VB HOME BUYER, Home Buyer in 23451

What happens after an auction when the properties don't sell? i.e. Sanctuary at False Cape

Asked by VB HOME BUYER, 23451 Tue Nov 25, 2008

I recently attended the auction for the condos in Sandbridge "The Sanctuary at False Cape" because as a first time home buyer I wanted to see what the "real" local market was doing not what my realtor, a home owner, home seller, or the media was telling me and I thought this would give me a good gauge of this. I was a little surprised to see that only 19 of the 75 condos sold and not only that but half of those went for the "reserve minimum" (no bidding even went on for these) and some were even able to go lower than the reserve! My question is obviously the builder needs cash and was visibly disappointed with the auction so what happens now to these condos that they were trying to auction off? What happens to the cash strapped builder?

Help the community by answering this question:

Answers

17
I attended the sale, and only 25 were up for auction - NOT 75. The auction company needed to meet a minimum for the bank, and that they did at this auction. There were bids for 20 of the 25 up for auction and those bids were accepted - because we bought one. It was one of those times where 5 years down the road you would kick yourself for not buying one. We are very glad we did.
1 vote Thank Flag Link Thu Oct 29, 2009
I spoke to the current president of the condo homeowners association, who said the lawsuit was a vendetta against the builders for not making a profit. According to her (which I am still trying to verify), the old president of the association was the same guy who sold the land to the developers and was supposed to take a profit from the sale of each unit. Since there is no profit to be had, he got nothing. This lawsuit is his away of throwing a monkey wrench in their plans.

This could be a BS story, but I'm less concerned with their excuses than the opportunity it provides me. The poor publicity should give me leverage in dealing with the sellers. If condos were being auctioned off for 250K before this news broke and before the real estate market dipped another 8%, what can I realistically get one for now?
0 votes Thank Flag Link Mon Apr 26, 2010
I would take a look at the following article which was published in the Virginian Pilot a few weeks back before even thinking about these condos:

VIRGINIA BEACH
The board of directors of a Sandbridge condominium complex has filed a
$3 million lawsuit against the community's developer.
The board of The Sanctuary at False Cape is seeking to recover the money
for poor workmanship, failure to follow good construction practices and
meet building codes, and failure to install proper hardware and roofing,
according to the lawsuit.
The suit was filed in Virginia Beach Circuit Court earlier this month.
The 248-unit luxury condominium complex overlooks the Atlantic Ocean and
Back Bay National Wildlife Refuge.
It features a restaurant and cabana bar and accommodates a mix of people
who live there year-round, second homeowners, and renters.
The suit contends, however, that there are construction problems with
balconies, roofs, parking garages, elevators and pool decks in the
complex.
The first phase of the complex opened in 2006.
Frederick Felini, president of The Sanctuary at False Cape Condominium
Association, signed an affidavit attached to the lawsuit.
Michael Inman, the registered agent for developer Sanctuary at False
Cape LP, did not return a phone call seeking comment.
0 votes Thank Flag Link Sun Apr 25, 2010
It's now April 25th 2010. Does anyone have an update on the Sanctuary Condos? I'm serious about buying one, but the on site sales agent wont come even close to the auction reserve prices of 2008 and 2009, yet the real estate market has deteriorated further since then . Do you know if they're planning another auction soon or is there someone above the on site sales agent that can cut a deal with me?
0 votes Thank Flag Link Sun Apr 25, 2010
You would think.

Take a look at this thread.

http://www.trulia.com/voices/Home_Buying/Does_anyone_have_an…

Not a smart place to buy IMO even with major fire sale prices. It's still a condo, where is the money to manage & operate the place coming from?
0 votes Thank Flag Link Tue Nov 3, 2009
I would of thought that if someone were to buy a condo in an auction in this market they would of done enough homework to know that they have tried to auction off these specific condos before.
0 votes Thank Flag Link Tue Nov 3, 2009
Kimbo:

You are talking about the 2009 auction. The post is about the 2008 auction.

I hope you got that junk property at a steal, next years auction will only be lower.
0 votes Thank Flag Link Tue Nov 3, 2009
Wait another year, save another 20%. At most of these auctions, you're going to pay 5-10% fees to the auction company. That may be worse than a 6% comission to a realtor. Good Luck
0 votes Thank Flag Link Wed Nov 26, 2008
If a buyer considers a property a comp, an appraiser doesn't have to. They have a very strict guideline they have to follow. They are regulated here in Virginia by their own board. Appraisers are very much under the gun and getting scrutinized a lot more these days. Not because what they did in the past was wrong, but it what a few did that caused problems for many. Appraisers need only find 5 comps typically, so they need to find like transactions, even if they have to go further outside of the area of the house. They also do have formulas for down markets and would adjust accordingly. But we all know just because a property appraised for a certain price, still isn't necessarily it's market value. In the perfect conditions, you'll get appraised value, but we don't see perfect conditions anymore for the most part.

You'd be surprised the restrictions put on appraisers. I've even heard of banks coming back after an appraiser to justify their value to the bank because they couldn't sell the property near the appraised value. There has never been times when we didn't have foreclosures, they always will exist, but just not at the amount we're seeing today. If you notice, they are 95% loans less than 24 months old too. Some people just shouldn't have gotten loans, others are falling on hard times fast.
0 votes Thank Flag Link Wed Nov 26, 2008
Jeff and Drew and VB - Remember the old days when we had no foreclosures? Appraisers didn't consider the REOs or short sales as comps, because they were distress sales and not representative of the market. However, today most of the market is in distress, so REOs and SS are on appraisals all over the place. If the buyers consider it a comp, then so must appraisers.

Honestly,it depends are percentages. If there are 100 sales, and 3 are auctions, it won't be more than a blip on the radar screen. If there were 6 sales and 3 were auctions, it means that the market is in distress and so distress sales are the market.

Make sense?
0 votes Thank Flag Link Wed Nov 26, 2008
Jeff,

You are correct, appraisers do take into account properties sold under duress. They typically look for like transactions to determine market value. Foreclosure sale vs foreclosure sale. Now this auction that was held isn't characterized quite the same, so the impact may not be as severe. But it will have some repercussions.
0 votes Thank Flag Link Tue Nov 25, 2008
To VB Home Buyer,

It's a good question. I've run across this in the past, where there was a foreclosure or auction that sold much lower than the traditional homeowner sales. Apparently, the appraisers take into account that these homes were sold under circumstances of duress. So, this will not affect the value of homeowner sales "as much". If anyone knows any different, please post. This is what was told to me and clients.
0 votes Thank Flag Link Tue Nov 25, 2008
You have lots of good answers, so I won't rehash that. Below, I've provided you with a link to a set of blog posts talking about auction (not this one, but in general).

In addition to the builder possibly losing properties to bank foreclosure (and this auction may have been part of a "short sale workout" with the lender), there are a few other things that I can mention that I don't see here. With condos, there are laws about how many need to be sold as condos. I think it's 2/3 of the building, don't quote me on that. If the builder can not sell them, then they may revert to apartments - there are many strategies. I have seen builders come back and buy back condos after attempting to sell them many different ways, so that the builder can convert it to a rental property (perhaps to sell it as a multifamily property, there's a lot of this going on).

Next, I want to say that selling 19 of 75 homes in a day sounds pretty good to me.

Lastly, to answer your questions about how this affects value... well, if the sales CLOSE significantly lower than the other homes are (and there is sometimes negotiations after the gavel price - like perhaps ungrades), then it just depends. I don't know this property or this auction, but appraisers should be looking at all the comps, including (but not limited to) those sold at auction. Nineteen is a significant number, so it will impact the appraisal prices, which may require the current contracts be lowered, which will further lower the prices. (May being the operative word here).

Hope some of this information is helpful!
0 votes Thank Flag Link Tue Nov 25, 2008
Hi there VB Home Buyer,

I agree with Drew, he's got some good points there. The builder wanted to get a littlie cash infusion going. I am actually working on a contract right now for someone who has a contract on one of the other units, that was not sold at auction. I'd love to work with you if you're seeking financing!

Kindest regards,

Alvin Lapitan
Cavalier Mortgage Group
757-333-9033
0 votes Thank Flag Link Tue Nov 25, 2008
I agree with the two responses that I have seen so far but also want to know more about how this affect the prices of the condos that are on the market (non auction) and also the overall value of the ones that are occupied. I have seen that there are quite a few on the market for double what the auction units went for. Can they really still sell them for this much when comps are now practically half the price of what they are asking?
0 votes Thank Flag Link Tue Nov 25, 2008
You are right, the builder needed the money to keep going. New construction has been hardest by the depression/recession/slowdown in the economy. The reason being is that new construction is costly and older homes are in established neighborhoods that have been proven over time to hold their value.

What will happen to the condos that are left will depend upon what the owners decide to do. Some continue tp market the condos in the regular market; some will add incentives; some may decide to have a special holiday sale; they may set up owner financing; they may convert some units to lease with option or even short or long term rental units. At some point, the condos may go on auction again.

If the builder can handle the bills, he may hold onto the condos until they sell. If he cannot, at some point the lender backing him may insist upon payment which will require the owner/builder/contractor to come up with a way to satisfy the loan.

If you want to see the local market, try going to open houses in older, established neighborhoods too. One auction in one neighborhood will not give you an adequate overall picture. Seek out 5-10 different neighborhoods in your area and find out about sales in those areas over the last 1-5 years to get a fairly good picture. If you're working with a realtor s/he can pull those numbers for you but you should still go to several neighborhoods in person to see and feel the flavor of each for yourself. You can go with your realtor, a friend who knows the area, or by yourself but do go. It will be a real learning experience.
Web Reference: http://www.mariatmorton.com
0 votes Thank Flag Link Tue Nov 25, 2008
The condos will simply return to the builders inventory and he'll continue to try to sell them via a realtor. The Auction use to sell homes is typically to get a lot of hype and interest, and if properties sell at the auction, great! If not, hopefully some of the marketing and exposure will bring in new buyers over time. We don't know exactly how cash strapped the builder is, but the biggest problem is now the deflated values of the other units. It can hurt current condo owners and can be an issue. But for the most part, those condos are still available to purchase. As far as I've heard the builder isn't in trouble enough to lose the remaining units, it was just a good marketing ploy to sell some units quickly and bring in some cash. Now he probably has the reserves he'd like to have to continue to hold the other properties until they sell.

This was a good use of an Auction to attempt to sell properties at market value. Auctions typically get people to overpay, even foreclosure auctions at the courthouse steps. You get so caught up in the moment you're likely to overpay at times. I see it all the time.
0 votes Thank Flag Link Tue Nov 25, 2008
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer