Posted on 10/14/2008 7:59:58 AM PDT by Technocrat
An auction that netted $7.5 million in bids on 56 distressed Utah properties fell through last week after the owners -- three banks and two private lenders -- decided they may get a better deal by holding out for the government's bailout plan. "There were buyers, but we couldn't sell the homes because free enterprise has gone out of the market," said Eric Nelson, founder of Las Vegas-based Eric Nelson Auctioneering.
His company on Sept. 30 put up for sale 56 foreclosed properties and lots, most of which are in Utah County.
The auction, held in Salt Lake City, attracted thousands, including 200 bidders who bid between $275,000 and $615,000 for 10 luxury homes in Midway and Murray that were appraised at between $525,000 and $652,000. They bid between $26,000 and $100,000 for 44 custom lots in Mapleton, Elk Ridge, Lehi, Alpine, Ogden, West Haven and Willard that were valued between $112,000 and $290,000 a piece.
The most-expensive properties on the auction block included a $1.2 million unfinished home in Draper, which attracted the highest bid at $615,000, while a 62-acre parcel in Park City that's valued at $3.5 million, snagged the highest bid at $1.125 million, said Eric Taylor Nelson, the company founder's nephew.
But all those bids were rejected late last week, a move Eric Nelson Auctioneering's founder blames on "indecision" among lenders caused by the government's proposed bailout plan.
Most of the Utah County properties are owned by lending institutions including Centennial Bank Inc., Proficio Bank of Salt Lake City, and Apex Investment Group LLC, according to Utah County land records.
"This has never happened before. In the 25 years we've conducted lender-owned auctions, we've consistently closed over 95 percent of all high bids," Nelson said.
"The stock market's historic drop last week and the bailout plan are some of the main reasons why the lenders rejected the bids," he said. "They're thinking, 'Why sell the properties for 50 cents on the dollar when they may get 75 cents or 80 cents through the bailout?' "
"If buyers aren't allowed to buy, that delays the process even more," Nelson said. "That's not a good thing to have when you're trying to get the economy back on track. It's disheartening for buyers and sellers and it has a real economic impact with thousands and thousands of homes coming on the market."
Representatives with Centennial, Proficio and Apex could not immediately be reached for comment on Monday.
Kelly Matthews, executive vice president and senior economist with Wells Fargo, said he doesn't believe there's any "clear-cut evidence or serious discussions over whether the government will buy those foreclosed properties."
"The initial proposal is that the government may buy mortgage-backed securities which could possibly include properties that were already foreclosed on," Matthews said. "But I don't believe there's any clear-cut evidence or defined program that the [U.S.] Treasury is going to buy those foreclosed homes."
The U.S. government is expected to buy stakes in the nation's top financial institutions in an effort to restore confidence to the battered banking system. The plan is designed to bolster bank balance sheets by providing new capital and removing rotten assets. All of it is designed to get money flowing through the system so that banks will lend to companies, consumers and each other.
Nonetheless, Nelson said he believes the lenders are in a difficult position because of the sharp plunge in residential real estate market values.
Based on the auction's highest bids, the lenders will only recover, at best, about 60 cents on the dollar for their properties' outstanding loan value, he said.
"I think the sellers were surprised that the lot prices came in so low. One of the sellers walked out in the middle of the auction on his lots. He paid about $231,000 for each of his lots, but they were getting $100,000-plus bids," he said. "Most of the bidders at the auction were investors, who typically pay less than those buying to build homes on the lots."
Steve Cuillard, owner of Affiliated Realty in Orem and a broker specializing in foreclosure sales, said he hasn't received any indications that the lenders he works with are holding off on sales on expectations of a government bailout.
If anything, he said foreclosure sales are slow because it's increasingly harder for people to get financing for a variety of reasons. "More lenders are now requiring 10 percent to 20 percent down payment, instead of 3 to 5 percent. I've had two potential buyers bail out on me this week because one of them had to take a pay cut, and another one was told his employer was cutting back," he said.
More artificial stimulus in the market....
The Law of Unintended Consequences takes effect................
why are people in utah being thrown out of their homes when this bailout was supposed to stop this?
BINGO!
OK, so those properties end up as assets held by the Treasury. I think the real problem is going to be waiting for Treasury to get those properties back onto the market. I’ve seen continents drift faster than the gov’t moves on almost anything, so getting those properties back into productive use will likely take forever. In the meantime, whatever opportunity cost is associated with those properties will be eaten by you and I as taxpayers.
Good job bailout Nancys. Where are all the pro-bailout monkey nowadays? Perhaps they’re warming up to cry the sky is falling when Paulson comes asking for his next check. Or maybe they’re sitting around the water cooler at their lobbying firm...
Time to pick up a nice little chalet in Park City on the cheap :)
I don't expect many of them ever will. The undercurrent politically is that Frank & Dodd would like these properties handed over to the 'community'. They'll sit on the governemnet's books 'til the heat is off and the Rats in control. Then they'll just be given away.
When can I come over and rip out the plumbing?
Remember the New Orleans trailer homes?
Treasury-owned homes will be allowed to rot until they need to be demolished.
They should have taken the offers, IMHO. They aren’t going to do any better by waiting for the gummint. When a bubble pops the residue settles to a more reasonable price and this one’s not through settling yet.
And so it begins. The mortgage companies aren’t going to want to accept the current devalued price for these “toxic” properties. They’re going to want full value. And the government is going to give it to them.
>>Good job bailout Nancys.
Yep.
Wondering how long until the new gooberment landlord turns these “assets” into section 8 rentals...
Remember “the projects” folks moved to the suburbs to get away from in the 70’s? This is the 2008 version.
“You WILL be equal, or ELSE”
Unintended consequences.
Like the government backstopping all mortgages. Once you know the government is going to renegotiate all of the bad loans, why would you ever pay.
If you bought at peak and owe $400,000 on a home worth $250,000 then you are $150,000 upside down.
If you keep making payments, you stand to lose $150,000 as you pay off that debt over time.
If on the other hand, you spend your savings on furnishing that house and getting an expensive new car, so you are broke, then quit paying that mortgage, you will soon fall into the “bad loan” category, and the government will renegotiate your loan down to $250,000 and reduce your interest rate.
You just made a cool $150,000.
That is what the government is going to get by renegotiating loans and reducing interest. You get more of what you subsidize. When you subsidize bad loans, you get more bad loans.
Utah needs more racial diversity. This would be a good use. Enjoy.
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