Bidding for a bargain on the foreclosure auction block

"I'm a nervous wreck," said Dennis Anderson, 62, as he waited for the property to be called.

As the housing market continues to slump and mortgage defaults mount, public auctions of foreclosed properties are luring buyers with the promise of bargains. On Sunday, about 600 prospective buyers and real estate agents packed a ballroom at the Doubletree Hotel in Ontario to bid on about 120 bank-owned homes across Southern California.

Starting bids ranged from $35,000 for a three-bedroom in Barstow to $390,000 for a four-bedroom in Norco. Potential buyers were able to view the properties at open houses that took place in the weeks before the auction.

Real estate services and investment firm Kennedy Wilson put on the event, promising an "exceptional inventory clearance" with "incredible deals." The Beverly Hills-based company holds foreclosure auctions around the country and is now staging them as often as every other week.

With thousands of foreclosed homes on the market, "some people tend to look at auctions as their first option as opposed to three years ago," said Rhett Winchell, president of Kennedy Wilson's auction division.

The Andersons, first-time auction goers, waited anxiously as dozens of other homes were sold. After three hours, the Idyllwild house -- Property No. 76 -- was called.

With his glasses perched on the end of his nose, Dennis Anderson entered the starting bid by waving a blue bidding card. Four other bidders jumped in, driving the price up in increments of $10,000.

At $300,000, he raised his card again. The price rose further.

Bidding began to slow once the price topped $400,000, but Anderson remained determined. He offered $416,000. No other cards were raised. Finally, he heard the words he'd been waiting for: "Once, twice, third and final opportunity. . . . Sold!" "Wonderful," he said, as his family cheered and neighboring bidders offered handshakes and congratulations. "It feels like we got a good bargain."

Homes typically enter foreclosure when borrowers can no longer make their mortgage payments and can't sell their homes for amounts that would pay off their loans. Once the properties are turned over to the bank, the lender is motivated to sell them as soon as possible -- and often for a reduced price, said Michael Carney, a professor of finance and real estate at Cal Poly Pomona.

"They've got money tied up in these houses that's not generating anything for them," Carney said. "It's basically a dead loss."

Susana and Edward Salgado arrived at the auction intending to bid on a four-bedroom Lake Elsinore home for their family of four.

"We're tired of renting," said Susana Salgado, 40, a customer service representative from Lake Elsinore. "Homes are going for a great price."

But the couple's bid of $257,000 was topped at the last second by another offer of $258,000. The Salgados didn't go higher.

"We should have bid a little more -- I think we would have got it," she said. "We're a little disappointed."

Although auctions can seem like a good way to buy a home, experts said buyers should research the properties first.

"People see these big signs -- 'Sale: 20% off, 50% off.' Off what?" Carney said. "We don't know what the price of housing ought to be. The real price right now is whatever they can sell it for."

The median price for a Southern California home last month was $408,000, down 17.6% from a year earlier and 19.2%, on average, from peaks reached last year, according to research firm DataQuick Information Systems.