A few meetings with a real estate agent, a visit to several homes up for sale, some private discussions, more consultations with the real estate agent, an initial offer for a house--such is generally the pattern for people in the market for a home.
But on Sunday at the Summerside Condominiums development in Simi Valley's 4,000-acre Wood Ranch, the routine will be more like, "I've got $100,000, do I hear $101,000? Going, going, gone!"
Sixteen two-bedroom, two-bath condos are set to be auctioned off by the Kennedy-Wilson International brokerage of Santa Monica. Starting bids for the 1,322- to 1,776-square-foot homes range from $100,000 to $120,000, as compared to the original asking prices of $159,000 to $209,900 two years ago.
As with other residential real estate auctions, this one is intended to be a win-win situation for the buyers and the seller, in this case Richland Interests Limited Partnership of Carlsbad.
Richland acquired the Summerside property from Bank of America, which obtained Summerside from Security Pacific Bank when the two merged. Security Pacific had taken over the property from the original developer, Olympia-Roberts Group of Canada.
"We've got a seller who has a straight economic interest in the project, not an emotional one. Rather than sell one [condo] at a time over a period of time, they decided to sell all 16 at once," said Bill Stevenson, vice chairman of Kennedy-Wilson. "The typical result from an auction is an opportunity for both buyer and seller to get a good deal." Stevenson said that at real estate auctions buyers tend to get a 10% to 15% discount off market price, and sellers save on marketing expenses, taxes and other costs that would have accrued by holding on to the property and selling the project gradually.
Though real estate auctions aren't the rage they were back in the early 1990s, they are still a viable option for sellers, said Stevenson, whose company has been involved with auctions throughout Ventura County.
"Historically, auctions are used to sell new homes and obviously there haven't been as many being built over the past few years as there were previously," he said. "They are used more often in declining markets when sales are very slow, and we went through that period in the early 1990s."
Chuck Dreyer, of Dreyer & Young Inc., a Newport Beach company that conducts real estate auctions throughout Southern California, said homes built in the mid- to late-1980s sat empty when demand for them declined in the early 1990s. Developers, he said, were forced to look for unique ways to market their product.
"There were thousands and thousands of houses all over Southern California with no buyers," he said. "Builders decided auctions were a good way of creating interest."
These days, with fewer homes being built and improved demand, Dreyer said most of the auctions are inspired not by builders but by money-lending institutions that have acquired property through foreclosures.
Dreyer said Ventura County's housing market is actually strong enough to warrant only a minimal number of auctions.
"Virtually everything that gets built in Ventura County sells really quickly. It's probably the best county in Southern California," he said. "So there isn't much standing inventory to be sold."
Nigel Taylor, housing director at the Ventura office of the Prudential-Jon Douglas Co., has also found property available for auction in short supply. And, he said, many of the Ventura County real estate auctions that do take place are not all that successful.
"There's a small population in Ventura County, and there's less emphasis here on great deals," said the former head of Jon Douglas' auction division.
Taylor said the real bargains come at auctions at which the property owner is in a must-sell situation. But in other cases, when the owner will not sell unless the winning bid meets or exceeds a pre-established bottom line, buyers in a bidding frenzy may end up paying close to, or even more than, the market value of the property.