I attended the 400 Bremerton and Press Auctions and came away with the impression that the Auction house and developer seller were the only winners.

The Press was still contacting me 2 months after the Auction offering 2 bedroom unit for $360K. Presumably inspite of loan prequalification the auction contracts did not result in a sale. Overpriced property being sold with Marketing hype.

Auction results

Editor note: link updated

Lotsa luck.

The Truth about Real Estate Auctions and why they might not be right for you.

From the reviews I’ve read, what I’ve gleaned of the auction process and the final sales statistics, auctions might and might not be a good deal for a buyer. Are they right for you?

Let ‘s start with the problem – unsold homes. Why are they unsold? Price. It’s a simple as that.

Like you may here from practically any real estate professional, price cures all. Even in this economy we still see buyers competing over very good deals on good homes. No matter where the home is, what shape it’s in or what our economy is like, there is a price that will get that home sold as long as the public knows about it.

Price is dictated by supply and demand. If you have a ton of inventory, the price is low. If you only have a couple of something or if anytime something comes on the market it’s swept up with fervor, the price inevitably gets higher.

Right now, we have a TON of inventory. That coupled with our economy and sellers not wanting to loose their shirts, makes pricing a little bit of a moving target. You might just then say, that the price of a home is what someone is willing to pay for it in an arms length transaction.

So why auctions? Is it because there is no other way to sell the property and the controlling entity wants to be done with it at any cost? You’d think so, but not exactly.

Auctions are just another marketing strategy geared towards getting the seller maximum returns in the least amount of time. It’s true that sellers want to be done with the project in the least amount of time and that they are willing to except prices below what they are currently listed at but, usually not by as much as you’d think. And, if they don’t get what they are expecting, they take them off the auction block and go back to traditional sales. You can see an instance of this at Seventeen07 and THE 400 in Bremerton.

At Seventeen07 the bidding was getting so low by the end they took homes off the auction block because they knew they wouldn’t get what the seller needed out of them. Which, I might add, was nowhere near what the starting bids were.

At THE 400 there were some good deals to be had. The final bids were near the starting bids and far from what they were originally listed at however, many of the winning bidders were not able to purchase the homes because the bank would allow them to be sold for those low prices. Additionally, there are sometimes hidden reserve prices which, if the bids are not at or above those prices, the seller does not have to sell. Just like Ebay.

When Auction companies approach sellers or the banks with this concept they show them statistics of other successful auctions at which homes sold for approximately 85 to 90% of the original list price (which was priced to high in the first place or it would have sold). They show them that auctions breed urgency in buyers and fear of loss. This is true.

Buyers get so caught up in the “competition” and “fear of loss” when the bidding is done, they may end up very close to original list price which may or may not have been near market value. You can see an instance of this in THE PRESS condominium auction where the homes ended up selling for 90+% of the original list price.

The way auctions are run these days is a very analytical and precise. They valuate based on number of registrations, number of pre-qualifications, which homes are being sought after based on buyer registrations then calculate how much interest there will be for any given unit and roughly what it will bring at auction. They take the homes with the least amount of interest of the auction block to ensure maximum interest in the ones that are left. They then sell the ones removed the traditional way.

But getting a home at 80-90% of the original list price is still a good deal right? Not in my opinion.

First, it maybe 80-90% of the original list price but like I said before, the original list price was too high to begin with or the home would have sold traditionally. So, really it ends up being more like 90-100% of MARKET VALUE.

Second you don’t get any of the protections you might see in a regular purchase. Auction homes are sold AS-IS. There is no chance for an inspection, title review, homeowners associate review etc. You could do it before hand but not many people spend money on a home before they know they can have it and many don’t know do it because they fail to use the expertise of a seasoned realtor.

Third, you won’t be able to ask the seller to pay for closing costs, HOD, interest buy-down points, etc. which for many it’s nice to not have to take the money out of your own pocket.

And lastly, the other homes you may have been considering at other communities could possibly be sold to someone else for a great deal. If you don’t win the auction you were after, of for some reason they won’t let you have your winnings (for reasons stated above), you are now just SOL.

Still sound like a good deal? Not at those prices and not when there are so many other homes to choose from where deals are to be had.

The auction companies are very good at what they do and they get paid well to do it. When there is an auction, you know it. They spend hundreds of thousands to make sure they hype sounding an auction is enormous and ensure hundreds of bidders attend.

My recommendation? For those searching for a home for themselves, go to and bid on an auction if it’s the home you really want, not because you just want a deal. Buying a home for a good deal doesn’t make it any better to come home to if you don’t like the home in the first place. If you do go, bring a realtor. It won’t cost you anything because you only pay what your bid price is regardless of whether you use one or not. They can help you stay within reality and make sure you don’t over bid and they can help do the homework before the auction. Lastly, don’t bid over 75% of the list price. If that much. There are other homes to be had at good values. Lastly, why not go put an offer in on that home or homes you really wanted for what you expect to pay at an auction and see what happens. You might be surprised. If it doesn’t work out… you have an auction to attend.