Foreclosure Auction Offers "Good" Deals, Not Great

• March 17th 2009

by Will Smith

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At this weekend’s giant home auction at the Washington Convention Center, Real Estate Disposition Corporation (REDC) sold a slew of foreclosed homes in DC, Virginia, and Maryland to an estimated audience of 2,000 people. The fast-paced, six-hour bidding fest started at about 9:30am on Sunday and saw over 200 properties auctioned off to an audience of hopeful homebuyers and real estate investors. About 30 of those properties were in DC proper, while the remainder were mostly in Virginia with a smattering in Maryland.

The consensus among attendees was that deals were good, but not great. This was probably due to the large number of actual homebuyers in attendance. People shopping for a primary residence generally have an emotional connection to a property that causes them to bid higher than real estate investors, whose disciplined approach sets a firm ceiling on how high they’ll bid for a particular property. “On average 80 percent of the bidders at our auctions are first-time homebuyers,” REDC vice president of client management Todd Gladis told UrbanTurf.

That left many of the investors feeling disappointed. “$120,000 was my limit,” one commented to UrbanTurf upon losing an auction to a winning bid of $160,000.

The quality of properties varied widely, and auction attendees had been advised to visit their target properties ahead of time to evaluate them. When announcing a new auction, the auctioneer would often note that the home had “mold and flooring issues” or “drywall and paint damage.” Groans and snickers were heard in the audience for one property that had “foundation and structural issues.”

With these potential headaches, it was sometimes hard to drive demand in a particular property, no matter how hard the auctioneer tried. “70, 70, can I get 70?? Make money in your sleep at $70,000!” coaxed the announcer at one point trying to push bids higher. Throughout the auction, tuxedoed “assistants” in sneakers danced up and down the aisles blowing whistles, signaling to each other, and generally trying to generate some excitement. At one point, bowls of candy were passed around, presumably to give bidders a quick sugar high so they would bid more aggressively.

Despite these transparent gimmicks, the auction was professional and well run. The announcers reminded the audience repeatedly of the 5 percent buying premium that is tacked on to every winning bid (the auctioneer’s fee).

Geographically, most of the properties were from less expensive areas. The DC properties were concentrated in Southeast and Northeast, with just a few in Northwest. Many of the Virginia properties were in exurbs like Manassas, Woodbridge, Herndon, Lorton, Leesburg, Stafford, and Centreville. A few were as far away as Fredricksburg, Front Royal, Spotsylvania, Winchester, and Culpeper. The Maryland properties were largely from Fort Washington, Waldorf, Oxon Hill, and Temple Hills. Noticeably absent were properties from more expensive close-in markets like Bethesda, Silver Spring, Arlington, and Alexandria.

See this post from yesterday for a sample list of about 80 properties and their winning bids. You can also view the two videos below to get a sense of what the process is like:

This article originally published at https://dc.urbanturf.com/articles/blog/foreclosure_auction_offers_good_deals_not_great/676.