All you wanted to know about the John Ross auction – and more

By Ryan Frank, The Oregonian

March 12, 2010,

The OregonianThe John Ross (left) and the Meriwether (right).

More than any other major condo project, the John Ross has come to symbolize the condo bubble and bust. In 2005, would-be buyers reserved 80 percent of the building.

But by 2009, the lender had taken control of the John Ross – and the neighboring Atwater Place – when sales sputtered. The Atwater Place has already gone to auction. Now, 50 of the John Ross’ remaining 80 units are headed to auction. I covered the rise and fall of the project in today’s paper.

The John Ross’ builders – Williams & Dame Development and Gerding Edlen Development Co. – in 2007 sued people who put down deposits but tried to back of their purchase. And among the John Ross buyers who closed their deals, about two dozen have already defaulted on their mortgages, by my count. That’s by far the highest of the three condo buildings in South Waterfront. The Meriwether was the first condo project in South Waterfront and sold out before the market turned sour. The Atwater Place is on the river, has nicer finishes than the John Ross and commands higher prices. That means the Atwater Place has a different buyer profile. They tend to be more affluent and able to withstand the recession.

If South Waterfront has an entry level condo building, it’s the John Ross. I wouldn’t necessarily call the John Ross entry level given its still relatively high prices. But the prices are lower the other South Waterfront buildings and the finishes not as flashy. It’s a block off the river and doesn’t have as many unobstructed Mt. Hood views as the Atwater Place or Meriwether. The John Ross buyers I’ve met tend to be single 20-somethings with dogs. Or California investors. The John Ross is also massive. At 303 units, it’s the largest building in the city. As of March 10, 223 condos had sold and two sales were pending.

The John Ross auction follows a similar auction for the Atwater Place in September. I summarized those auction results here. That auction drove prices down again in the Portland condo market but they also sparked new buyer interest.

Patrick Clark, at Realty Trust City, has been the listing broker at the start of all three South Waterfront condo projects for the developers, Mark Edlen and Homer Williams. According to his figures, the John Ross had five closed sales in the first seven months of 2009 before the Atwater auction was announced. Those sales averaged $300 per square foot. In the seven months since the auction, the John Ross has closed 36 sales. But those sales came at a 10 percent discount at an average of $271 per square foot.

At the Atwater, 59 home sales closed before the auction was announced at $439 per square foot on average. Through the auction, the Atwater sold 39 homes at an average $303 per square foot. (34 of those have closed.) Since the auction, the Atwater has closed 16 sales at $340 per square foot, according to Clark’s figures.

Real estate auctions are always a buyer beware situation. The auctioneers are pros. I attended REDC’s auction for Buena Vista Custom Homes’ inventory in December 2007 and Accelerated Marketing Partners September 2009 auction of the Atwater Place. The auctioneers know how to whip up bidders into a froth. That’s all fine. But it’s important for anyone who is thinking of buying to understand the rules and bidder obligations. That means you must carefully read the terms and conditions and consultant a real estate lawyer or broker. The terms and conditions are laid out in this brochure.

Kennedy Wilson Auction Group, which is running the John Ross event, did the same for Astoria’s Cannery Lofts last year and an upcoming auction for Seattle’s Fifth and Madison condo building.

I’m neither a lawyer or a broker. But I have listed some important points to know below. To keep up on the latest about the auction, keep coming back to this point. I’ll post updates here.

For details on all 50 units going up for auction — including highest list price and the discounts offered at auction — check out this spreadsheet.

• There is a minimum bid. But unlike the REDC auction in 2007, there is no unpublished reserve price. An unpublished reserve is a secret price that’s above the minimum bid. Even though a bidder has surpassed the minimum threshold, he or she won’t necessary get to buy the real estate if the price hasn’t surpassed the secret reserve price. The unpublished reserve breeds skepticism because, well, it’s secret. The John Ross auction won’t have one.
• There is no buyer’s premium. The REDC auction included an extra 5 percent – above and beyond the winning bid amount – to cover expenses. That also added some skepticism to the 2007 auction. But there will be no buyer’s premium here. The winning bid is the buyer’s price.
• You MUST register just to bid at the auction. The auctioneer suggests registering before 6 p.m. Thursday, April 8. People who register on auction day can buy just one unit.
• There will be an informational auction session at 1 p.m. Saturday, April 3.
• If you buy, you will be on the hook for homeowners association dues that can be substantial.
• Potential buyers can inspect any unit they may bid on before the auction.
• On auction day, bidders must bring a $5,000 cashier’s check for the unit they plan to buy. The check should be payable to Ticor Title Insurance. That $5,000 would go toward a deposit that’s 3 percent of the winning bid. If there’s more to pay toward that 3 percent deposit, it can come from a personal check. You must show your cashier’s check and personal check before the auction starts.
• If you’re the winning bidder on a unit, a staffer asks you to sign a bid confirmation sheet, then escorts you to sign the purchase documents and pay the deposit.
• All bidders must be pre-approved by the auction company’s two approved lenders, Bank of America Home Loans or MetLife Home Loans. That’s true even for bidders who plan to use another mortgage lender. The auction company says they do this because some lenders are reluctant to make loans on condo purchases and could back out after the auction. Buyers who use a preferred lenders and close within 45 days will earn a $3,000 credit toward closing costs. Bidders who buy with cash will get a 1 percent discount if they close within 21 days.
• Broker cooperation was a big issue at the Atwater Place. Here’s how it works with John Ross. The auction company will pay a 2.5 percent commission – less than the traditional 3 percent. That applies only to qualified and registered brokers. Buyers must register their broker on a registration form before Thursday, April 8.
• All sales must close on or before Wednesday, May 26, 45 days after the auction, unless the seller extends the sale in writing. The seller will grant some extensions with a non-refundable $1,500 extension fee. The fee will not be credited to the purchase price. Requests for extensions must be made in writing at least five calendar days before the scheduled closing. All extension requests are considered on a case-by-case basis. Extensions are granted only to buyers who have demonstrated good faith in trying to close their sale.