This sounds quite interesting. Someone could get a great deal on a new home!

Hi Amy ~  Yes, I agree!  It will be interesting to see what transpires.  I would imagine that investors would like this prospect.  Thanks for reading and commenting.  Have a very Happy Thanksgiving!

Sarah,

It looks like some bargains will be had there. With prices starting in the high $60k, that is unbelieveable! That should be an interesting and eventful thing to participate in. Have a Happy google gobble Thanksgiving Day! :)

Hi Dave ~  Yes, it should certainly be intriguing!  I will try to remember to keep this updated after the event has gone by.  It just may be a good idea for a lot of builders out there left holding a big bag of inventory!  Like the "google/gobble" Thanksgiving Day!

I recently went to an auction by Liska and Assoc. a big auctioneer of real estate working out of Grants Pass in Oregon. There was no minimum bid, an estate left to the state of Oregon in the heart of the popular Irvinton neighborhood.. You  needed a cashiers check for $15k just to bid. I was prepared to bid a bit over $500k for my clients, but the ending bid was over $750k! RMV was only about $800k, and the home an extreme fixer! The buyer's were in a frenzy, and kept bidding higher and higher, it seemed just to "win", at the shock to most of the crowd. I think these homes will be sold at a price that is somewhat discounted, but not at all close to the opening bid! It is an interesting way to sell a home that usually works well per statistics on the Liska and Assoc. website.

Tanya ~  Thank you for sharing your experience.  I am looking forward to how this one works out.  These homes are brand new, most having never been lived in.  I imagine that the minimum bid will be quickly passed up.  At the same time, I cannot help but wonder...if these do not sell at a high value, then we are looking at reduced property values in the brand new homes which were sold in the neighboring developments.  It should definitely prove interesting!  Thanks again for your insight.  May your Thanksgiving be richly blessed...

I have been doing some investigating about this. The terms state that there is a reserve price that the bidder must meet in order to win the bid and they won't disclose that price. They do say it's not the low published price they list on their site. Those prices are to generate interest only. The auctioner acts as the sellers agent and can not only open a bid but can continue to bid succesively on top of any other bidders or his own bid until the reserve price is met. I don't know why they won't just start at the reserve price other than it won't sound nearly as good as saying "bids starting as low as $69,000". I suppose there could be deals to be had there but not as good as some people might expect. People really need to make sure they have all there financing in order becasue they have to close in 30 days and if they don't they will lose the 5% down they have to put on the house at the auction. There are some frustrated people out there that have had bad experiences at REDC auctions.

Tim ~  Thanks for dropping by and commenting.  I have not yet had a chance to go in and read all of the terms.  I ihave, however, read a lot.  Somehow I missed the reserve price notice being higher than the published price.  That is interesting.  Although, I suspected that the low prices are only to generate interest.  Why else would a builder oblige in selling that many homes for such a low price?  I do think, though, that if you do your homework, a good deal could be had in this opportunity!  As for people being frustrated with REDC auctions, I am sure that it is the case.  If you look hard enough, people are frustrated with every company for one reason or another.  Thanks again for commenting.  Feel free to comment again!  :)

This seems to be a scam to me. I would not participate in an auction where the reserve price is not stated. You can do all of your due diligence, inspect the property and then be the high bidder and not win if your bid is not as high as the reserve price. The reserve price is above the starting bid and probably quite a bit above the starting bid. If the seller would actually be willing to sell around the starting bid price, assuming little interest in a particular property, they would have opted to have gone with no reserve. 

If you are looking for a bargain, you would be better served to look at homes that are for sale and then make an offer to the seller that you believe represents the foreseeable market value.  For example, take home auction PE001. The starting bid is $319,000 and the "previously valued at" amount is $509.950. Assuming a 8% decline in values from the appraisal at the time the home was started to the current time, the actual value is likely to be $468,000. However, if you buy at $468,000 you will pay a 5% premium and so any bid over $444,000 will be overpaying. However, the reserve is likely set around the $444,000 amount. The builder could certainly sell the home a little below that price and so he will not be willing to set the reserve much lower than that. By contrast, if you go around the area and find a similar home, you can take your time and make an offer and not worry about being swept up in emotions in a fixed game where the house wins and you lose.

If you think that this type of auction gives you a chance to get a bargain, you have duped by the marketing. You will end up paying market value or higher. A consumer should never be willing to participate in a reserve auction. 

Hi Jacob ~  It seems very clear to me that you have done a considerable amount of homework or you have had some measure of "personal" experience with these types of transactions.  As one who has never participated in this, let alone heard of such a thing, I am happy to have your input. 

Just to clarify, I am by no means suggesting that anyone get "duped" by marketing.  Admittedly, on the blog itself, I caution people to do their homework.  As you have done so, it appears that for you, this is not the best option.  I disagree, however, that someone else cannot get a better deal.  It depends on the quantity and quality of your homework.  If you have the patience to stand by and make sure that you are getting the best deal, great.  In other words...no one is forcing you to bid higher than what your predetermined amount is. 

I do respect and admire your passion and the fact that you are willing to share with this group.  This is exactly what this type of forum is designed for...open discussion!  So, thank you again for your contribution here.  Please feel free to watch this blog and continue to make your opinions known.  They certainly seem valid to me!  :)

Best Regards,

Sarah Eubanks

Hi Sarah. In the terms and conditions it says all properties have a reserve price and the staring bid is not the reserve price. The prices they show on the auction page are the "starting bid" price so that would say to me the reserve price is higher. Has to be, I'm sure he won't take a loss on these homes. I think it's possible to get a deal too, just not what people think they'll get.

Tim ~  Thank you for your interest in this topic.  I agree with you on most all of this.  I am not so sure that the  builder is unwilling to take a loss.  Additionally, with the profit margin that a builder makes, even at really inexpensive, they would not likely take a loss.  On average, a general contractor builds 20 to 30 percent profit margin into the cost of a custom built home.  So, if a home costs $300K, the builders profit would account for $60K-$90K.  In that respect, the actual cost to the builder then, would of course be somewhere between $240K-$210K.

The other factor which I see being equally important is that the builder may be willing to take a loss on a few of the homes.  When his inventory is sitting at almost 250 homes, he needs the capital to continue his source of income.  I guess I see it the same way that a car dealership does actually sell loss leaders.  It definitely draws the attention of the crowd, and it can be a write off on the losses.  I registered for the event so that i can go and check it out.  I will then be knowledgeable the next time that I am hear of something like this!

Again, Tim, your knowledge, thoughts, and opinions are greatly appreciated!  :)

Hi Sarah...If you go on the Buena Vista website he has a letter to his homeowners..part of it says that the auction company will use a very aggressive pricing strategy to generate interest but he anticipates the actual selling price to be in line with the market. I wonder if he'll have a high reserve price or if he is just trying to calm down his recent purchasers?

Hi Tim ~  Nice to hear from you again!  That is interesting what he posted on his site.  I am going to need to go and check it out!  I was actually commenting about the current homeowners to someone else.  If I were a homeowner there in one of the neighborhoods, I would be concerned about the effect it could have on my property values.  I think that he is likely trying to reassure his buyers.  As has been stated, I think that people will - for the most part - pay pretty close to retail price.  auctions can get crazy with bidders forgetting their heads...almost like gambling!

Only time will tell, I guess, and with about three weeks left, I am starting to get interested in attending to see how it turns out.  Will you be going either of the days?  If so, I will look forward to meeting you there...

This is amazing! I want everyone else to stay home. BECAUSE I'M GOING TO BUY THEM ALL! Take that, suckers!

Hi Sally,

I admire your conviction and your intensity.  I would certainly recommend that you register and go to the event.  Have you had a chance yet to do that yet?  I certainly hope that you do get a lot of great deals.  I think that this situation can be a real win-win.  The builder can clear some of his invnetory and buyers can purchase good homes for possibly a terrific price.  If you need any help with the finance side, please do feel free to let me know!  :)  I can certainly help in that regard! 

Thanks again for your thoughts and support,  Sarah

Definitely a buyer beware situation.  Please read my blog post about it: http://pdxre.blogspot.com/2007/11/auction-is-coming-to-town.html

Michelle ~  Thank you for adding your input to this discussion!  I am off to read your blog on the topic!  :)

Michelle ~  I did read your blog.  You included a lot of solid information in there.  Nicely done!  :)

Hey Sarah... Did you go want to go to this? Maybe we should grab Goodwin to go too....

Jennifer ~  That sounds great to me!  I registered for it already.  I figure that with it being free, it would be good education, minimally!  :)  Let me know what you think!  I emailed him today about our area.  Did he let you know??  By the way, I would love for you to post something lyrical to the new group!  :)

Hi Sarah - Auctions can be a fun experience. They seem to be becoming a more popular means to move excess inventory, for banks, builders and some large investors. We attended the HUD REO auctions in the Los Angeles area after the Northridge earthquake in 1994, and that was something! Attendees ran the gamut, from excited first time homebuyers with their agents hoping to get their first home for a song, to the savvy investors looking to quickly build their portfolios. Mind you, the HUD properties that weren't sold before going to auction were the roughest of "diamonds"...the properties we previewed were sometimes tough to decipher which room was which, since they had been completely and totally stripped. What an experience! Hope you enjoy it as much as I did. Still haven't made it to a trustee's sale on the courthouse steps. One day soon...

Hi Karen ~  Thanks for the info!  I love hearing experience of my trusted colleagues and friends!  I just think that until you have been there and been involved, you cannot make a snap judgement.  Thanks for stopping by and sharing with all of us.  This topic has stirred much conversation in our neck of the Oregon woods!  :)

This is an excellent time to view lots of plans and choose one for a later building project.  I definitely found a plan that I want to build.  All of the homes are open everyday so you can look at your leisure.  I've been through all of the Happy Valley inventory once or twice and enjoyed every minute of it.  You do need to be careful as some of these properties are not finished and will not be finished by auction day.  Also you will quickly notice that the budgets for finish work were cut way back.  Much of the inventory has rental level finish and floor coverings.  In my opinion all of the dollar estimates of previously listed for are high to begin with and then at least another $50k was cut out of the cost of finish work.  One house was so severely cut back that the fireplace cutouts are covered by painted wood.  As you go from house to house don't forget to estimate the cost of finishing the lots with landscaping and fencing.  Many of these, perhaps most are on undesirable lots with little or no usable ground.  Also I noticed that several have decent views, and there is a premium for that.  If you look closer however you may find that the views are only temporary and will be blocked by future development.  I don't feel comfortable with the idea that there are reserve prices that cannot be known.  Having reserves means you and I have to spend a lot of time to prepare for something that may be a complete waste of time. On a more positive note I think that this event, no matter the outcome, will help to facilitate the necessary market correction in our area that will bring values back to reality. 

Hi "Manazuma" ~  Sorry, I just do not have a real life name for you, so I will use this one!  Thank you for your comments and your knowledge.  Truly, it is nice to read your comments.  Your insight seems to be life experience, and positivity wrapped into one.  I particularly enjoy your detailed look at the extra expenses with landscaping, fencing, and the like.  Thanks for posting, sharing your research, and I hope to hear from you again sometime soon!  :)

To all who commented and left their opinions...please feel free to check the update link at the bottom of the post.  Thank you for sharing your thoughts here!

Hi Sarah!

Did you attend?  I missed it - I updated my blog with your information.  Thanks!  Happy holidays, my friend!

Sara ~  No, I had other things that day, too!  You are welcome and Happy Christmas to you, too!  We'll get together soon.  Perhaps I will get you your check in person!  :)

Sarah..Great Blog, lots on detail and interaction from the Public and AR members. It certainly is a new niche for all here, Thanks all you hard work and keeping us informed.

MERRY CHRISTMAS...HAVE HUGE YEAR IN 2008!

Fred, Thank you!  I was pleased to see the input from members of the community too!  Have a blessed Christmas yourself!  :)