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I’ve got $300K, Do I Hear $325K….SOLD, the Real Estate Auction
Are Auctions Becomming the New Guerilla Marketing?
The Dalton Condominium project in Pasadena unveiled a new marketing campaign today.
When you see several large banners on a new Condo project in Pasadena that advertise “AUCTION”, what comes to mind? We usually associate the word “auction” with desperate, fire sale, below market, especially when its pinned to real estate. Almost certainly when its spelled out in big red banners and the commercial offices on the street level have been vacant and advertised for last for the last 6 months.
However, things are not always as they seem.
As an example, the Ostrich Farm is South Pasadena had an auction in an attempt to move some of their slow selling inventory. It may not have necessarily been because the project was in financial distress, but it may have been an attempt to create some buyer excitement, sell some units and increase the financing availability to more prospective buyers.
One of the problems with community developments is that lenders can be very reluctant to loan money unless a certain number of units have entered escrow. With the new tighter controls on financing, that number can be as high as 50%. For a new development to hit 50%, they need to create some excitement. Push, Pull or Shove. No reasonable deal refused. Neal can’t say no. See the feeding frenzy begin to develop?
Obtaining the magic number of 50%, enables lenders to move away from 20% down payments into FHA with 3.5% down payments. More people can qualify, more people buy. AUCTION ACCOMPLISHED!
It has been rumored the auctioning company will have stooges planted throughout the audience. Not to make you laugh, but to actually bid against you. They have no intention of buying the unit you are bidding for, their only purpose is to make you pay more. If I were a betting man, I would just about guarantee that each unit that will be auctioned will have a minimum acceptable bid. If the bid price is not obtained, the unit will be removed or the stooge that just bet against you, will not be able to complete the purchase.
Beware of the auction mentality. To be successful at an auction you must have a pre-established maximum you are willing to pay and do not exceed it. It will be easy to get caught up in the moment as you try to outdo your competitor only to find out, things are not always as they seem.
July 20th, 2009 at 11:13 am
Nice to see prices getting down to a reasonable level for first time buyers in the nicer parts of Southern California. Thanks for the update!
July 20th, 2009 at 2:52 pm
Are you certain that the 50% requirement from Fannie Mae is really only those which have *entered* escrow?
Because if that’s the case, an auction is really an unnecessary diversion to make this happen.
I do suspect this is more of an “advertising” auction than a legitimate one.
July 20th, 2009 at 4:08 pm
[...] Willis presents I’ve got $300K, Do I Hear $325K….SOLD, the Real Estate Auction posted at [...]
July 20th, 2009 at 4:30 pm
[...] at $759,000 will have a starting bid at $375,000. But the bloggers over in Pasadena are suspicious. Via local blogger Doug Willis: “It has been rumored the auctioning company will have stooges planted throughout the [...]
July 23rd, 2009 at 7:13 pm
Tim,
It was my understanding that many of the banks had requirements that 50% of the units must be under contract. Firthermore it was my understanding that this was why the Dalton seemed to close with no information that left me wondering as to its future. I had heard that they contracted with a new bank that agreed to 20 to 25% as opposed to the 50%.
July 31st, 2009 at 4:06 pm
You are probably right about the stooges as this is the norm at most auctions. With 650 sqft studios starting the bid at 165k and the largest 1700 condo starting at 395k, I’d say that it’s only worth buying if people buy them at the starting bid price. Anything more than $5k more is still overpriced. that is still about $250/sqft and you have to pay HOA and do not have a private garage. The sad thing is that Doug is right. People will overbid and the Dalton will have succeeded in getting more money. 1 year ago I offered them $395k for the 1700 sqft condo. They laughed. next week they start their bid at 395.
August 16th, 2009 at 8:38 pm
Went to this auction and never really got a chance to bid. The 1042 sqft 2 Br units sold from 420k to 469k from starting bid of 265k. The bigger units sold fr 567k to 600k. The 708 sqft loft units sold fr 303k to 310k from starting bid of 185k. This property sold out in lesss than 2 hours.
October 5th, 2009 at 6:37 pm
Nice to see prices getting down to a reasonable level for first time buyers in the nicer parts of Southern California. Thanks for the update!