From the P-E:
Foreclosed homes that went to auction in Riverside the morning of April 25 were reserved for bidders who wanted to buy their first houses and had been qualified for financing that the County of San Bernardino offers through its Neighborhood Stabilization Program.
The county previously had little success using the first-time home buyer financial assistance. A major reason was that the funds come from the federal government which requires houses purchased with such assistance to be bought at a discount of at least 1 percent below market.
Fierce demand for foreclosed houses from first-time buyers and investors has caused home prices to soar too high on the open market to qualify for the Neighborhood Stabilization Program.
Something similar happened at the April 25 auction. Several real estate agents who were there with clients complained that the bidding went way above what they figured the properties were worth, although they had understood the auctioneer would halt the bidding before it hit the limit.
The winner of the first house auctioned said he had raised his bid far higher than what he figured the house would appraise for because he realized that the price would have to be lowered to meet the guidelines of the Neighborhood Stabilization Program.
His strategy may work. In an e-mail, Jim Park, chief executive of New Vista Asset Management, an asset manager for Freddie Mac, whose forelcosed homes were auctioned, said appraisals were being ordered on the 14 homes earmarked to be sold with Neighborhood Stabilization Program buyer assistance.
“If, for some reason, these NSP appraisals come in below the purchase price, Freddie Mac intends to adjust the price so that the property meets the NSP and financing requirements,” he said.
No moral hazard here… move along please.
Read about this auction last week in the NC Times (link – http://www.nctimes.com/business/article_65c7e3b7-59c8-58a4-9e0f-624274160e94.html ). New Vista is Carmel Valley based.
I may not be the sharpest knife in the drawer, but isn’t this auction an exercise in futility? Bid a kazillion dollars on a property, knowing Freddie Mac will adjust it to the NSP appraisal? What am I missing here?
Man this whole trip just gets weirder and weirder.
“Freddie Mac: Q1 Net Loss $6.7 billion, Asks for $10.6 billion” – Calculated Risk
If the houses are all going to be bid over the limit anyway, why don’t they just set the price at the limit and hold an essay contest or something to see who gets to own them.
@emmi,
I propose the following formats for the next Riverside foreclosure auction.
http://www.youtube.com/watch?v=xO8JZaqdpuc#t=1m57s
if the bids are going to be adjusted, set a ceiling to NSP, keep it secret and have each person submit a sealed bid. Whoever comes closest without exceeding the bid wins it.
that way the overbidders lose, it’s the careful bidders who win.
Hmmm…where have we gone when apply `Price is Right` rules seems like the most sane thing to do.
I agree with emmi, if this is what’s happening you should just set a price and hold a lottery. That’s what they do with affordable housing in many other jurisdictions. Anyone willing and able to pay that set price and who meets the other eligibility requirements gets a ticket.
“But in a sign that the US housing sector is still in difficulty, Freddie said the percentage of its loans not paid on time or in full rose to 4.13 percent in the first three months of the year.
In the final three months of last year the rate stood at 3.98 percent.”
Full Article: http://sg.news.yahoo.com/afp/20100505/tts-us-economy-property-finance-972e412.html
So they are losing massive amounts of money, but refuse to sell homes to the highest cash bidder??? Guess we know who their fiduciary responsibility is to, and who it isn’t to (taxpayers)….I’m in the wrong business…
I bid a million-billion dollars for that 1900 sqft house in Riverside.