Yesterday, Inman News posted an article about live auctions of residential real estate (see Real Estate: An Auction Block Party)
The gist of the article was the growth of live auctions as a means of selling one’s home in a slowing market. However, I found the mention the National Auctioneers Association’s multiple listing service for auction properties more intriguing. This site spans the US and includes residential, commercial and land auctions. The site is very well done with various search capabilities and incorporates data from Google and Zillow as well. You investors, bargain hunters, etc should bookmark this one.
So I looked up Reno and found a couple auctions being conducted next Monday (2/18). How’s a 3BR, 2BA, 1,625 sq. ft. Fernley house sound at $25,000. O.K. so $25,000 is the opening bid, but if you’re the only bidder out there…
Or, perhaps a 3BR, 2BA, 2,080 sq. ft. Verdi house for $50,000 might sound more appealing. [Again, $50,000 is the opening bid.]
If anyone attends either one of these auctions, let us know the outcome.
GreenNV
The 260 Lakeview auction in Verdi is pretty interesting. I’ve been tracking the property for over a year. It was one of the first truly egregious TD’s I ever ran into, and its listing history since has been a model of chasing the market down. Here is the loan history, and I’ve asked Guy to tag-team with me and post the listing history:
8/9/01 Purchased for 320,000 (probably 80/20)
5/31/05 Refi 460,000
5/31/05 2nd 115,000 (same bank)
9/1/05 3rd loan 30,000
1/30/07 NOD on 1st
7/18/07 TD 432,000
Anyone have a guess what this will sell for?
Allen Murray
Zillow has it at $427,500, I am interested to see how close to this it goes for.
tallguy
My guess is not close to the Zillow price.. well below. If you go see the house, its pretty dated and poorly laid out. The bank was unable to sell this at their final asking price of 440K (started at 550K), so no buyers who saw it were probably thinking 400K at all. The original seller tried to sell it at 625K (insane), and chased the market down to 550K, then was foreclosed upon. Not an appealing home without major renovations. I’m interested in seeing how high the straw bidder from the bank bids it up during the auction, and trying to ID who the straw bidder is.
Guy Johnson
Mike,
You asked for it, you’ve got it. There is quite a listing history the Verdi property in question. Two years, four agents, five listing agreements, and too many price reductions to count. Here it is:
01/08/2006 $799,200 first recorded listing (MLS #60000493)
04/20/2006 $784,900 price reduced
04/26/2006 $784,900 listing expired
04/27/2006 $764,000 re-listing, new agent (MLS #60009458)
07/07/2006 $752,000 price reduced
08/07/2006 $740,000 price reduced
08/26/2006 $740,000 listing withdrawn
10/10/2006 $635,000 re-listing, new agent (MLS #60024847)
11/15/2006 $635,000 listing withdrawn
03/27/2007 $629,000 re-listed w/ original agent (MLS #70006255)
06/28/2007 $629,000 listing expired
09/10/2007 $576,900 re-listing, new agent (MLS #70019291)
10/03/2007 $559,900 price reduced
11/03/2007 $545,900 price reduced
12/04/2007 $449,900 price reduced
01/07/2008 $449,900 listing withdrawn
02/18/2008 $???,??? live auction, opening bid: $50,000
Reno Ignoramus
Guy, you can show up and be the only bidder, bid in the opening bid, and you won’t get the property. That is because this so-called “auction” puts reserve prices on all the properties. Which means it really isn’t an auction at all. If they don’t get what they want, they don’t sell it.
I went to one of these about a year ago. It was apparent there were no real deals. The auction company was just hoping a couple of fish showed up who would buy into the hype.
And tallguy is quite right about the straw bidders. The most amusing thing about the “auction” I went to was that one of the company shills was a very attractive young woman in a pretty short black dress. I think the theory was that perhaps she would cause a bidder or two to lose some perspective.
tallguy
Wow, that is even more insane than I thought.. I think I saw it first list at the 629K price, which I thought was way too high then. But the original 799K price- beyond insane to stark raving lunatic.
smarten
Guy,
The devil is in the details.
And if it sounds too good to be true, IT IS!
There will be NO HIGH BIDDER! Why? Because according to the terms of auction [did anyone bother to read them?], ALL auctions are subject to court or SELLER APPROVAL.
Do you really, really think this institutional lender-seller is going to agree to sell this once $800K property for only $50K? I suspect the seller won’t entertain “approval” unless/until it is offered at least $350K and probably closer to $400K. For this reason you must assume the seller/auction company will have at least one shill ensuring the “opening bid” gets bid up to at least $350K or more.
If my suspicions are correct, then IMO auctions like these represent nothing more than an artiface; a marketing “technique” to make the uninformed believe they’re getting some “deal” when in-truth-and-in-fact, they’re not.
Don’t believe me? Why don’t you attend the auction and report back?
Guy Johnson
Smarten and R.I.,
Yes, I had read the terms of the auction (e.g. “As-is” sale; subject to Seller approval; 5% non-refundable deposit; etc.). And I would hope that anyone seriously interested in bidding would read the auction terms prior to the sale, as well. Do I really believe this property will sell for $50,000? Of course not. I simply thought it would make an interesting post to let people know of these auctions taking place next week. The event might be fun to watch at the very least; especially if “a very attractive young woman in a pretty short black dress” is out there running up the price. But seriously, if anyone attends, for either fun or profit, let us know the outcome.
You know, this whole post reminds me of a personal experience with the live auction format. A few years ago I attended an auction for the sale of a property (SRF) in Chicago, IL. I was purchasing the house as my primary residence, so I suppose I was willing to pay a little more than the “investors” in the audience. Anyway, to my pleasant surprise I was the high bidder, and won the property. Similar to the terms of the auction in this post, the terms stated that the Seller, which happened to be a bank, reserved the right to accept the high bid. They had ten days to make their decision. A couple days after the auction I was called into the bank office to meet with representatives to discuss the sale. I was led into large oak walled conference room where I was joined by two guys in suits. Apparently my bid did not meet the bank’s reserve threshold, or so was told. I can’t remember the exact amounts, but I believe my high bid was $260,000 for a roughly $450,000 (FMV) property. Anyway, the bank claimed they needed $285,000 minimum to close the deal. The bank guys went on to tell me what a great deal the house still represented even at $285,000. I listened to their reasoning and then politely refused to pay anything more than what I had bid.
A couple days later I was called back into the big room to discuss a new “offer”. This time there were three guys in suits. And this time, I was told the bank was willing to accept a mere “$10,000” more than my high bid in order to close the deal. Again, I refused. They feigned incredulity. They even went so far as to amortize the ten grand over the life of a 30-year mortgage, at which time they concluded that “for less than the price of a Big Mac a day, I was willing to let this property go”. Again I stuck to my high bid. I was escorted out a few minutes later.
Did I get the house? No. At the end of the ten-day approval period I was contacted by the bank and told that my bid was not accepted. Did I mind? Not really. You see, also written into the auction terms was a clause that said something to the effect that if one were the high bidder, and your bid was subsequently rejected by the seller, you would be compensated with $500 for your time. I received my $500 as stated, and later that night treated my fiancée and me to a nice dinner. And as we toasted with a glass of fine wine we talked of Big Macs.
smarten
I like your Chicago story Guy; back when you were naive. If it were me, when the Bank first tried to up my “winning bid,” I would have responded by reducing my bid by a like amount [what’s good for one side of the transaction is good for both, isn’t it?]. But that’s me.
I think your and RI’s experiences make the point. Interesting fodder but in the real world…
Parenthetically, I have made quite a number of trips to New Zealand and at one time actually contemplated purchasing property. There SFRs are typically marketed for sale via auction. They’re advertised for sale, much the same as here, and an auction date sometime in the future is advertised. The idea is that perspective purchasers have the opportunity to inspect the home prior to the auction.
At the auction the high bidder secures nothing more than the “right” to negotiate with the seller; the very same thing you secured in Chicago.
To me this is no different than being the high bidder on eBay only to realize nothing because your high bid hasn’t met the hidden reserve. I don’t know where you come from but where I do, this is no auction. In fact, the entire process should convince you right from the outset to NOT participate [unless you’re writing a story for the RGJ or reporting back to us].
Tom
These auction stories brought to mind my trip with a retired industrialist client to Lexington, KY, a few years back, to bid on thoroughbred yearlings. Supposedly no reserves were set in those sales, but there were undoubtedly some friendly bidders in the crowd.
My client through chatting in town over mint juleps had tipped his cards: he let it be known what he thought it might take to get a good racing prospect. Suddently every colt he liked became a $35,000 yearling. I asked a bloodstock agent afterwards why there were so many $35,000 yearlings, and the response was “Well, he just looked like a feller who wanted to buy a $35,000 horse.”
donna
Did anyone notice the taxes on the Verdi home? Is it a typo or are the taxes really that high out there?!?!
Taxes approx $8594 (?06)
smarten
Interesting observation Donna.
If accurate, we see that the taxes since acquisition in 8/01 represent about 2.7% of the initial acquisition price.
If this had been a comparable California purchase, we’d be looking at ad valorem taxes totaling about HALF this sum [1.4% of the initial acquisition price (1% plus a maximum of a 2%/year increase x 7 years)].
Am I wrong here?
If not and as I have queried in past posts, $8,600/year in ad valorem taxes on a property now worth $350K-$400K max, is outrageous [remember, these taxes WON’T go down in the future based upon a lower sales price]. Could the myth that real property taxes in Nevada are markedly less than in California be another industry spin?
doofus
The property tax is definately a typo. 2007 taxes are $2490.57. Based on the current assessed value, 2008 taxes for a new owner will be $3080.23. The current tax rate in Verdi is 3.1202% of assessed value ($98,719), which is defined as 30% of the assessed taxable value ($282,054)of the property. Property taxes at the time purchase in 2001 were $2180.73, so there has been about a 2% annual inflation in taxes.
tallguy
Verdi just got cheaper…
338K at auction, so we are now down to 162 a square foot for at least some of those homes. Lots of bidders there, but really only about 3-4 serious bidders. Bidding fell off precipitously shortly after 300K, and two bidders battled it out to 338K.
Guy Johnson
tallguy,
Thank you for the update on the auction outcome. $338K; sounds interesting. Out of curiosity, were you in attendance as a bidder or spectator?
tallguy
I would consider myself to be a serious bidder, but I had a somewhat lower estimate of value than the final price. Once the price was over my estimate, I put my card away unused. For me, the numbers didn’t work once the costs of renovation/remodel were considered. For investors, I don’t think the rent equation worked either at anything close to the 338K price.
Gene
The housing that is selling over $700,000 in Reno is ridiculous.
The infrastructure cannot support those prices hence all the foreclosures. I know most of the Californians who bought up there drove the housing prices very high. Out of reach for most people.
However, those people are now stuck with these over inflated homes, which are causing the pricing to drop like rocks. Now those people are trying to move back to the Bay Area only to find they are completely out priced in the real estate here in San Francisco.
San Francisco proper is still going up (for how long who knows), however, the suburbs are dropping fast. We have many communities within 30 miles that are sitting 48% empty. Whole towns empty. OMG!
Those people are now looking to foreclose and now rent. I know several who are doing this now. The rental market in the Bay Area is full. You can’t find an apartment anywhere. People are lining up 30 to 1 JUST to rent an apartment and paying three times/overbidding what the landlord is asking for rent. It’s insane.
I was in the market last year, so we went up to Reno and looked around. I saw a great home in Somerset and inquired more in detail. The real estate agent was smug, pretentious, and informed us that we would be lucky to get the home at $800,000 and shouldn’t delay. A rush, rush mentality. I encountered this same smugness over three times with different housing communities throughout Reno. Since when do Real Estate Agents (not all, just some) use tactics like a used cars salesman?
We would love to move to the Sierra Nevada area, but to pay over 700,000 and above? Lets get real here guys….
GreenNV
The auction was the biggest thing to hit Verdi since the Great Train Robbery! There were about 100 people in attendance, 35 registered bidders, and as tallguy said, only 3 or 4 serious bidders. Still, that’s 35 people who were cashed-up to at least some degree to bid. The whole thing was over in less than 3 minutes.
Did the winning bidder get a deal (assuming the bank ratifies the offer)? My back of envelope estimate is that the house needs about 125,000 in improvements. It would have to resell at over 500,000 to break even, and it would still be a goofy house with a strange, shared well and septic situation.
RobF
Well said Gene. I had a similar experience with a popular Carson City realtor. When I described in detail what I wanted to buy and expressed a sincere interest, she barely paid attention.
Most of the newer places for sale now in Reno in the 600k-900k range need to come down to 400k-600k. I ain’t paying 800k for a stucco tract home.
Dianne has treated me well and will get my business when I buy.