Home auction draws bids, criticism
More than 200 foreclosed Las Vegas homes were sold at auction last weekend with average prices of $190,000 to $210,000, an executive for the auction firm said Tuesday.
The auction at Lake Las Vegas attracted about 2,200 people and participation among bidders was strong, Dallas-based Hudson & Marshall Chief Executive Officer Dave Webb said.
“Everything is under contract, but that doesn’t mean anything,” he said. “How many do the banks actually take? The banks were there on a majority of properties. They approved 60 (percent) to 65 percent already. As motivated as they are, it’ll be a good 80 percent.”
Eric Young of Liberty Realty in Las Vegas tracked the results of the previous auction by Hudson & Marshall in August and found that although 87 of the 90 homes received bids, fewer than half of the winning bidders were able to negotiate agreements with the banks that own the homes.
“The banks aren’t obligated to accept the high bids at these auctions,” Young said. “Many of the high bids received counter-offers in the days and weeks following the auction.”
Two months after the auction, only 38 properties had closed escrow, he said. Average asking price was $311,000 before the auction. Factoring in Hudson & Marshall’s 5 percent fee, the average closing price was 12 percent below pre-auction asking price, Young calculated.
The remaining homes went back on the market. They’ve all undergone a price reduction averaging 21 percent, he said.
“The best deals on the market are the stale foreclosures,” Young said. “The only question a buyer has is whether he should make his offer now or hold out for another price reduction and risk someone else getting the home.”
Bob Reeve of Red Rock Canyon Realty attended last weekend’s auction and thought it was on the edge of being illegal.
“This is no auction. It is merely a bidding party and the poor bidder is forced to pay a 5 percent premium for what he could have gotten the day before with full agency representation and at no extra cost,” he said. “They force you into a cash transaction contract when most buyers will probably be putting on a new mortgage, so we do not have a meeting of the minds from the get-go.”
Reeve also wondered if there might have been “shills” planted in the audience to help bid up prices.
He found a disclosure clause in the printed brochure that says: “Bidder acknowledges that seller and auctioneer and their employees, agents, affiliates and associates reserve the right to place bids on properties up to the seller’s reserve price, if desired, at their sole discretion.”
“How about that to make you feel warm and fuzzy?” Reeve said.
Webb of Hudson & Marshall said that tactic is sometimes used in “absolute” auctions in which there is no reserve price.
“That’s not necessary when you have the banks there and the right people,” he said. “Banks don’t have any interest in bidding on property they own. Even if it doesn’t bring enough (to meet the reserve), the bank can always turn it down.”
Contact reporter Hubble Smith at hsmith@reviewjournal.com or (702) 383-0491.