Sonoma County Courthouse Steps Auction
I’ve written about Sonoma County real estate auctions before. To the average person, it seems like the court house step auctions might be a good way to buy property at a discount. There are a host of pitfalls, however, and the reality is that auctions are suited to investment syndicates and savvy investors more than wanna-be homeowners. Still, the lure of getting a house for tens of thousands of dollars beneath retail pricing is strong. I continue to visit the aucti0ns to see if anything has tilted the playing field in favor of regular bidders.
I regret to say that things are just as tough, or tougher, than ever. The biggest barrier to participating in the auctions is the raw amount of time that is required to be a player. It would be great if there was a date and time certain where you could attend an auction where you knew the property would be sold. Unfortunately, the foreclosure industry works on cancellations, bankruptcy proceedings, and the dreaded “mutual agreement” postponements in which the homeowner is granted a reprieve for a month or two, but which keeps would be bidders confused as to when the home is on the market.
Banks keep most auctioned homes
Worse even than the delays, however, is the eagerness of banks to keep these toxic assets on their books. This chart shows that barely 20% of auctioned homes are sold to the host of eager bidders that are waiting to buy them. It’s not clear if even the banks know why they take so many of these homes back, but every time the auctioneer says “sold to the beneficiary”, it’s another house that gets stuffed into the bank’s inventory of homes they’ll get around to selling some day. We are averaging about one home sold to a third party bidder per day. Considering that at least half a dozen groups are there every day for just that purpose, there are a lot of frustrated bidders.
To be a successful bidder you must know the house you want, know what the liens and loans are, know the physical condition, know whether there are tenants or not, and know the date of the auction. Even with all that, you only have a 20% chance of the home being auctioned for a market price…and you’ll have some antsy investors fighting you for it since they’re as frustrated as you are by the too-few chances they get to buy houses to hold or to flip.
If you want to look hard, there is a silver lining. For REO buyers in Sonoma County, there is an advantage to the banks keeping so many of these properties out of the hands of investors. It means there will be more fixer REO properties available for banks to sell in the future. If the investors buy them, they will do the repairs and updates themselves and the home prices when they put the home back on the market are going to reflect repair costs and profits for the investors.