Advantages of home foreclosure auctions

Foreclosed homes include a two bedroom, one bath house in Scotts Valley in the Santa Cruz mountains, once valued at $499,000,lwith a starting bid of $59,000.

April 23, 2010 7:47:44 PM PDT
About 225 foreclosed homes go on the auction block this weekend, providing an opportunity for buyers to get low prices.

However, there is also a downside for neighbors whose home values may be negatively impacted by those low prices.

The homes in the Bay Area, Sacramento and Fresno will be offered at three separate auctions by Real Estate Disposition, a Southern California company that has done similar auctions previously in the Bay Area and across the country.

ABC7 Moneyscope spoke with Trent Ferris from Real Estate Disposition, which is running three Northern California auctions this weekend.

"Somebody's moving into that house. Somebody's buying paint, carpet or whatever it is that they want to do to make that house their own, and there's a whole ripple effect throughout the community," he said.

The Bay Area auction will be held Sunday, April 25 starting at 9:30 a.m. at the Hyatt Regency Santa Clara. The Sacramento auction will be held on Saturday, April 24 and the Fresno auction takes place on Monday, April 26.

Foreclosed homes include a two-bedroom, one-bath house in Scotts Valley in the Santa Cruz Mountains, once valued at $499,000,lwith a starting bid of $59,000 and a seven-room house in San Mateo, once valued at $804,000, with a starting bid of $259,000.

Matthias Wloka has been looking for a good auction deal for six months, but he hasn't found one yet.

"There's a lot of people in Silicon Valley that have a lot of money, so if there is a good deal, they're probably there first and scoop up the deal," he said.

A neighbor of the Scotts Valley house said she welcomes the auction because the house has been vacant for months. However, she points out that it could have a negative impact on what's known as "comparables" or "comps." The sale price of a house sets a benchmark for the value of similar homes in a neighborhood.

Karl Lee, president of the Santa Clara County Association of Realtors, says foreclosures and short sales (homes that are not yet in foreclosure but are being sold to prevent foreclosure) represent close to 50 percent of the region's real estate market. So these so-called distress sales already are having an impact on home prices.

"Probably 40 to 50 percent of our market is still either short sales or foreclosures, so yes, I'd love to see us get into a more normal market, a more normal community, where we have fewer foreclosures and fewer people at that risk," he said.

Lee points out, though, that getting these homes sold helps to restore balance to the housing market. As the inventory of foreclosed homes drops, that leaves a smaller inventory of houses available for sale. Tighter inventory tends to boost sales prices.


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