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And by Ron Ares, re:PDX founder / editor and marketing specialist.
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Bear Market Bites Builder
But will buyers benefit?
I’ve generally given local homebuilders a lot of credit for their restraint in not swamping the Portland market with speculative housing. But it appears at least one builder has overshot the mark to the point of employing a bold bailout strategy to unload unsold inventory.
Buena Vista Custom Homes announced they will be auctioning their entire inventory of finished homes, around 230 in all, in a two-day auction December 15 and 16. List prices for homes are between $300,000 and $650,000. Bids start at $69,000.
It’s no wonder. I spent last weekend touring Happy Valley with new clients and found street upon street of finished, vacant homes in Buena Vista developments–only to see new surveying flags and infrastructure installed on extensions and new phases in these same neighborhoods. Time for a fire sale!
Large-scale auctions have been conducted in other overbuilt markets, but this is the first such event I’ve heard of in Portland. In today’s Oregonian, Buena Vista’s president says that properties could sell for as little as 40% of the original list price.
From Buena Vista’s press release:
The homes that will be offered are located in some of the most popular selling communities in the Portland Metropolitan area. Communities include: Beaverton, Happy Valley, Hillsboro, Sandy, Bend and Scappoose. Floor plans range from 1113 to 5073 square feet and many include Buena Vista’s popular amenity package’s which include designer finishes such as granite counter tops, extensive hardwood floors, cherry cabinets, stainless steel appliances, multiple fireplaces and much more.
They’re going to keep on building, however.
The company has many projects on the horizon for the future. In early 2008 the company will embark upon new neighborhoods in Tigard, Oregon City, Southwest Portland and Happy Valley.
This time, my guess is they’ll be taking deposits first.
About the Auction:
Dates: December 15th and 16th.
Location: Oregon Convention Center.
Registration: Will open at 9am
Auction Start Time: 10am on each day.
Over 250 New homes, investment properties, and condominiums will be auctioned with starting bids as low as $69,000. Financing will be provided at the auction by Countrywide Home Loans with down payments as low as 5%. Loan pre-qualification before the event is available via phone. Event admission and registration are free. Bidders must have in their possession a $5,000 cashiers check made payable to themselves on auction day in order to receive their bidder number. Winning bidders will be required to put this $5,000 toward their down payment and write a personal or business check for the remainder of the down payment open to escrow. All escrow on properties sold at the auction is expected to close in 21 days. Expected attendance for the event is over 1,000 buyers. At the auction each home will be individually offered, potential buyers can visit the homes in advance Friday through Sunday (10am-5pm).
If you’re interested in one of these homes, you’ll likely be on your own. There doesn’t appear to be any reciprocal compensation offered to buyer’s agents, so you will need to pay an agent or lawyer out of your own pocket if you want advice or representation during your due diligence period.
Links:
AuctionToday.com – Buena Vista’s auctioneer (no property information as of 11/15/2007)
Auction FAQ
Buena Vista press release
[tags] Portland, Oregon, homes, houses, builder, construction, auction, Buena Vista [/tags]
Comments
29 Responses to “Bear Market Bites Builder”
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I’d give anything to be a renter right now — but unfortunately I own a home in the Happy Valley area already, and I think the Buena Vista homes over there are too big to be good rentals. They are beautiful, that’s for sure.
Staci,
Most BV homes ARE too big to rent. The builder already tried that tack. Some of the properties on auction are actually leased units.
Bearlee,
There may be additional liquidation as you mention, but I think most other local production builders reined things much more than BV did. Renaissance and Arbor Homes, for example, aren’t building homes unless they’ve got a deposit in place. It doesn’t mean that buyers won’t back out, but there is much more commitment than the ‘build it and they will come’ mentality.
It seemed to me that BV acted almost like an out-of-state, high-production builder–not in tune with the local market.
BTW, if this blog is as ‘useless and fluffy’ as you state elsewhere, why are you reading?
It’s good news for those of us looking out for our customers who NEED to sell. Less inventory….easy equation.
Now, if you’re a buyer waiting for the bottom, I suppose it’s not good news.
Which side of the coin are you on?
Leigh,
I appreciate the thoughtful comment prior to the last regarding the content here. It ended up in the spam folder temporarily :0
Yup, guilty as charged for promoting the Portland market (and me, too). But most people I meet through this site are predisposed to want to live here for lifestyle reasons, relative affordability for West coast cities, etc.
I write posts to communicate the state of the market and make occasional judgments, but I’m not here to debate economic policy or be an investigative reporter. At the same time, I’m not breathlessly flogging the market for something it’s not.
So, I guess I’m stuck with fluffy…but hopefully not useless.
Good points Leigh. I’m fascinated by the realtor/developer/buyer life cycle as well and read (mostly) just to watch the market evolve, movie popcorn in hand.
PS. Leigh, I think I may know you. if your husbands first initial is “S” please tell him Chris H. left him a note on flickr. We lost contact and I’ve been trying to reconnect.
Tough crowd. Thanks for sharing the scoop on the auction Ron. May be a rhetorical question, but assuming that most of these properties are clumped together in new neighborhoods, I wonder what those neighborhoods will look like in a year or 2? Mostly homeowners? Mostly renters? Mostly vacant waiting for the market to turn? I know there was a comment about them being too large to rent, but not sure I get that. If an investor could buy at 40% of list, sounds like a good rental candidate to me.
R, Jon
Question: What makes a home too big to rent?
Hmmm. There are now a couple of hundred properties listed on the auction site that Ron links to above. The lowest opening bid I see is $149k, and many have opening bids over $300k. No sign of the $69k opening bids mentioned. ??
Jon
With respect to ‘too big to rent’, I may have spoken out of a bias that homes larger than 3,500 sq. ft. (which is what I saw during my tour of BV homes), aren’t the typical rental. But nearly anything pencils with >30% down.
With respect to opening bids and $150K ‘minimums’, my cynical side wondered if the 40% number was just a canard to spur interest in the auction.
Can anyone give opinon or information on what this means to home vaules of current Buena Vista Home owners…. do our values collapse as comps in the area sale for auction prices or is it looked at as what is is…a distressed builder but not a true indicator of market value?
Joseph, if current Buena Vista home owners have comp houses the market price for those houses fall as these houses bid, e.g. who would buy a similar slightly used house for more money than a brand new house down the street?
Joseph,
crander is right…for now, with so much supply on hand, current homeowners that need to sell (whether BV homes or any other builder’s homes in the same area) will suffer from depressed values. Once the inventory is absorbed, I would expect prices to rebound over time.
Where did Leigh’s comments go?
Good question. I did some comment moderating for spam pingbacks, etc. this morning. Leigh’s post was originally flagged as comment spam, so I guess the filter took care of it again. I will re-post the comments from my email copy.
No censorship here unless things get uncivil.
(This is a comment from bearlee that was inadvertently removed. -RAres)
Comment:
My guess is other developers will be required to hit the auction block, ie the condos in SoWa (John Ross and the Atwater) and also the Timberland development off of NW Cornell just to name a few. All depends when the banks get anxious and tell the developer to unload. As for the owners that will soon be walking away from their properties, there will be even more auctions. I am not sure why any one would consider selling right now unless they are in over their heads or need to move to another state. There seems to be lots of motivated sellers on Craigslist. bearlee
(This was a comment from bearlee that has inadvertently removed. -RAres)
Comment:
Why am I reading it…I like to see how the housing market is being marketed to folks who are seeking to relocate here from out of state. And not just out of staters, your site is likely being accessed by potential sellers and buyers in the Portland area. I am just dumbfounded how the media (and many realtors and lenders, including yourself) is being so light on developers and the housing market in general. When BV homes started to lease the Happy Valley homes the developer acted like that was all in the plans. Where was the investigative reporting? Where were the tough questions? Same thing with the John Ross and other condo builders…who is calling out their lies about how many units they have sold or who is questioning why Ball was quick to sell the Wyatt. I have coworkers trying to sell and their realtors are telling them things are going to pick up in January. Really? What is happening to indicate that? When we sold our house we could not get it through our realtors head that things were heading in an ugly direction.
When I read your site, like the Room for Millionaires post, you solicit your services to view these properties. Would you advise someone to buy when it is predicted that we are heading through a major skid. I do not know your ethics but would you encourage an ARM or other risky loan options to make the purchase?
You have a conflict of interest so I do not expect you to be too harsh on the economy/housing but when the dollar is falling sharply and you are reporting on nude gardening in Happy Valley I just think this is just another source of many out there for glimpse of the housing market. I just hope folks do their homework.
http://www.portlandrealestateblog.com/
This is another example of fluffiness. This blog complains about Smart Money stating that Portland is 47% overpriced. Instead of just whining about it they could have discussed how they got that figure. But then, that would have scared folks away from buying in Portland…another conflict of interest.
Here is a suggestion…talk about how the fed should NOT lower interest rates cuz it will cause the dollar to tank even more. Realtors do not want to hear about rising interest rates because it will stall the housing market. Can it be stalled any more?
How do you think these auctions of 40 cents on the dollar will effect other homes on the market? Do you see this auction of 230 set off a slippery slope?
so maybe you are not useless, just fluffy:O)
(This is a comment by bearlee that was inadvertently removed. – RAres)
Comment:
MORE FLUFF…from your friends at
portlandrealestateblog
…inventory declined…celebrate!!!!
So why did it decline…I am guessing because it got too painful for folks to let their home sit and get no offers.
So why is that good news?
Sorry if I seem a bit harsh, just from personal experience I have had too many realtors NOT looking out for my interests and focusing on just making a sale
Ron, your Fluff has been exposed. Spam filters do not remover posts once you have cleared them. Therefore you deleted my post! I ended up on your Spam filter because you put me there. You want to closely monitor your blog so not to give the impression that it is NOT a good time to buy at this moment. I hope readers/potential buys are looking at housing blogs other than those of realtors and mortgage brokers (who have a conflict of interest).
bearlee
Leigh,
If I had meant to censor comments, I would have deleted my replies to you as well.
You are always welcome to comment here as long as long as things don’t get abusive.
Going through today’s junk pingbacks and comments, I may have marked yours (and others’) comments for moderation–which are now gone. That’s why I reposted them when Chris asked where they were. (If you’ll notice the stats at the bottom of the page, I’ve moderated over 40,000 comment spams, and I don’t bother to read them.)
As for my conflict of interest, I’ll let the readers make their own judgment as to my intent and transparency.
Some of these larger houses (the ones too big to rent) could end up being divided into duplexes (or maybe even divided more) and then those units could be rented or perhaps sold as townhomes. I never understood this whole “McManstion” thing – who really needs a 3500 sq ft. house? OK, maybe someone with a bunch of kids (like 4 or more), but generally they wouldn’t be able to afford that kind of morgage (kids are expensive) and I suspect mos tpeople who live in McMansions don’t have kids.
We’re talking about finished homes, here. Dividing McMansions into duplexes and triplexes is unlikely due to zoning limitations and cost to remedy. They weren’t engineered for multifamily layouts or utility service.
If you read about REDC, the company doing the auction for Buena Vista, you’ll find that at most of these auctions there is a “reserve” price they don’t tell you about. If the house doesn’t reach the reserve price it will not be sold. Roger Pollack isn’t going to lose 100K per home in an auction. I read an article from someone who worked for a public auction company that said in the 10 or so REDC auctions he went to he saw fake bidders driving the price up to the minumum. There could still be some good deals but I don’t think you should be lured into thinking you are going to get a home at 40%-60% off. Do you homework, look through the homes and go to the auction with your maximum price in mind. Make sure you qualify and can close in 21 days, I read a few horror stories where people lost their money when they couln’t close in time. I hear the contrcat is very “seller” oriented.
Just so you can see it. Here is part of the terms and conditions for these auctions. There is an unpublished reserve price that the auctioner can place an opening bid on for the seller and continue to bid on for the seller until the minimum reserve price is met. They will do this by pointing out into the croud as if soemone has placed a bid when in actuality it is them.
The Auction Company,
Real Estate Disposition Corp. , specifically states
in the Terms and Conditions that the auctioneer
is allowed to bid for the Bank or Seller.
Section 3 of Terms and Conditions states:
3. BIDDING AND BUYING AT THE AUCTION
Reserve Price. All Properties have a Reserve Price, meaning the Seller of each Property has established an unpublished, minimum selling price. The starting bid is not the Reserve Price. In order to become the Winning Bidder for a Property, a Bidder must meet or exceed the Reserve Price and have the highest bid. The Auctioneer may open bidding on any Property by placing a bid on behalf of the Seller. The Auctioneer may further bid on behalf of the Seller, up to the amount of the Reserve Price, by placing successive or consecutive bids for a Property, or by placing bids in response to other bidders. If no bidders meet the Reserve Price, the Seller is under no obligation to sell the Property. The Seller may withdraw a Property at any time prior to the announcement of the completion of the sale by the Auctioneer. Auctioneer is not acting as an agent for any Bidder in any capacity, and is acting exclusively as the Seller’s agent.
BTW Ron, here’s an item for you. Looked inside one of the Ts & Cs and found they are willing to compensate brokers 2%. You’ll want to check it out further, but here’s a piece…
“We invite broker and agent participation. A two percent (2%) commission, based on the winning bid amount, will be paid by Auctioneer to brokers or agents who have properly registered as a “Registered Broker” on-line at http://www.AuctionToday.com prior to the Auction day, and whose client(s) successfully purchase the Property and close the transaction.”
Update:
Michelle Berry has dug in a little deeper (as many of you have, too. Here’s her report.
Thank you for the link, Ron. I’ll be udating as more information becomes available. There was chit chat around my office that The Oregonian published the letter sent by BV to current BV homeowners, so hopefully folks will understand who/what they are dealing with before they attend the auction.
[...] am a little ambivalent about this effort, based on the recent auction in the Portland area. While other West Linn builders like Arbor, Legend, and Renaissance have offered incentives, [...]