In the last weekend in January, I went to the Real Estate Disposition Corporation (REDC) foreclosure home auction and builder liquidation at the San Diego Convention Center. They auction homes all over the country and details can be found on their website. There were over 222 homes auctioned and I stayed from 9:30 in the morning until 3:30 in the afternoon. Within the time frame that I was at the convention center, I was able to see over 147 auctions take place. For any home buyer that is interested in a used home, I would very much recommend attending one of these free events to understand what kind of market you’re dealing with. Especially with the kind of uncertainty we have with the housing market, it can only help to understand what foreclosed townhouses, single family homes, and condos are selling for.
Tips for Bidders
– The REDC# is the order that the properties are auctioned off. If you’re looking at the later REDC# auctions, you don’t need to go to the auctions until later in the day. For example, if you went to the SD auctions and you were looking for properties 180-200, then you probably don’t need to come anywhere near the 9:30AM starting time. Like I stated above, 147 auctions took over six hours so if you’re only looking for a particular area and don’t care about the other areas being auctioned off, don’t waste precious hours of your day waiting for your prized properties to come to auction.
– Pay no attention to the starting bid price because the final auction prices end nowhere close to what the auction starts at. It’s like selling a Nintendo Wii on Ebay with a starting bid of $1 or $150 because regardless of what you start it at, the Wii should be getting fair market value.
– Similarly pay little attention to the listed prices that REDC says these properties are valued at. This tends to confuse people and does not necessarily mean that a particular property was recently valued the amount that they stated as being “previously valued to.” Only one piece of property ended up selling for more than the previously valued price (and that was only 2.4% more) so the auction prices should be well below that previously valued price. I will analyze the accuracy of the previous valued prices stated by REDC in another continuation to this posting.
– Make sure to check out the properties you’re interested in before bidding. Bidding based on the square footage or the lot size only takes you so far because there may be underlying reasons why the home is being sold. If you visit a home and it has more damage than previously expected, you might not be so comfortable bidding on that particular property. Purchasing a home is an important life decision and it needs to have thorough research done beforehand.
– Be aware of the buyer’s premium!!! There will be a 5% premium added to the final auction price which is how Real Estate Disposition Corporation makes their money. If the condo you buy cost $250,000, make sure you factor in the $12,500 buyer’s premium for a total auction price of $262,5000. Factor the 5% premium into the amount that you’re willing to pay.
Faults of Auctioning Process
– Occasionally the TV screens (in the auction area) that detail the housing auction number, address, square footage, previous valuation, and other pertinent information would shut off and would not be restored until the next auction that starts (which is immediately after the previous one finishes). There should not be those kind of problems because potential bidders want to have all the possible information before making their bid and non-functioning TV screens will not help their bidding decisions.
– The average time to close a housing auction was not timed properly. The first 30 auctions (Chula Vista) seemed to go on forever and the auctioneer seemed like he was holding the auction longer than was necessary to get an additional $5,000 from bidders. As time proceeded to the city of San Diego auctions (100 auctions deep into the auction), the average time was much quicker to finish an auction and they almost seemed like they were hurrying a bit too much as much of the crowd had left toward the afternoon time. I understand that the higher the auctions sell for, the more money REDC makes, but if people get impatient, potential bidders may leave.
Tips for People Just Interested in Learning About the Auction Process
– Make sure to pick up a booklet at the auction with the details of all the properties so that you can log down how much they actually sell for. This will give you some valuable data to work with so that when you price the market in the future (whether it’s a month or a couple years), you can compare how much houses or condos are selling for at auction so you can get a better feel for the health of the housing market.
– Go get your free coffee. This auction can get lengthy if you stay there for many hours so get some caffeine in your system to keep up your attention span.
– You don’t have to register to attend the housing auction. You only need to register and go through all the pre qualification steps if you actually want to bid on an auction. Registering though will allow REDC to send you a catalog/booklet of their properties before the auction.
Investing Happily 
Just curious – i’m not in the market for a home and i’m unfamiliar with the San Diego area – what was the quality of the homes you saw? Were they in largely undesirable areas, and in abandoned condition? And when you say that the auctioned homes ultimately fetch a fair market price, is that comparable to a similar home at list price? i’m just wondering how bad the housing market is in san diego, because it still seems stable in most parts of the bay area.
Some parts of the bay area have gone down in price, but in San Francisco, you still need to outbid other people when purchasing a home. It’s ridiculous. A lot of foreign money is coming in since the dollar is weak. Real estate is almost always a good investment since there isn’t enough land to go around. If the interest rate drops anymore, buying a home will become really attractive.
I have been looking for the review/experience at auction as I am planning to attend one. This is the first hit when I google it. Great work.
It’s funny that you say that about the health of the bay area housing market. Even if you don’t see a ton of foreclosures doesn’t entail that the housing market is all peachy. Matt of fact, 12,704 homes were foreclosed in the 4th quarter alone of 2007 within the nine county Bay Area. This is an increase of 137% from the same three month period of 2006. If you go statewide, California had a whopping total of 81, 550 foreclosures in 2007. Granted, a lot of the foreclosures are occurring in speculative areas during the housing boom like Stockton, Modesto, Fresno, and Riverside.
With all the statistical evidence above of the number of foreclosures (and following double digit housing price decreases across the country), people are still in denial of their house depreciation as can be viewed below in the recent article:
http://money.cnn.com/2008/02/07/news/economy/homeowners_views/index.htm?postversion=2008020716
It’s amazing to see that 75% of people believe their home has not dropped in value. A lot of people own their homes too so since they’re not looking to sell, they may be oblivious to the fact of the sour housing market.
In regards to the questions about the SD market, the areas with the highest foreclosure occurrences were in Chula Vista (south of downtown San Diego) and Temecula (50 miles north of San Diego). I don’t know the areas too well but they’re not terrible places. Average household income for a household in Chula Vista was over 64k in 2005. Even though I did not personally visit any of these houses up for auction, some looked in undesirable condition, some looked brand new, and some looked like newly renovated condos (so a mixed bag of worms).
Stay tuned for a future post about the auctioned homes prices in these foreclosure auctions in respect to “fair market price.”
My hubby and I attended the REDC auction in Riverside this past weekend We also attended the one that was held in November 2006 in Ontario. We noticed this time around a lack of energy and interest by most who attended the auction. We stayed around for 3 1/2 hours which seemed like the average amount of time most folks stayed. There were many spectators but not nearly as many bidders as last time. The auctioneer did seem to hold the auction longer than necessary trying to squeeze out a few more thousands of dollars or so. For example, a couple of homes received bids for $420,000 but the auctioneer spent at least an additional 3 to 5 minutes trying to get someone to bid $445,000. Well it didn’t work. I guess he thought that the bidders were that stupid! Who would bid $25,000 more than the standing bid for a property that couldn’t sell in the first place?! Auctions can be very interesting but I think we’ll give them a rest for now. Especially since there are so many REO homes that you can probably obtain for less than at auction without having to add a 5% premium.
That should have been November 2007…
I want to send a complete review of the REDC auction at San Mateo Feb 23, 2008. I was there since morning 9 AM until 7 PM. I will writing an article about this soon. On the whole, the Auction is fast and real, no hide and seek. It is around 200+ properties sold. Overall feedback, Oakland properties sold 25% of previously valued sale. Most of the cash sale! San Jose properties were hot and competitive, and they were all gone at 75% of previously valued price. High competition of San Jose homes. Salinas properties were sold at 50% of previously valued rate. Tracy properties sold around 50% to 60% previously sold amount. However, Tracy was very competitive too. I will provide complete details later.
can you guys post the details?? thanks
How much over the starting bid do houses go for when there is no seller financing? I would guess these cash only properties are more desperate for sale. But much more expensive to restore too. Thank you.
I understand that the $ 5000.00 premium is collected from the winning bidder on the same day of the auction; so what will happen to the money if the bank declines financing?
You lose your deposit unless you can buy with cash or arrange other financing.
I found your article to be very informative. I do have one question. Where does the starting value placed on the home come from and is it the actual current valuation? In other words, I am curious to know if the starting values are inflated to make it seem like a better deal, or are the starting values real current values for the homes?
Thank you again for your review and any help you can provide to my question.
Chris
Chelsy – Please see my part 2 review for more of the details of the auction prices
Jem – I did not keep track of how much the cash only properties went for as I was more concentrated on the final auction price and how often properties were re-auctioned. Again, see part 2 of my review for my REDC UShomeauction experience that I posted on March 3 for how much these properties sold for in respect to the previous valued prices. I think the starting price is irrelevant because the properties sell nowhere close to the starting price. Also, there were a number of re-auctioned properties that sold for more than what it had auctioned for originally so I think final auction price is independent of starting bid. On Ebay, starting bids make more of a difference because there are a higher ratio of auctions/ebayers. In this case, there is a set amount of homes being auctioned and people will do their homework beforehand to decide what they believe it’s worth.
Efrain – First off, it is a 5% premium, not $5000 premium. If the bank declines financing (which would happen soon after the end of the auction), then the property would go back onto the auction the same day to be re-auctioned. I can’t imagine they would take the 5% premium though because the home would be up for re-auction and another 5% premium would be collected from the new winning bidder.
Chris – Great question. Check out part 2 of my review for this foreclosure home auction regarding some more detailed data of the auction process. I will be posted a part 3 soon which will go into what the “previously valued prices” or “real current values” really mean in respect to the final auction prices. Stay tuned!!!! One note though before you see part 3: I don’t believe the starting values represent the current valuation of these properties. If they were, I’d be buying every single property!!
great info, thanks all! anyone know if a way to make an offer to the bank directly on a propertly cataloged for auction? my calculation says based on what people are suggesting on these types of posting (average home sells about 20-25% below “previously valued”), then you will probably get better deal going directly with the bank (after all, doing that takes away auctions costs which have to be recouped from sale). one point everyone attending these auctions should keep in mind, most auctions are geared for seller benefit (ie. the selling party is the auctioneer CLIENT), and they won’t sell unless they get their FAIR MARKET VALUE.
I have seen (my REDC UShomeauction experience) that there is no relevance to starting bid price. starting bid is listed at a very low value to attract more people to the auction.
REDC auctioneer starts the bid at that value, and hikes to reserve price (which is known only to them and the lender) whether people are bidding or not. Once they reach reserve price, they hang around for bidders. Everything happens in a fraction of minute. Unless you concentrate, you can not find this difference.
The real bidding happens after this reserve value. Depending on the locations, market value, and the competitors, the final price settles.
As I said earlier, San jose home final prices were 75% of previously valued amount.
Tracy range is appx 350k to 450k, apprx 50% to 60% previously sold amount.
Oakland is the worst hit with 25% of previously sold amount.
If there is a resale, the amount goes to appx same value. I have seen south san francisco condo has been re-auctioned four times.
Cash offers sold 50k to 60k less than credit/finance offers.
Silicon, the numbers you provided is included the 5% preminium?
Also do you have the sales price for San Leandro, San Lorenzo, and Heyward?
Chelsy,
The figures does not include 5% premium. You have to add this 5% over it.
Since I was concentrating San Jose area, I have few sale quotes for San Leandro, San Lorenzo, and Heyward, not complete. If you have specific property, please update the details, I can reply you back.
I am trying to compile complete info to my website, never had sufficient time to make a chart. Soon I will.
silicon
I am compiling the list. Complete excel sheet will be soon posted at my site soon. http://www.jayasankar.com/?cat=7
Thank you, I think there are just several houses in San Leandro, San Lorenzo and Heyward, I hope I can get some datas.
[…] REDC (ushomeauction.com) San Diego Foreclosure Home Auction Review Part 3 Just a week and a half ago, Chris asked “In other words, I am curious to know if the starting values are inflated to make it seem like a better deal, or are the starting values real current values for the homes?” I would like to answer that question and analyze the validity of the previously valuation price in the REDC booklet/ushomeauction site with respect to actual present day value. First off, the starting values of the auctions are not the current values of the homes. I consider the starting bid irrelevant because the auctions are bid up so far beyond the starting bid that REDC could start each auction at $1 and it wouldn’t make a difference. This is not like an Ebay auction where you might not have people looking at your items during your auction lifetime which means you need an adequate starting bid to protect against giving away the auction. In the REDC auction process, all bidders who want to bid are present at the auction. […]
FYI — the “previously valued to” price is what the property was worth at the peak of the housing boom. I’m guessing it’s a way for them to make the uneducated buyers think that the property is worth more than it really is. Since prices have come down, I would take about 25% off to get what the property would appraise for today.
Where can I get a list of the winning bid prices for the So. Ca. auctions held 8/16-8/26/08?
Sorry Chris but unfortunately, REDC does not publicly disclose on their website winning bid prices for previous auctions. It wouldn’t be in their best interest to do so. If they did disclose that information, then bidders/buyers could analyze the data to see if they could find trends in the auctions or health of the housing market. If you saw prices continuously dropping auction after auction, you might be inclined to keep on waiting until prices bottom out or change directions. Otherwise, blogs like ours are probably the only way you’ll get that data. If you attend any southern California auctions and take any data, please share with the rest of us.
Thanks for the review. I have comments on the REDC valuation.
I was interested in on of the home being auctioned and was listed to valued at $630,000. I did some digging and found found the owner bought it in 2005 for $630,000. The home is current listed by a real estate agent for $480,000 which is in par with other home being listed and no takers. The listed price is ~76% of the REDC valued price. The value listed by REDC is overly inflated.
Dav, you are right, the listed valuation of these auctions are not in line with what they are worth today. Check out part 3 of my REDC review for comparisons of the REDC valuation with respect to what they would be worth in modern day valuation on Zillow.
When they list as a cash sale, does that mean you need your own financing and if so do they give you any time.
Is there any guarntee that the title is clear and there are no tax or utility leins?
If they do not make that resrve amount, where does the property go from there… back to the bank?
To start with the conclusion , REDC sucks, and they should be shut down. After winning a property at an auction, they referred me to an escrow company. No one was to be reached at REDC anymore . By the end of the escrow the seller still didnt sign all documents therefore we could not close. REDC is legally representing the seller and makes a hefty 5% of the price paid by me, the buyer.
However they simply wont mediate and compel the seller to close on time. So now the transaction is in limbo, the escrow holds 126K of my money interest free and REDC is calling me everyday with a recorded message threatening to take my initial deposit if I dont close escrow in time.
When I called them, I got to a “Closing specialist” answering machine, 2 days later she still didnt call back…
I will have to contact an attorney, file a complaint with the dept of real estate , etc…
I thought the buyer was well protected during these litigious times, but despite the 33 page contract , buyer still can be ripped off by unscrupulous corporations with armies of attorneys on payroll, so beware.
To conclude, REDC are a bunch of incompetent morons that simply wont do their job. Take your hard earned money somewhere else.
PS
To make matters worse , there is no final inspection of the premises before closing, so if a fire, flood, or vandalism happened in the meantime , you, the buyer must deal with it at your own expense.
I would strongly caution anyone buying from REDC who is not a serious investor buying with their own funds. I am an investor who has purchased two homes from REDC. Both times, there were lender problems. The first backed out because “the house was in below average condition”. Most auction houses are. The second, B of A, did nothing for 4 weeks then hit me with a barage of requests. Even though I provided everything they wanted within 24 hours, they couldn’t close on time. Both times I was able to complete the purchase with a private lender or my own funds. If I hadn’t, I would have lost my $5,000 deposit!!! Their sales are not contingent on financing. Even though it’s their recommended lender, if it falls apart, you’re the one out of luck. They keep your deposit!! Buyer beware!!!!