Does This Second Lender Foreclosure Home Auction Show the Direction We are Heading?
San Diego County Lender Foreclosure Home Auction
Conducted by Real Estate Disposition Corporation August 18, 2007
San Diego Convention Center
www.USHomeAuction.com
The first auction conducted by REDC in May which I researched contained 3 Oceanside, CA properties and 1 in Carlsbad. This time around there were 14 in Oceanside and 1 in Carlsbad. Certainly that trend seems consistent with the housing market in these 2 adjacent cities as foreclosure activity is increasing significantly and prices declining rapidly in Oceanside, while Carlsbad is faring much better on both fronts.
I have sales data for 6 of the auctioned Oceanside homes and note a few interesting facts:
1. All were purchased as non-owner occupied and at least one was a real estate broker. 2 were cash purchases, and two were with 5% down payment.
2. A home auctioned in May at $465,000 that did not succeed with that buyer was sold at this auction for $415,000
3. The final sales price(including the 5% buyer's premium) was about halfway between the published "Previous Value" and the starting bid price.
4. 488 Big Sky was sold for $535,500 and then put on the market for sale the next day at $539,900!
My interpretations of these above facts:
1. Investors seem to think these homes are being sold for a good price, but owner-occupied bidders are noticeably absent. I would think it should be the other way around, that a less knowledgeable purchaser would end up paying "too much" at an auction. A couple of the purchasers even did so with only a 5% down payment. In these uncertain times, that is quite risky.
2. Did this home go for much too high the first time around, or has the market dropped over 10% in that time? I lean towards the latter analysis as the lender guideline tightening of a few months ago has had a HUGE impact on buyer activity in Oceanside. Also this home had some potential issues such as a roof leak and a $10,000 tax lien.
3. This might be a neat fact if you are trying to decide whether there is a good opportunity for a particular home well before the auction takes place. Then you can spend your time doing diligent research since these are all "as-is" sales.
4. Is this seller trying to lose money? Or did they hope to create a multiple offer situation to drive the price higher by listing it at what seemed to be well below market value?
Well, it seems the direction we are heading is a larger number of foreclosures and more homes on the auction block like this. Prudent investors should wait for some price stabilization before buying these homes as there is still no positive cash flow with 20% down and there is downside risk. While owner-occupied purchasers should step up to the plate knowing that if they stay in their homes for several years, the price they pay today is justified.
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