Trouble selling houses? Try an auction.
Later this month South County Housing will auction 28 townhouses
and single-family homes in downtown Gilroy for as little as
$295,000.
Trouble selling houses? Try an auction.
Later this month South County Housing will auction 28 townhouses and single-family homes in downtown Gilroy for as little as $295,000. Last fall prices ranged from $700,000 to $800,000, and SCH planned to leverage that once-lucrative market to subsidize the rest of its 210-unit Cannery Project, nearly half of which targets low-income residents.
Instead of relying on government money, SCH meant to use the private sector to finance the affordable portion of the project – at least that was the plan, said SCH President and CEO Dennis Lalor. But things have changed, and so has the plan.
“We chose the auction method as a way to respond to the uncertainty of the market,” Lalor said. “People now don’t feel that they have a way to determine what the real value of a home is, but the auction process gives buyers a chance to study homes and then decide for themselves what they think they’re worth.”
And if the recent past is any guide, Lalor is right.
Last February, Accelerated Marketing Partners – a Danville-based firm that SCH has hired to market and host its auction – did the same for DeNova Homes, the developer of Morgan Hill’s 78-unit Jasper Park neighborhood on San Benancio Way. All 18 homes that went up for auction began at $475,000 (down from as much as $900,000), and they all entered into contract afterward, according to DeNova’s Web site. Ten of those units closed in early March for an average of $700,000, according to WhoBoughtWhat.com.
While Lalor does not know how much SCH’s units will fetch, he said he is confident prices will rise well above the minimum asking prices because the educated, pre-approved bidders at the sell off event will know what they want and only have an hour to decide. In general, real estate agents have said that the time crunch nature of auctions placate worried lenders that pressure developers to sell their inventory – fast.
Before the auction, though, there were only traditional buyers, such as Rick, a local gas station owner who declined to give his last name and who bought one of SCH’s Forest Park townhouses on Forest Street last August for $680,000, according to WhoBoughtWhat.com. Now SCH is asking for $485,000 for an identical next-door unit, according to AMP’s auction brochure, which refers to SCH merely as “the seller” throughout.
“I am upset, but I’m told by (AMP) that (the auction) is just a marketing strategy, and they feel the auction will bring higher prices than those listed … They even said that maybe I should come up and buy more (houses),” Rick said with a laugh.
“I do feel upset, but I bought the house as an investment purpose for the long haul,” Rick added. “At that time (last August), I thought the prices were reasonable relative to the market.”
While none of Forest Park’s 39 homes are below-market-rate units, the rest of the 210-unit Cannery Project must include 101 affordable housing units because the city gave SCH that many housing allocations from its affordable exemption pool; the rest came from the downtown exemption, which permits market rate homes.
“Affordable housing” is reserved for those earning up to 120 percent of the county’s median income, or $88,600 for an individual and $126,600 for a family of four. In 2006, the nation’s median annual household income was $48,201, and California’s was $64,563, according to the U.S. Census Bureau. The median house price in Gilroy is $581,9000, according to MLS, a real estate listing service.
Essential info about the auction
How to register:
