Once, Twice, Sold!

by Roberta Avery, National Post Published: Thursday, December 11, 2008

CORNVILLE, Ariz. • Senator John McCain’s retreat is just down the road, so John Gray was hoping for lots of action when his upscale home went under the hammer, but although the auctioneer asked for an opening bid that was less than half of its previous valuation, no one was interested.

“There weren’t many buyers in any case,” says Mr. Gray referring to the National Real Estate Auction held in Phoenix in late November.

When his 3,000-square-foot home, which stands on 1.09 acres with a swimming pool, was custom built in 2004, it was valued at around US$500,000 – and that was before Senator McCain’s nomination as a U.S. presidential candidate put the Arizona community of Cornville firmly

on the map. After all, it’s the place where Senator McCain and his wife, Cindy, have owned a spread for more than 20 years.

Mr. Gray’s home is just one example of the bargains being offered at auctions in states such as Arizona, California and Florida since the sub-prime crisis caused the U.S. housing market to collapse, says Rhett Winchell president of California-based Kennedy Wilson Auction Group.

“The auction business is growing tremendously,” says Mr. Winchell.

Before the U.S. housing crisis, his company averaged about two auctions per year, that number has soared to 35 auctions in the past two years

with between 30 and 150 homes on the auction block at each sale.

While some of the homes on auction are bank foreclosures, not all are; builders and developers, who are finding themselves left with subdivisions full of unsold homes, are increasingly turning to auctions to unload inventory, says Mr. Winchell.

“For builders anxious to avoid expensive carrying costs, it’s the best option as they can move a year’s worth of inventory in one day,” says Mr. Winchell.

That means Canadian snowbirds seeking a home in the sun can get some great bargains at auctions with home prices as low as US$50 per square foot, says Mr. Winchell.

“We’re talking brand new homes,” says Mr. Winchell.

At a recent Kennedy Wilson auction in Arizona, buyers from northern states were snapping up second homes in the area around Phoenix, including the resort community of Scottsdale at discounts of 50% to 60%, says Mr. Winchell.

While a handful of Canadians registered as bidders for that auction, none made a purchase, but Mr. Winchell expects that to change at future auctions.

“There will be a lot of tremendous opportunities for buyers,” he says.

The Real Estate Disposition Corp. (REDC) offers details of upcoming foreclosure auctions at ushomeauction.com in locations across the United States, including Florida, California, Oregon and Colorado. Starting bids at a recent REDC auction in Orlando, Fla., for example, were as low as US$119,000 for a three-bedroom home previously valued at US$750,000.

While “starting” bids are used to generate interest from buyers, there is no guarantee that the property will sell at the starting bid if there is a hidden reserve bid. Advertised “minimum” bids, however, mean that is the least the seller will accept.