So yesterday I took several hours out of my busy schedule to go to the Bay Area foreclosure auction up in San Mateo, at the event center. I’d turned my brother on to the foreclosure auction some weeks ago, and he’d actually taken the time to drive around to quite a few of the properties on offer, to verify their condition, at least visually. I was going because I wanted to see how much the six properties in Santa Cruz county would go for.
I went with my wife, and we got to the San Mateo Event Center around 11 AM. The auction was already in full swing, and they had several halls packed with potential buyers and lookie-loos. There were thousands of people there. All of the properties were numbered, and that day they started with number 627 (the auction ran for multiple days). The properties my brother had been interested in (mostly in San Jose, Daly City, South San Francisco) had mostly been auctioned off in the first couple of hours. All of them had sold a fair bit over his maximum bid price.
Of course, his bid price was set at the maximum price he could pay and be cash-flow neutral on the properties were he to rent them out. It’s a tall order to get a property that cheaply in the Bay Area, where you can put just 10% down and get it to be at least cash-flow neutral. Really, this was a retail auction. I don’t think there were a lot of professional investors there. There may have been a few flippers out there, but most of the excitement seemed to come from nicer homes in the nicer Bay Area neighborhoods, and people were looking to get into the market for a bit less than full retail value.
Yeah, the death of the Bay Area Home Market is pretty exaggerated. There is still a lot of demand for real estate out there. It didn’t look to like the Bay Area homes were selling all that cheaply – especially not considering that the buyer has to pay a 5% commission on top of the auction price. Really, the prices seemed to be about the same as the MLS/REO price (I think all of these properties were previously for sale on the MLS as bank-owned real estate).
It’s hard to generalize, but I’d say that most properties in the Bay Area foreclosure auction went for at least twice the opening bid. The more desirable properties sometimes went for as much as three times the auction price. Factoring in that five percent add-on, and I’m not convinced that the average buyer was really saving all that much money going the auction route.
Unfortunately, I didn’t stick around til they made it to property number 789 – the first one in Santa Cruz county. We calculated that it wouldn’t be before 7 PM that they would get to that property. Maybe a lot of other people ended up losing patience and wouldn’t have been around towards the end of the auction, and could have picked up some of these Santa Cruz properties for a song. I’m going to make a note on my calendar to check the sale price of these properties in six weeks or so, to see what they actually ended up selling for. I’m really curious to know.
Bay Area Foreclosure Auction Video