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.