Posted on Mon, Jul. 11, 2005

For sale: BTK's home goes up for auction ROXANA HEGEMAN Associated Press PARK CITY, Kan. - The small three-bedroom home where Dennis Rader raised his family and lived until his arrest as the BTK serial killer was on the auction block Monday, but it wasn't clear whether the grim history of its owner would help or hurt its value. "It is the highest profile property that we have had the opportunity to auction," said Lonny McCurdy, owner of McCurdy Auction Service. Rader, who pleaded guilty last month to killing 10 people in the Wichita area from 1974 to 1991, called himself BTK, for "Bind, Torture, Kill," in messages to media and police about the crimes. He faces sentencing Aug. 17. The traditional auction, to be held in Rader's backyard, is open only to serious bidders who can prove their intentions with $2,500 in certified funds. Reporters will be allowed to watch, but others are being kept out. "We have keyed our marketing to serious buyers and we are not encouraging sightseers," McCurdy said. The home's assessed value is $56,700. Built in 1954, the plain-looking, 960-square-foot house doesn't stand out among others on its street, but McCurdy calls it "a nice property and we are here to sell it." Auctioneers don't know what effect the home's connection to BTK will have on its selling price. McCurdy's Web site doesn't mention the case, but the site has drawn thousands of hits, and inquiries have come from around the country. Since Rader's arrest, curiosity seekers have routinely driven slowly past the home for a peek. The sale is being watched by real estate agents who wonder how the BTK link will affect the final price. Ed Roberts, a broker at Real Estate Resources in Wichita, doubted the value would be driven up or down by the notoriety. "It is real estate. The house didn't do anything. The property didn't do anything. It happened to be the individual that lived there," Roberts said. "Is it going to become a famous place? I don't know." What happens to proceeds from the sale is up to the court. At least three wrongful death lawsuits have been filed by relatives of Rader's victims. The latest suit was filed Monday by Steven Relford, who was locked in the bathroom along with two siblings when his mother, Shirley Vian, was strangled. Rader's family has the right to accept or reject bids. His wife, Paula, has made no public statement since her husband's arrest and wasn't likely to attend the sale. The couple's two grown children live in other states. Rader killed his victims at or near their homes, so novelty bidders seeking to buy a house of horrors will be disappointed.

 

$1 Million Dollar per Minute Auction takes Sleepy Pacific Palisades by Surprize!

June 23, 2005

In an auction conducted by Nicholas Varzos of Exclusively Auctions, Inc. ~ Bidders lined up in the otherwise quiet Pacific Palisades neighborhood to witness a home that had been on and off the market for almost three years sell in less than 5 minutes flat! Limos pulled up to drop off anxious bidders. Strategies were carefully close-guarded by those sipping champagne and viewing the home one last time.

The buyer, a Broker from a nearby Sotheby's International Real Estate office, said she was simply tired of how her old Rockingham neighborhood had grown. The 5 Bedroom, 6 Bath home was perfect for her 2 dogs and six children. Although her husband was out-of-state during the auction, the buyer knew it was the right decision. She was surrounded by a crowd of about 70 that validated her purchase with a round of cheers and a champagne toast!

Competitive bidding came from hopeful homeowners, investors, brokers, and  lenders - all came to the auction looking to snap up this desirable piece of  real estate. Two real estate brokers who had previously listed the property were in attendance.

The sellers, a doctor and his wife, were not in attendance at the auctioneer's request. Varzos said that frequently during the drama of an Absolute Auction, buyers simply cannot contain the heart-pounding excitement that comes with the day. To allay this loss, the auctioneer hires a film crew to both document the transaction and to provide the seller and buyer a memorable souvenier of the day.

Varzos cited a recent release on NPR (National Public Radio) that said Real Estate Auctions were up 14% over last year. And that although they currently only account for some $64 Billion of the $1.7 Trillion dollar real estate market, the NAR (National Association of Realtors) predicts 1 in every 3 homes will be sold this way within four years!

Listen to this story on NPR ~ http://www.npr.org/templates/story/story.php?storyId=4713076 

 

Real estate foreclosure can be tactic, not tragedy

Sunday, June 05, 2005

By Elwin Green, Pittsburgh Post-Gazette

Foreclosure. For most people, the word is emotionally charged, layered with implications of the fear, despair and shame that can accompany the loss of one's home. Foreclosure represents the end of the line, the bottom of the barrel, the point at which things could scarcely get any worse. So when a Downtown office building goes up for sheriff's sale as a result of foreclosure, and then a second, and then a third -- as is happening tomorrow with the U.S. Steel Tower, on the heels of Dominion Tower and Warner Centre earlier this year -- the conclusion seems obvious: Downtown is in shambles.

Well, not necessarily. In fact, for the commercial real estate investor, foreclosure may simply be a strategy for gaining title to a property, one of several that investors use to maximize profits and privacy, and to minimize taxes and risk. In such instances, foreclosure is merely the final step in a process that may have begun years before, with an agreement between a property owner who wants to be rid of a property and an investor who wants to acquire it.

The process basically works like this: Instead of buying the property outright, the investor will buy the mortgage attached to the property. No cash goes to the property owner; rather, it goes to the lender that had been holding the mortgage. Now the investor owns the mortgage, and is entitled to receive the mortgage payments from the property owner. The property owner then skips a mortgage payment, or several, giving the investor the right to foreclose. Upon foreclosure, the property goes up for auction at the sheriff's sale, where the investor places a bid for the amount of the mortgage plus costs.

Because the investor already owns the mortgage, the only out-of-pocket costs would be the processing and related legal costs associated with the sheriff's sale. If no one outbids the investor, then he or she -- or more likely the investment group -- takes possession of the property. For the investor, the primary advantage of this process is that a sheriff's sale generally discharges any liens against a property (other than municipal tax liens). A second benefit is that the transaction is exempt from real estate transfer taxes, an exemption that was originally created as a concession for mortgage lenders.

"The concept is that the lender typically did not want to own the property, and that if they foreclose, they would at some point turn around and sell it, at which point there would be a transfer tax payable," said attorney Jack Barbour of Klett Rooney Lieber & Schorling. In Pittsburgh, realty transfer taxes total 4 percent of the purchase price, so the exemption can save investors millions of dollars.

For instance, local real estate professionals peg the value of the U.S. Steel Tower from $200 million to $250 million. If it were sold for $200 million in the traditional way, the realty transfer tax would be $8 million. When the building goes up for sheriff's sale tomorrow, the holder of the mortgage, 600 GS Prop LP LLC, expects to take possession of it while avoiding the need to pay that tax. If the parties want to avoid the publicity that a sheriff's sale can generate, the owner can grant the investor a deed in lieu of foreclosure. With this approach, as before, the investor buys the mortgage, and the owner skips one or more mortgage payments, giving the investor the right to foreclose.

But instead of going through foreclosure, the owner simply surrenders ownership of the property, handing over the deed to the investor in a transaction that is much quicker and simpler than foreclosure. It can be done "as quick as a lender and a borrower can agree to do it," Barbour said, while "a sheriff's sale is probably a minimum of six months." Like foreclosure, this approach avoids the need to pay realty transfer taxes. On the downside, it does create more risk that other creditors may require the new owners to settle liens they have against the property.

For the property owner, these approaches have the disadvantage of not putting any cash into his pocket. But if a straightforward sale would not have generated enough cash to do more than pay off the mortgage anyway, they leave the former owner no worse off.

However, if there is a profit to be gained, the owner and the investor may agree on a different approach: Instead of the investor buying the property directly, he may buy the legal entity -- typically a partnership of some kind -- that owns the property. Control of the property changes hands, but the property itself doesn't, and therefore the transaction can be free of the realty transfer tax. But it is not automatically so. In 1997, the Simon DeBartolo Group avoided paying nearly $2 million in transfer taxes when it took control of South Hills Village shopping center by buying out the mall interests of the New York State Teacher's Association. But in 2000, Allegheny County Common Please Judge Max Baer ruled that the transfer was subject to the tax. In 2001, Simon DeBartolo and the municipalities of Bethel Park and Upper St. Clair agreed to settle out of court.

The sale of CNG Tower (now Dominion Tower) in 2000 also was scrutinized because the investor group, led by Oxford Development Co., technically bought the partnership that owned the building rather than the building itself, thus avoiding $2.7 million in transfer taxes on the $82 million transaction.

Ira Weiss, solicitor for the Pittsburgh Public Schools, was among those doing the scrutiny. In the end, he said, "We decided that this transaction wasn't of a type and nature that was subject to real estate transfer tax." The state and county also reached the same conclusion, he added. "Both the state and most municipalities have said that if more than a certain percentage of the entity's assets consists of real estate, then that transfer is taxable," Barbour said. The percentage that triggers the transfer tax varies by location.

Even so, he added, "The sale of entities can still provide opportunities for legitimately avoiding the tax."

 

NEW YORK TIMES

Sales of Existing Homes Hit Record as Prices Soar
By JENNIFER BAYOT

Published: May 24, 2005

Sales of existing homes swelled 4.5 percent to a record in April, and prices climbed at the fastest rate in almost 25 years, the National Association of Realtors reported today, defying predictions of a slowdown and adding to some analysts' concerns that the market is overheating. Low mortgage rates were responsible for the sharp rise in demand, economists said, but the cheap cost of borrowing may also be encouraging people to buy in hopes of selling quickly at a profit.

Anthony Chan, senior economist at J.P. Morgan Asset Management, predicted that home buying would stay strong until mortgage rates jump, and that speculative buying, in particular, would remain attractive until then. "For the most part, the strategy has been a winning strategy and people will continue to do it" until they start losing money, he said. Sales of existing homes rose in April to an annual pace of 7.18 million, up from 6.87 million in March, as purchases in the South, Midwest and Northeast jumped to record annual rates. The overall sales rate set a record, surpassing the previous annualized high of 7.02 million in June 2004.

Meanwhile, the nationwide median price on an existing home was $206,000 in April, up 15.1 percent from a year earlier - the steepest increase since November 1980, when the median price rose 15.6 percent. On single-family homes, the median price also increased 15.1 percent in April from a year earlier, to $203,800. Sales climbed 4.5 percent to an annual pace of 6.28 million, from 6.01 million in March.

Because the data are recorded at the closing of a home purchase, they generally reflect contracts and prices reached in March and February. "We are now seeing another wave of Spring buying," Joshua Shapiro, chief United States economist at the economic research firm MFR Inc., wrote in a research note to clients. He compared the activity to the rush of purchases made early last year by people who had waited to buy and had finally decided to do so. "Is this also fence-sitting buying or can this pace be maintained?" he asked.

As long as mortgage rates stay low, Mr. Shapiro said, the buying - and borrowing - will persist. "We think speculation rather than demographics is driving a substantial portion of sales," he said.

 

Cash terms deter land auction bidders

David Stubbs of Sperry Van Ness stands outside of the Cox Pavilion, the site of last week's private land auction.

BY TONY ILLIA

BUSINESS PRESS

Southern Nevada's white-hot real estate market has seen a torrent of recent activity from developers, speculators and investors. Despite this, a private land auction held last week at the Cox Pavilion attracted nearly 300 people, but very few bidders. The event conducted by real estate firm Sperry Van Ness offered roughly 254,000 acres of land for sale, including 50 parcels in the Las Vegas valley zoned for commercial and residential development. But only one-third of the parcels sold, and many far below market value. Ultimately the cash terms of purchase deterred heavy bidding activity.

Modeled after the highly successful Bureau of Land Management auctions, winning bidders were being asked to pay a 20 percent nonrefundable deposit on-the-spot and close escrow within 90 days. There were also two 30-day deadline extensions permitted for a 5 percent cash payment. "More people wanted to negotiate different terms than what was being offered," says Jeff Pori, Sperry Van Ness' managing director. "Our phone was ringing off the hook after the event took place. All properties are being listed."

Vacant land sale prices increased 149 percent last year, averaging $520,448-per-acre, or $11.95-per-square-foot, during the fourth quarter, reports Applied Analysis, a Las Vegas-based economic research firm. It marks a dramatic $311,737-per-acre gain over the previous year. Yet only three auction parcels sold above the opening bid, including five acres in Kyle Canyon for $1.3 million; a 2.1-acre piece, also in Kyle Canyon, for $545,000; and two acres near Russell Road and Decatur Boulevard for $610,000. The most heated bidding was for three parcels, totaling 24.5 acres, off Interstate 15 in the Southern Highlands area, which fetched a combined $12.6 million.

"I don't think we'll see these private land auctions occurring on a regular basis," says Brian Gordon, principal of Applied Analysis. "There is enough activity occurring from the typical sales process with people marketing parcels through land brokers and real estate agents."

There were 310 land sales, combining for 1,817 acres, in the fourth quarter with an estimated total value of $951.8 million. And while the Sperry Van Ness event fell short, the heightened sense of excitement created from an auction environment can often escalate sale prices far beyond their assessed value.

"I think the private sector has seen the success of the BLM auction and how much higher the sales prices are as opposed to their estimated value," says John Restrepo, principal of Restrepo Consulting Group, a Las Vegas-based economic research firm. "The BLM's slow release of land, due to local municipalities' involvement, has created a pent-up demand." The BLM's February 2 auction netted $602.5 million for 2,284 acres in Clark County, which was far above its $369.35 million estimated value. But North Las Vegas withheld 2,300 acres to give it more time to resolve environmental concerns, limiting development on the property. The BLM also sold 13,328 acres of land in Lincoln County on February 9 for $47.52 million, averaging $280,471-an-acre.

Auction revenues were $35 million above the appraised value, yet the federal agency tried and failed to attract bidders for much of the land in an October 2001 auction. "I'm disappointed by the auction turnout, we expected three times as many people," says Pori. "But I think we did an awful lot of things right."

 

Flipping real estate ... without getting burned

Special to The Seattle Times

SUSAN JOUFLAS / THE SEATTLE TIMES Investors fed up with stocks are scooping up property

In December, Paul Galasso quit his Costco management job to join his wife, Evelyn, as a full-time real-estate investor. The leap from salaried manager at a $48 billion public company to residential real-estate entrepreneur wasn't impulsive, Galasso said. The couple made more than $100,000 from five Eastside deals they completed during 2004.

Galasso, 38, is among the growing ranks of weekend real-estate investors in the area who, encouraged by a housing market that continues to sizzle and buoyed by the success of initial deals, have decided to pursue the practice full time. Galasso is a member of the Real Estate Association of Puget Sound, or REAPS, a nonprofit real-estate education group that has tripled its membership to 900 since 2003. He and his wife have spent more than $20,000 on investor "boot camps" and seminars to learn how to make deals ? and he says every dollar has been worth it. The National Association of Realtors in Washington, D.C., released survey results in March indicating that 23 percent of all residential real-estate transactions in the U.S. last year went to investors, rather than to buyers looking for a place to live.

Association spokesman Walt Molony said he believes this level of investor activity would apply to a market like Puget Sound's. Glenn Crellin, director of the Washington State Center for Real Estate Research in Pullman, agrees.

Investment tips


For those thinking about investing in residential real estate, experts offer these tips:
Do your homework: Stick to one particular part of town and get to know it like the back of your hand.
Start small: Find something you can live in while you fix it for resale. Avoid something needing massive renovation.
Buy low: Know the market to help avoid paying too much for a property, the mistake that most often leads to losing money. Some experts recommend that investors buy properties at 30 to 50 percent below their market value after they're fixed up. Often, this means looking for properties owned by motivated sellers ? owners facing foreclosure or people who don't have the time or money to fix up their homes.
Choose a quick flip instead of a wealth builder: Before buying a property with the intention of reselling it quickly, look for at least a 20 percent profit margin after subtracting rehab expenses, taxes, commissions, financing and other costs. A 20 percent profit is something of a break-even point because most interest-only loans available to buy investment properties cover 80 percent of a home's expected market value.
Rely on experts: Seek out mentors and experts, including a good banker and an accountant, who can help you avoid costly mistakes. Consider Nashville-area investor Toby Hildabrande and his wife, who thought they were getting a great deal until their inspector discovered the property was once a gas station and probably had environmental issues.
Get an accountant: Taxes on investment properties can get complicated quickly. Anyone remodeling a home must have builder's risk insurance, and rental owners must have a fire-insurance policy with large liability limits.

Galasso said his bosses were shocked when he left. But among his peers, the move to real estate isn't unusual. Galasso said he knows people just like him in Georgia, Texas, California and beyond now investing in residential property. "The hard part is knowing where to start," he said. Many also say it's important to do research first because novices can lose a lot of money if they don't know what they're doing.

Why real estate?

The real-estate market has been booming locally and nationally for years. Around Puget Sound, the combination of low housing inventory and low mortgage-interest rates has created a seller's market. The average price of houses and condos combined has risen more than 24 percent in King, Snohomish, and Pierce counties between 2000 and 2004, according to data from the Northwest Multiple Listing Service.

But rising property prices aren't the only thing driving folks like Galasso into the business: The dot-com crash and stock-market declines of 2001 made many investors rethink their reliance on stocks and seek alternative investments. Since then, they've been doing their homework on how to invest in property. "I lost a ton of my portfolio in 2001, and that's happened to a lot of people in America," Galasso said. "It spurred my interest in learning that there was a better way out there. I'm the last of 11 children ? the oldest is 21 years older than me, so he's 59, and he's still working hard." He believes the retirement of baby boomers will drain the market and that Social Security's uncertain future means diversifying now is crucial. He's serious about moving away from old-school stocks and mutual funds: Around the time he left Costco, Galasso and his wife fired their financial planner and shifted 75 percent of their retirement resources from regular equities and mutual funds held in a traditional IRA into a "self-directed" IRA that they can use to fund real-estate deals.

How the deals work

Mark Schmale, president of REAPS, says that most people who join his organization want to learn about nontraditional investment strategies that they can use to buy single-family homes. About 90 percent of members use some form of "looking to buy" marketing to find sellers who want or need to sell quickly, Schmale said. Those who want long-term investments focus on lucrative Seattle neighborhoods such as Green Lake, Queen Anne and Capitol Hill. Short-term gains can be found almost anywhere throughout the Puget Sound region, he said.

Among the techniques members and other investors use:

? Buying, holding and reselling fixers without repairing them;
? Buying and repairing fixers to sell at a profit;
? Wholesaling, or flipping ? making an offer on a home and, before closing, finding a buyer who will pay more for it (this leaves the investor the profit);
? Signing lease-option deals in which investors rent out a property at above-market rent to a tenant who wants the right to buy the place at the end of the lease.

Doing the homework

Making money as a real-estate investor requires more than buying and selling properties using conventional mortgages and real-estate agents, Schmale said. "A lot of people come into the market not knowing the true costs involved," he said. "Of course, [learning that] is the responsibility of each individual."

Real-estate investments


Many local investor groups are optimistic about the potential to make money in the current real-estate climate, but they all recommend doing homework ? reading, attending seminars, networking with other investors before cutting deals.

Here are some of the techniques many investors use:

Flipping
Pros: You make an offer on a property and secure a new buyer before you close on the property, diverting the property to the new owner and pocketing the difference between your offer and theirs. In a hot market, this means you can make money fast.
Cons: You may end up closing on and holding the property if you don't find a buyer, which could tie up cash and lead to capital-gains taxes if you choose a short-term resale. If you have multiple wholesale deals in progress, you could get financially over-obligated.

Rehabbing a fixer
Pros: If you know how to do the work or have a network of inexpensive contractors, the likelihood of making a profit is high.
Cons: This can be capital-intensive, and if the home is in terrible condition, it can be difficult to secure a lender. Work ? and the resale ? can take a long time, tying up capital.

Lease-purchase options
Pros: You can charge higher-than-market-rate rent to tenants who intend to buy your home (and thus serve as quality renters), guarantee your sale price, avoid real-estate-agent commissions, and reduce capital gains by not executing the sale until a later date.
Cons: You will need a lawyer to learn how to structure an agreement correctly, and tenants attracted to this often have sub-par credit.

Foreclosure purchases
Pros: Properties are available at discount, and informed buyers can leverage some new loan products to bring more cash to auction and skirt some liens owed on the property.
Cons: Often you can't see a home's interior before buying it, meaning repair spending could skyrocket. You may also inherit liens on the property, adding to the expense.

Jeff Wolfson, a residential land-development specialist at Skyline Properties in Kent, is researching investment opportunities for himself and clients. Wolfson, who has been in the industry for nearly 20 years, says many investors are overextending themselves on the assumption that the market will remain favorable. He believes low interest rates contribute to this, he said. Interest rates on fixed 30-year mortgages haven't gone above 6.5 percent since late 2002, according to data from HSH Associates, a research firm in Pompton Plains, N.J. In Seattle, the typical 30-year fixed mortgage rate was 5.92 percent last week, HSH data show. "I've been in the industry long enough to see how it operates in cycles ? and it cycles on [mortgage] interest rates," Wolfson said. "I believe the market right now is in a bubble ? people are putting 10 percent or 5 percent or zero down, or they're taking adjustable rate mortgages, but then one day their renters can't afford the rent, and the owners aren't prepared for that."

Wolfson's belief is reflected by Robert Shiller, the Yale University economist whose book "Irrational Exuberance" foretold the dot-com crash. Shiller's latest book ("Irrational Exuberance: Second Edition," Princeton University Press) was published in March and compares investors' current zest for real estate with their behavior during the dot-com bubble. The book argues that investors have shifted their money from stocks to real estate and that, en masse, they are using the same mentality that created the hyperactive dot-com economy. Only now they're using a different asset: housing. Such a marketplace, the book argues, must eventually correct itself.

Mix-and-match portfolios

To counteract the potential risks, many investors use a mix of strategies. They want to balance the benefits of holding a home long-term with short-term deals that allow them to keep more cash on hand. Roz Burton, 32, of Bothell is a club member who invests with her husband, Kerwin Burton, 33. She said they have closed six deals since July 2004, and they are working on more. She now works full time on real estate; her husband, part time.

The Burtons have experimented with several types of transactions. After they married two years ago, they began renting out the two condos they had lived in. They sold one condo to buy a house in Mill Creek that they will rent out. They're selling their other condo in Kirkland through a lease-option deal. The two-bedroom unit in Kirkland would rent to a regular tenant for $1,000, but in a lease-option they're able to charge $1,500 ($1,200 for rent, and $300 a month toward the tenant's down payment).

After a year, the tenant can either buy the unit or the Burtons can start the process over again ? making $2,400 more a year from rent than they would have without the lease-option deal. (The tenants get the down-payment money back if they don't buy.) The Burtons also have flipped properties, such as the fixer they found in Burien for under $90,000 that they sold to an agent for $100,000. The Burtons spend much of their time looking for sellers ? cold-calling, knocking on doors or mass-mailing ? or trying to cut deals without real-estate agents who charge commissions. They pay scouts a $500 reward if a lead becomes a deal.

For investors, the key to a good deal may be tracking down people like the Canadian who had neither the time nor the money to repair a Queen Anne fixer. He sold his house to the Burtons for a bargain; they made a profit selling it to a builder.

Foreclosures

The Puget Sound investment organization isn't the only group teaching investment techniques. In 2003, three Windermere agents and a partner formed The Foreclosure Group, a resource for investors that offers property photos, financial history, comparable properties in the area, and status updates on the home's auction, said Christopher Hall, one of the partners. Kerry Hemmingsen, another partner, told the 20 or so investors who came to an April 21 meeting that 1,400 foreclosures take place each month in King, Pierce and Snohomish counties combined, the majority because of divorces.

Hemmingsen and other partners lead investors in weekly information sessions to outline the different types of foreclosures and how his company's service and commission fees work. Investors who decide to bid on a particular property attend a huddle the evening before the property they want goes to auction. On Thursday nights, it's all about discussing strategies. Michelle Dickerhoof, 35, attended the April 21 session to learn more about how the company operates. Dickerhoof quit her corporate-affairs job at Starbucks last fall to collaborate full time with her contractor husband to find fixers to invest in. The couple already own an investment property in Edmonds and plan to use their primary home in Magnolia as a rental down the line. Having contracting know-how, she says, gives her and her husband confidence about dealing with the uncertainties of a foreclosure. (Unlike normal listings, buyers can't walk through or inspect most foreclosures before purchase, so it's hard to predict repair costs or the home's true condition.)

Right now, Dickerhoof is working on buying one of two Magnolia foreclosures set to be auctioned before May 6. She's just secured a home-equity line of credit on her primary home to pay for the new properties. She expects the two properties she's eyeing ? a 1960s home with a starting bid of $238,000 and a 1950s cottage with a minimum bid of $224,000 ? could be resold for around $400,000 after they're fixed up.

Different sort of investment

Schmale, the Puget Sound investment-group president, says investing in real estate is fundamentally different than investing in stocks and mutual funds: Real-estate investors are more actively involved in influencing their investment than those who put money into stocks. The investors who flock to real estate, in the end, may like the participatory aspect of it the most ? doing the research, overseeing renovations, cutting deals. "In real estate I can do a lot to increase the price and value of my holdings, which isn't true of having stock in some large company," Galasso said. "By the end of this year, we'll be doing two to three homes a month."

And he doesn't regret leaving his management job. "This is so much better than being in a cubicle."

 

Make your bid and take your chances at auction By Lori Weisberg STAFF WRITER   Christine Tenuto quickly surveyed the living room and kitchen in the tidy 1960s-era San Carlos home and nodded approvingly. She'd surely replace the kitchen linoleum with wood flooring and possibly repaint, but the cream-colored carpeting would stay. Tenuto, a first-time buyer, had never been inside the three-bedroom home before, even though she had purchased it a week earlier at a county government-sponsored auction. While she had seen the exterior of the house, she didn't have time to make an appointment to go inside. Sight unseen," Tenuto said with pride, quite pleased with the choice she had made. "I feel really blessed." As risky a venture as it may seem ? buying a $465,000 home with nary a look inside, let alone a formal inspection ? Tenuto seemed strangely calm. That wasn't the case, though, at the auction. "They go really fast, and my agent was hitting my leg and saying, 'Raise your hand, raise your hand.' She said, 'Trust me, you'll be OK,' " recalled Tenuto. And then it was all a blur. The next thing she heard was: "Going once, going twice, third time, sold to the lady in the corner." She had followed the advice of her agent to not continue bidding when the price rose above appraised value. As a result, she was one of only three buyers at the county auction to nab a home for a price below its appraised value set by the county.  "It's not the most beautiful house, but we are in San Diego," said the 27-year-old Tenuto, whose parents helped her with the 10 percent down payment. "I was ecstatic that I got it for under appraised value." Tenuto's Lake Ashmere Drive home was one of a dozen properties that went on the auction block last month as part of the county's role in managing the estates of people who have either died or are legally incapable and have no one available to dispose of their property. While the public auction may be viewed by some as an opportunity to pick up a bargain property or two, more often than not houses have sold well over their appraised value. This last auction, however, was the first time since November 2002 that some homes were purchased for below market value. It may well be a barometer of a cooling market, suspects Kent Schirmer,estate property manager for the county. Attendance, in fact, was one-third of what it was a year earlier, attracting 526 people, compared to 1,580 last year. "Interest rates luckily have stayed fairly consistent in the marketplace, so that props up the market, but buyers are getting to the point where they're experiencing price fatigue," said Schirmer. "And sellers are in denial because their friends and relatives down the street sold 18 months ago for $800,000, and they're putting their houses up for $900,000."  While the auction crowd has diminished in size in the last year, the event still drew plenty of interested buyers because many of the houses for sale were priced below the county's median-priced home of $475,000. "The people came to our auction, saw the majority were well below the median price, so they said, 'This is something I can afford,' but when they go to the marketplace they see everything is priced in the high 400s and 500s. So I think that's why people come ? because they have a chance." The homes sold this time around ranged from a small one-bedroom condo in a seniors complex that went for $127,000 to a three-bedroom College-area house that a buyer picked up for $566,000 ? $146,000 over market value. In between were a downtown condo in a two-year-old Little Italy project that an investor bought for $385,000, which was under the appraised value of $416,000; and a 1920s University Heights fixer, appraised at $425,000, that was purchased for $511,000. Proceeds from the sales are returned to the respective estates, although the county is permitted to collect a court-approved fee equivalent to 1.5 percent of the sales price, which defrays the cost of advertising and staffing for the auction. In some cases, the proceeds from auctioned houses are needed to cover the costs of care for people whose finances are managed by the public guardian because they are no longer able to care for themselves. One of the stated conditions when buying a home through the county auction is that it is purchased in "as is" condition, meaning there's no turning back once a deal is consummated.  The county's Web site makes it clear that the Public Administrator's Office offers no guarantees on the condition of the properties being sold. "An individual purchasing a property is doing so based upon his or her own research and findings," states the site. The Public Administrator's Office will not provide information concerning zoning, usage and other matters that may affect one's decision to purchase the property." In Tenuto's case, the home she ultimately purchased was one of three she bid on, although the other two went over appraised value. She relied on the research and counsel of her real estate agent, Veronica Carroll, who had advised her which houses would best suit her. Because the county includes the auctioned homes in the Multiple Listing Service used by real estate agents, the agents are permitted a 3 percent commission on the sales. "I was sitting there saying to her, 'Don't be disappointed because it doesn't look like we're going to get anything,' " Carroll recalled. "Some houses went $50,000, $150,000 over appraised value. We agreed beforehand what our limit was." Losing out was not an option for Alan and Suzy Levy, who were determined to buy the College Avenue house located directly behind their own custom home. Fearful that an investor might grab the house and convert it into a mini-dorm because of its proximity to San Diego State University, the Levys decided they had no choice but to outbid their rivals for the 1,639-square-foot house.  "It was buy it or possibly move," declared Suzy Levy. "I heard people talking over the fence (behind her house) about doing what my biggest fear was. One man said, 'What else,' and I said, 'I'll fight you tooth and nail.'  "This was not something we really wanted to buy, but we felt we had to." Now that they have purchased the house ? for $566,000 ? the Levys, who own a remodeling business, plan to fix it up with updated bathrooms, dual pane windows, new landscaping and a re-stuccoed exterior. "I might rent it out to some college kids, but at least I can make sure they're good kids, and I can fix up the front yard and set an example for the neighborhood," said Alan Levy.  Real estate agent Gilbert Rodriguez escorted his client to the auction to help her purchase an investment property. She was no novice, however, having purchased homes at three previous auctions. Rodriguez noted that his buyer never stepped foot inside the two she purchased last month ? the Little Italy condo, which offers a glimpse of San Diego Bay and the Star of India; and a small home in Clairemont overlooking a canyon. "These auctions definitely aren't for the faint of heart. Some people don't know that someone died in the house, and wouldn't want to buy if they knew there was a death inside the home." For those considering buying a house via the auction, Rodriguez offers this tip: "You kind of have to have a poker face," he said. "When people don't know when you're going to stop bidding, they might feel like they better bail out." Susan Bauer decided to take the plunge on a unit in a seniors-only complex more out of altruism than a desire to make big gains in the market. The 480-square-foot unit, located southeast of SDSU, will eventually be an ideal place for her parents, who may have to move here from their present home in New Mexico to take advantage of medical care for her ailing mother, said Bauer. In the meantime, she has a friend who has fallen on hard times and is in desperate need of affordable housing. Her friend, who qualifies as a senior citizen, would be able to live in the complex. "I think it's a total blessing that I got this," said Bauer, who works as a closing agent for a mortgage company. "It was very nerve-racking (at the auction), and there was one other lady who bid against me. If I ever had a chunk of change around, I might do it again."