Lender Foreclosure Home Auction Round 2: August 18, 2007. More homes on the block!Does This Second Lender Foreclosure Home Auction Show the Direction We are Heading? San Diego County Lender Foreclosure Home Auction 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. Update as of October 27, 2007: 1. No additional homes have closed escrow that were on the auction list 2. 3839 Vista Campana S. #32 in Oceanside's 55+ community of Oceana is still listed in the MLS since 6/8/07 now with an asking price of $164,900 3. 4477 Pala is still listed in the MLS since 6/6/07 now with an asking price of $244,500. Both are listed by the same broker and were taken off the market during the auction time, but then re-listed. 4. With less than half the homes that were on the auction block actually sold, does that mean buyers are now avoiding the homes altogether, even with the low starting bid prices? 5. 488 Big Sky closed escrow yesterday with a sales price of $539,900. That's great they got their full asking price after being on the market 20 days, but the auction buyer has probably realized a loss of at least $14,000 and that is assuming the listing agent didn't take his commission of at least $10,000 6. And from the May 12, 2007 auction, 4306 Morgan Creek is still listed for sale, and has dropped their price about $75,000 from when it was first listed to it's current price range of $625,000-685,000. The house was bought for $649,000 at the auction! It's too bad that this home and the one on Deer Valley are in the River Ranch community which has seen some drastic price drops in the past couple months. 7. 4306 Deer Valley went in to escrow after being on the market only 10 days and priced at $479,000. The original May 12 auction price was $465,000, but that deal fell through and it was sold again Aug 18 for $415,000(including the 5% buyer's fee). This investor upgraded the house with travertine, tumbled marble, granite, paint, and carpet. Since this was a cash auction buyer, their cost to buy and sell is probably about $30,000. When you include the cost of upgrades and owning the home for a couple months, this one might be a break even deal. I still think these investors would be better off consulting a local knowledgeable real estate professional to discuss the risk and reward of trying to flip properties in this market. They may be better off at this time considering other markets, probably outside of San Diego and Riverside Counties, or even in other states. |