Homes on the auction block
One of my colleagues asked me to accompany him to a home auction at the fairgrounds in San Mateo County last weekend. Now, when I think of auctions I think of the Keeneland Yearling Sales in Kentucky, the Napa or Sonoma Wine Auctions or livestock auctions. The concept of auctioning peoples’ HOMES, I found depressing and sort of difficult to imagine, as if the homes would be paraded around the livestock ring on a lead rope, with numbers stickered on them, and the happy buyers would roll them away in shopping carts. So last Saturday I decided to go, and to help Miguel and Cecilia, his wife, as their agent, and see what the scoop was.
The auction was run by LandAuction.com, a company which primarily has run land sales, but recently has started to move more homes due to the subprime mortgage situation and the amount of homes in default. The process of buying a home in this way is appealing to a lot of people (they think they are getting a deal, and the average time of a home on the block (2 minutes–or 500 homes a weekend) certainly shortens the sales cycle! In Australia, many homes are sold at auction. The process is fraught with risks however, and is about as different as can be from the “standard” California home purchase transaction as it can be, without completely disregarding California laws concerning seller disclosure and buyer investigations in real estate transactions.
In the case of the auction, the buyer generally must
do ALL of their investigation prior to bidding on the property
buy the property as is and with no contingencies
close within 21 days of the auction
Unless you are very familiar with an area, and have thoroughly investigated a property, you could find yourself in the position of losing your earnest money deposit if you change your mind after your “winning” bid and decide not to go through with a purchase. This is the reverse of the sequence and a vastly different process on a “normal” purchase where the buyer is in the driver’s seat during a negotiated contingency period and can cancel a purchase during their timeframes if the property does not pass their inspections or their loan is not approved, for example if the property doesn’t pass muster with either the bank or the appraiser. There is no loan contingency period unless you use the lender affiliated with the auction company, which might not be the most competitive. This did not stop hundreds of people of all ages, races and persuasions to turn out to find a deal. We had to wait five hours for the house we were interested in to come on line, and it sold for $25,000 more than we thought reasonable, so the day, while interesting, did not leave us with a full shopping cart.
By the way, 10 of the 500 homes were from Sonoma County. I don’t think there were any screaming bargains, but a few of the homes might have been 5 per cent below market, with most of the nicer homes coming in pretty close to market.