Home sellers turning to auctioneers for help

DISCOVERY BAY - Robin Anderson's home here was on the market for six months with no offers when her Real Estate Agent decided to quit.

"At that point we though, do we re-list with another agent? What are we going to do?" said Anderson, 35, who owned the home with her husband Eric, 38.

The Andersons' home started off on the market in February at $525,000, dropped to $485,000, and only a handful of people had looked at the house. They started calling "We Pay Cash for Houses" people and said, that they were offered an average of $350,000.

After moving into a new home and paying three mortgages (two firsts and a second), the Andersons were in a hurry to sell.

"All the Real Estate Agents said the same thing, that nothing's selling and nothing's moving," she said. "Then one of the agents suggested the Auction."

Anderson said that she was not as sold on the idea as her husband, but they met with Pacific Auction Exchange and looked over their proposal. "It really was scary," she said of the idea of putting her house on the block for a minimum bid of $299,000. "But at least with this option we knew it would sell."

Home Auctions increased 4.5 percent in the third quarter from last year, said Erica Brown, public affairs manager of the National Auctioneer's Association, making it the biggest growth sector in the industry -- even surpassing Charity Auctions.

"People are sick of their home burning a hole in their pockets while they sit for six to eight months," she said. "Now, they're increasingly going to Auction."

The Andersons' home, a two-story, three-bedroom, 2.5-bath single family detached home in the 3700 block of Sailboat Drive was opened on two consecutive Sundays for prospective buyers to conduct an inspection or just look around.

Visitors came in clusters, many of them curious neighbors interested in the "Real Estate Auction" sign placed prominently in the front yard, replacing their "For Sale" sign.

"I saw that other sign come out and thought, 'Oh, no. What happened?'" said neighbor Ann Galassi, 57, who owns two houses in Discovery Bay's Country Meadows subdivision.

Galassi, like many people, knew that many homes go to Auction because of foreclosure or back taxes, but she soon figured out that the homeowners were willing participants in the sale.

"Times are changing," she said, mentioning that she could not sell one of her homes for what she paid for it a year ago.

Neighbor Debbie Edinger, 42, also peeked at the house at its preview with her brother Don Schauer, 38.

"This is just a new and different way of selling," she said.

In Discovery Bay, 295 homes were on the market in October, according to Prudential California Realty. Discovery Bay has an estimated population of 9,000.

Steve LaRocque, owner of the Pacific Auction Exchange Franchise in Pleasanton, said that sellers pay a 10 percent commission, a $1,000 Auctioneer's Fee and typically any other associated closing costs. Some of that money, like in the Andersons' case, went to Real Estate Agents that represented the buyer and referred the Andersons to the Auctioneer.

"We don't want to say what we pay Real Estate Agents because then agents will start demanding a certain number," he said.

LaRocque's next Auction is scheduled for Dec. 2, where his office will Auction off several parcels from San Mateo, Sonoma, Mendocino and other counties in Foster City.

Vince Malta, president of the California Association of Realtors, said that although Auctions are still a small percentage of homes being sold, they are becoming more popular.

"It seems like a trend on both extremes of the market, in both hot or cold," he said.

Malta said that an agent works in the best interest of his or her client, so he or she would have to act as "safeguard" to make sure they were being represented properly in the process.

LaRocque said that they have turned down many customers who ask him to Auction their home, since many are in debt for more than 100 percent their loan value.

"The Auction process won't work for them because no one will pay that much for the house," he said. "Homes that are 110 percent of the value of their home are difficult to sell through a Real Estate Agent or Auction Process."

Bidders were pre-qualified with a $25,000 cashier's check to bid on the Discovery Bay home, but LaRocque said that amount also varies on the property's price.

Seven qualified bidders came to the Auction to place bids on the Discovery Bay home. If there are less than five bidders, there is a reduced "No Sale Fee," he said.

The Andersons had to move because they bought an after school tutoring Franchise in Oakdale and soon began looking at new homes in the area. They received great buyer incentives for their new home, including thousands in free upgrades when they bought a new home in February for $425,000.

The only problem was the same thing was occurring in Discovery Bay, where their resale home was competing with new construction with up to $100,000 off.

But once the couple and their two children (and a third on the way) moved into their new home in July, the reality of paying two first mortgages and a second became a stark reality.

"In the market right now, I don't think there is an ideal situation," Robin Anderson said. "The ideal situation is hanging on until the market turns, but that wasn't an option for us."

They met with LaRocque in September to put their house on the block. She said that the Auction Company did not give unrealistic expectations and told them there was a chance they may not get more than their minimum bid. But without pricing it low to attract buyers, they ran a chance of not having enough bidders.

LaRocque said all that was needed to conduct a sale were two bidders bidding above the minimum of $299,000.

Anderson said she kept her fingers crossed and hoped the house would sell for $360,000, enough to be out from under the home's two mortgages.

"With this you have had the option of knowing it would be done in this amount of time, but you don't know how much you're going to get for it," she said. "But then with a Real Estate Agent, we still don't know the amount of time and how much money you're going to get."

The Auction of the Anderson home took only four minutes in front of the house on a recent Saturday afternoon. They did not attend.

The winning bid was $434,500. The Andersons received $395,000.

"I was biting my nails," Robin Anderson said. "But what they said worked."

Barbara E. Hernandez covers Real Estate. Reach her at 925-952-5063 or bhernandez@cctimes.com.