I was driving down the road this evening, out and about, doing some drive-by BPOs. I was out in North Monterey County, which if you’re not familiar, is pretty rural – farm country. Basically, it consists of rolling hills covered in farm fields, horse pastures – and, of course, houses. Everything from run-down mobile homes, to virtual shanties where the folks who grow our food live…to larger, newer homes – McMansions, or whatever you want to call them.
I was driving down Garin Road in Prunedale, to get over to Lewis Road. A few days earlier, I had seen a very visible bright green sign saying “Home Auction” pointing down Garin Road, but seeing as how I wasn’t going that way, I just kept driving. But today, since I was passing by, I saw the house and picked up a flyer. The flyer was short and to the point, printed out in black and white: “Auction this Saturday at 12 PM.”
Of course, there’s a web site to go to – TheAuctionHouseInc.com – so naturally I went and had a look. They’re auctioning off quite a few properties this coming Saturday – you can bid either on-line or go in person to the auction company in San Jose. On this particular property, the owner says it’s worth $1,400,000 – but they are allowing bidding to start at $599,000. Of course, there’s a reserve – but they don’t tell you what that is. But if the reserve isn’t met, the property doesn’t get sold. What’s the fun in that?
They also provide a handy Zillow link to the property. It brings up a nice page where you can see a picture of a lovely kitchen, granite counters and all. You have to look closely, though, to see Zillow’s Zestimate: $950,493. That’s more like it. See, the thing is, the neighboring houses are selling for lots less – there’s one just down the street, selling for around $750K. Granted, it’s not such a lovely house as this one – but it’s that darn principal of regression at work here. You don’t want to over-build in an area. That house might be worth $1.4 million somewhere else, but right there – I don’t think so!
Zillow might be right on this one. But don’t get complacent – Zillow is notoriously inaccurate, at least in these parts. I was doing a CMA on a property right on the border of Capitola (behind the mall), and Zillow said the place was worth $973K – zoinks! Even though all around it, Zillow reported sales prices in the mid-$700’s, and this house was remarkably similar to its neighbors.
But, I digress. There’s been a lot of (mostly cheap) talk about the coming of auctions as the predominant want to sell properties. From what I hear, it’s a fad – it comes, and it goes. It is the standard way of selling homes in, say, Australia – but even there, my understanding is that if the reserve isn’t met, then the home gets sold the old-fashioned way, like we do here in the good ol’ USA.
I think that the reason auctions haven’t really caught on is that people have found that, more often than not, they don’t end up getting the home any cheaper, but they do run the risk of getting caught up in auction fever and perhaps locking themselves in to buying a property they know little about. And for sellers, of course, there’s always the fear that unless they set a decent reserve, that they will get less (maybe a lot less) than they’re hoping to get for their house.
Anyway, it will be interesting to see if this sort of thing really starts to catch on – I have my doubts, but it’s a trend I’ll be watching.