Home auction in Sacramento offers dreams -- for buyers

Francisco Cervantes paced like an expectant father, back and forth, until a security guard asked him to move out of the aisle. His wife, Victoria, sat patiently in one of the rows of folding chairs, paperwork in hand.

Like the hundreds of others in this Cal Expo exhibition hall, this young Yuba City couple were looking for a home at a bargain price for their three children at a two-day auction of foreclosed homes in Sacramento.

On Sunday, the pickings were lush, but their eyes were on a four-bedroom, two-bath home closer to their jobs in Woodland.

The 3,800-square-foot home, a symbol of a slumping Central Valley housing market, represents dreams that have been dashed and a dream opportunity. Once valued as high as $711,000, the starting bid on Sunday was just $259,000.

"Maybe it will come down a little more," Cervantes said, eyeing the bid board in the exhibition hall between the horse track and the woodworking show.

He left Sunday waiting to see whether a rival's winning offer would be confirmed. And, just in case, he filled out paperwork hoping for a second chance.

Some bargain hunters are like Cervantes, novices grasping at their chance for the house they've always wanted in a market they have been priced out of for years. Countless other shoppers are investors looking to one day realize a tidy profit in a capitalist economy that rewards good timing.

The homes belong to the banks now, and the lenders appear eager to make deals. "The banks are extremely realistic. They're extremely motivated" to sell, said Keith McLane., a division president at Real Estate Disposition Corp., the Irvine-based company running the show.

The banks can decline deals that don't meet their reserve price, McLane said, but it's rare that they don't get what they want – even though bidding can and does start below that reserve.

No one could estimate the discount that bidders are getting on the homes' previously assessed value, but McLane and real estate agents insist that buyers are walking away with real deals.

The Real Estate Disposition Corp. sells more than 90 percent of the properties it takes to auction. In 2008, that has translated to about 5,200 properties at some $1.2 billion nationwide.

At the auction, buyers who win a bid are taken over to a side table to determine whether they have the financing and down payment. If not, the house goes back up for auction until it's sold.

Armand Sarcomo and his wife, Rachel, were eyeing a ranch-style home on five acres listed in the Yuba County community of Browns Valley.

The house, once valued at $424,000, opened for far less and Armand was ready. He flashed his bid card at $169,000 and a few times more, stopping at $200,000. It wasn't enough, though, and the property sold at $205,000.

"We're looking for a second home," said the 28-year-old union sheet metal worker. "It's a good investment. We're a young family trying to move up and take advantage of the market."

REDC would sell 165 homes on this day, many far below their original value. The company will sell more than 1,000 properties on its nine-day tour of Northern and Central California before it pulls up stakes May 5.

The market's in tough shape, Chris Chamberlain, REDC's executive vice president, said from a seat in the documentation room – a large tent at the rear of the hall where the deals are finalized.

The Sacramento area has taken more punishment than most. Only Southern California's Inland Empire and the San Diego area have had a worse time of it, Chamberlain said.

Most of the homes up for bid were in places like Lodi and Dixon, small towns where the mid-decade building boom took flight only to crash-land when the housing market nose-dived.

The median home price in Dixon, $453,000 in April 2007, is now $375,000. In Lodi, where the median was $360,000 last April, the median is now $249,000.

It's the long division of soaring mortgage payments, credit card debt and plummeting home equity that's equaled negative numbers up and down the Central Valley.

The flip side is that more buyers are entering the market and finding deals on the auction floor, said Dick Swain, a Realtor at Windermere Real Estate in Sacramento.

"More buyers are out there now seeing an opportunity. The stuff's selling," Swain said. "There are still quite a few people who still have the ability to buy a house, and they're doing it."

The auctioneer's call sends tuxedoed bid takers sprinting up and down the rows, flashing hand signals, exhorting buyers to pump up the bids.

"One-ninety-five, one-ninety-five, one-ninety-five. I've got 200!" And, just like that, it's on to the next one.

Mike Burkett of Elk Grove took a cigarette break before heading back inside to bid on a bank-owned home, an investment property to give his children a doorway to their economic future.

"You look at the appraisal price, and it's $300,000 from two or three years ago, and it's starting off at $49,000 or $50,000," Burkett said. "Three, four years ago, you couldn't even buy a house."

But he knows what led to this opportunity.

"You're bidding on somebody's loss. You're thinking about somebody who invested all of that money and now (the home) is on auction."

Burkett has had a front row seat to it all. A lifelong resident of Elk Grove, he remembers the city's rural roots and its wide swaths of open land. Later, he watched it boom into one of the nation's fastest-growing cities. Then he saw it all come tumbling down.

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• Call The Bee's Darrell Smith, (916) 321-1040.