. These were never homes, they were built for the banks and speculators to pass on with a zero down.Today in the times: Flour is up 300%. Can I take a mortgage on that "baguette" please ?

[Hugh Jorgan]

If the houses have reserves, are the bidders aware? Lots of auction items have a reserve, and the bidders are told the item has a reserve (check e-bay's auto section).

If the banks aren't telling the bidders the house has a reserve, then no one should waste their time.

[Golfproz]

8856 Gentle Wind Drive Last sold in April 2006 for $975k. That's a $550k loss or 56%. There are still sellers on this street trying to get over a million dollars for their's. That sale should put the fear of god into them!

[Phyllis Pollini]

As a real estate agent, I am seeing a wide range in this market. Less desirable locations are getting hit hard, but attractive homes in nice areas (regardless of the price range) are still selling at prices that generally exceed or come close to those of 2005 & 2006. In these locations, there are certainly deals to be found, but not steals, except in a few rare cases.

[Tex]

This seems like a good time to throw in my own auction and short sale stories for everyone's amusement and comment.

Last month there was an online auction for a cute but run-down spanish-style house in Leimert Park, 1600 square feet on a 6000 square foot lot. Address was 3950 Olmsted. My agent says the house had been previously listed for over 360 days at $595K and did not sell. Starting bid for the online auction was $200K, but the auction company listed the property on the MLS and Zillow for $440K. So my agent and I were wondering if $440K was the seller's reserve price. The auction company, Pax Powerhouse, also said they would add 10% to the final sales price for their commission, and that they reserved the right to "bid on behalf of the seller" (!). That sounded a little suspicious but I figured as long as I stuck to my guns about how much to bid, no problem.

Anyway, the auction was supposed to end at a certain time, so we logged on 15 minutes prior. The price was up to like $285K. We started bidding, but every time we placed a bid, bidder 1039 (who we thought might be an automated fake bidder trying to raise the price), immediately overbid us by $100. At the time the auction was supposed to end, the auction company extended the bidding for another 20 minutes, presumably because the bids weren't high enough yet. This went on for a while, with the auction company extending the auction several times more and bidder 1039 immediately outbidding everyone else by $100-200. The last bid was $374,800 and the winning bidder was -- you guessed it - 1039. So I guess time will tell if 1039 was a real bidder -- lets see if the records show it sold.

Nevertheless, that auction sure says something about the market value in a neighborhood where realtors love to insist that every house is worth over $600K!

In other news, I made an offer last week on a short sale property for about 10% under the list price with a 25% down payment. Financing contingency was that I get a conforming loan at no more than 6.25% and my agent also prepared a "short sale addendum" which said deadlines for removing contingencies did not start to run until the transaction was approved by the bank.

Sellers countered with what my agent said was an outrageous and ridiculous counter-offer: full list price, buyer to pay for everything seller usually pays for (all termites, bringing things up to code, seller's share of closing costs, etc.), buyer to change loan contingency to jumbo loan with 7.75% interest (!) and -- here's the kicker -- that all deadlines to remove contingencies run from the date seller accepts the offer, not the date when the bank approves the transaction (which could be 3-6 months later). What the #$%??!

The thing that baffles me is, if a seller is doing a short sale, doesn't that mean they are in distress and need to sell the property ASAP? What is the point of alienating legitimate good faith buyers!?

[Susan]

Thanks very much for the legwork Peter.

It sounds like there aren't a whole lot of good deals out there in the foreclosure world yet.
Prices struck me as nutty several years ago, and they still strike me as nutty.

The property on Bani in Lomita, for instance, did not sell for much less than its last listing price.

It's definitely worth checking the auctions periodically, though, if for nothing else to gauge the mood of the home buying crowd.

[manraygun]

"but attractive homes in nice "areas (regardless of the price range) are still selling at prices that generally exceed or come close to those of 2005 & 2006."

Thanks realtor friend. What a relief. For a brief instant I though we were in the midst of a historic and unprecedented housing crash. With one insightful and courageous post you've allayed my fears. So rue not homeowners, you're still the millionaire you always knew you were. And your local realtor will not continue living in that empty refrigerator box. The soft landing is back. Everyone in the pool.

[Michael Snyder]

Tex
Blowin' smoke is blowin' smoke; be it into a Bubble or anywhere else folks tend to blow smoke.

I'm with you in betting buyer 1039 was a ringer. The selling prices in Peter's post suggest a few properties benefited from a "competitive atmosphere" during the bidding. Let's face it, a '69 Camaro is a very cool car, but would you pay well over twelve times the original price for one? That's the great fallacy about auctions; bargains can only be had if you stick to your guns and don't get sucked into the competition. They call it a "winning bid" for a reason. Don't be fooled into thinking you're the winner.

[Brian]

Houses still overpriced. When a person has to make $120k a year just to afford a median priced house in Callifornia something is wrong. Median income is like $75k a year.

[Teresa]

I agree with you, Brian, except on one point: Median income is not $75k/year. The top 10% of all wage-earners make $75k/year. Median income is somewhere in the mid- to high $30's. (Source: IRS)

Unless you were talking *household* income, of course, in which case it is probably about $75k/year.

[Cal]

If someone could explain the Bani sale to me, they ended up paying MORE than list if you tack on the 5% fee.

Auctions create time pressure and are a great marketing tool to get homes moved. The wife likes one of the homes in next months REDC auction (but has set an impossibly low price even considering todays market). So conceivably we could buy earlier than we were planning on, but I highly doubt that will be the end result. Just shows how auctions are an effective way to get people wanting to buy all in the same place.

[Hugh Jorgan]

8856 Gentle Wind Drive, Corona is within 3 blocks of I-15. The noise from the freeway alone should be enough to convince anyone not to live there.

If Real Estate is 'location, location, location', then how could this place ever sell for so much in the first place?

[brad]

Michael, while I agree with you that auctions are more likely for suckers than winners, Paying 12X the original sales price for a cherry 69 Camaro IS the market.

[liz]

I wonder if some "sellers and their agents" are falsely stating that "it's a short sale" just to get offers??? The psychology of it is interesting because if a buyer sees short sale, auction, foreclosure they may think they are getting a good deal even if the listing price is still ridiculous.

Although I imagine in a few months their property probably will be in foreclosure....

[sfvrealestate]

Great post, Peter. About how many people were there to bid?

[msprompt]

D'oh.! Bani, not Bain. (Hey it was early on Sunday.) Agree with Cal. Those buyers paid more than the list. Where's the deal there? And the locale ain't all that great. They back up to a commercial corridor on Crenshaw.

[mbob]

All these figures about median income, household income to use as a measurement of housing affordability beg a question: so what's a "household?"

Muchas personas de una casa? Affinity group? Extended family? Cult? Renters? Lodgers? Com-mune? Col-lective? Group home? Section 8 housing?

It's a post world war II innovation that we all get our own room, let alone our own house or apartment.

Immigrants over the past decade or so know full well how to get by -- share.

A very highly paid studio guy I knew said that all he ever really wanted was a room of his own, he'd grown up bunking in with a stinky, snoring elder relative.

[SJ]

Hey Phillis,

It's only a matter of time and the areas you are talking about will start to feel the same pinch. Maybe not as bad as the IE, but there will be more price declines in ALL areas due to the economic slowdown/recession.

I'm tired of the whining from the sub primers. Noboby forced you to buy a home you could not afford to pay off. You should payback what you borrow. You people are the reason we are in this mess now.

No bailouts for irresponsible borrowers, no bailouts for irresponsible lenders.

Let the market behave freely without government intervention (socialism) and the hyper inflated prices will continue to correct themselves.

Perhaps then, regular hard working people (teachers, fire fighters, cops, etc.) can afford to buy a home.

[JK]

Housing prices still have A LONG WAY TO FALL.

Even the president of Freddie Mac said - home prices have fallen ONLY 1/3 of their way.

[l.a.guy]

"Thanks realtor friend. What a relief. For a brief instant I though we were in the midst of a historic and unprecedented housing crash. With one insightful and courageous post you've allayed my fears."

You can't slip anything past all the experts on this blog.

I know everyone is certain that every house is destined to fall back to 2000 levels, but guess what? Nice houses in nice areas are selling, sometimes with multiple offers. (I myself just bought a home for $2M in the Valley) The secret to selling is to price the house right. (Regardless of the house there is a right price for it)

But hey, what does Phyllis know, she's only a real estate agent. Obviously she has an agenda and is part of the "Lefty" conspiracy of disinformation being spread to prop up the RE business.