A 30-year decision was made in a matter of seconds for 16 people Sunday night, with DeNova Homes-hired auctioneers selling the new single-family houses in the high $600,000 range.
This is the second home auction in Morgan Hill in recent months. The trend, which is happening throughout California and the West Coast, especially in highly desirable areas like Morgan Hill, is caused by the housing slump, with homes sitting on the market for months even with prices at the lowest level in years.
There were about 80 bidders, with about another 200 friends and family members attending to support them, and some Bay Area home building insiders looking on as the unusual selling method unfolded at a conference room in the San Jose Hilton Hotel.
The room was abuzz at 5 p.m. when the auction started, with four barkers - those working the room, and keeping track of the highest bidder - the auctioneer and the attendees, who effectively set their own prices, giggling with the excitement that sometime in the following hour they might be homeowners.
The starting prices were as low as $475,000 for the four- and five-bedroom homes, located at Butterfield Boulevard and Central Avenue. Their suggested prices - the price DeNova could have sold them for about two years ago, perhaps - ranged from $822,000 to $958,000. Buyers left with an average purchase price of $650,000, about a 20 to 35 percent savings.
"In the end, it's a thousand-dollar buying decision," said Ken Stevens, founder and Chief Executive Officer of Danville-based Accelerated Marketing Partners that put on the auction. "That's why our process works. There's very little fallout. People win houses."
Bidder Greg Berg, who didn't raise his hand once during the hour-long auction, had a more cynical view.
"They probably realized their goal, and probably got the prices they wanted," he said. Berg called the process manipulative. "The artificial excitement of the barkers, the shouting that they do, grinning like they're having the best time in their lives. It's their goal to make as much money as they can."
Berg, who owns a home in San Juan Bautista but works as a special education teacher at Live Oak High School, said he went out of curiosity and to see if he could get a good deal.
But, the bidding went higher faster than Berg expected. But, in all, Berg said he learned a lot about home buying in this crash course and he might be tempted to go to another, if the prices were right.
Morgan Hill resident Amer Safadi bid on four different homes but wasn't the high bidder on any of them. Had he gone another $6,000 to $10,000 higher, he might be the owner of a new home, he said.
"The last couple thousand, I was a little shy," Safadi said. He said he was a little disappointed that he didn't win, but that there might be more auctions in the future with even lower prices.
Safadi said the auction was nerve-wracking.
"When you raise your hand and confirm the number, the (barker) comes and is on top of you, pushing you to go higher," Safadi said. "Before the auction, you put yourself in a price frame, and when it goes out of that range, you end up renegotiating the decision within yourself, but there's no time. That's why I ended up not getting one."
After the auction, Safadi said he "went home and took two Tylenol."
Stevens admitted there were people there who thought they could snag a brand-new home at the starting price.
"That's why they didn't bid, the prices were higher than their expectations," Stevens said.
Stevens said he's been doing three to four auctions each weekend on the West Coast, in Portland, Arizona and Seattle. This was his second Morgan Hill auction, with the first being in February.
"What's unusual about this auction is that these homes went directly to auction," Stevens said. "And even though (DeNova Homes President Dave Sanson) didn't get quite what he wanted, it was enough to satisfy the construction lender."
Don Lapidus, a Morgan Hill development advisor, said in the 1980s, if homes weren't selling, they "just sat there." Developers were stuck owing bank interest, he said.
"That's the benefit, in my mind," Lapidus said. "You sell the houses, and get out from under the interest rates. If you can't sell the product, you find other ways to motivate the project."
John Moniz, project manager for Pinn Brothers Construction - which has two projects in the works in Morgan Hill - said he attended the auction as an onlooker, to get the most current pricing for new homes.
"The best comparable (price) you're going to get is what just sold," Moniz said.
Moniz said the auction was successful, in that all the homes sold - even though they were at the buyers' price, not the sellers'.
Stevens said Sanson used the auction as a marketing tool for his new homes.
"It was a risky deal, but he trusted the market," Stevens said.
Stevens said Sunday night's bidders were "a very cosmopolitan mix, with big families, little families, young couples, older folks. Every profile of buyer was there. Everyone had fun, and I think everyone felt like they won."
Sanson did not return calls for comment by press time.
Natalie Everett Natalie Everett covers education and city issues for The Times. Reach her at (408) 779-4106, ext. 201, or neverett@morganhilltimes.com.
Although the Morgan Hill Times does not have any obligation to monitor this board, the Morgan Hill Times reserves the right at all times to check this board and to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable to the Morgan Hill Times in our sole discretion and to disclose any information necessary to satisfy the law, regulation, or government request. The Morgan Hill Times also reserves the right to permanently block any user who violates these terms and conditions. All threats to systems or site infrastructure shall be assumed genuine in nature and will be reported to the appropriate law enforcement authorities. Submission of any comments will be considered permission to use online or in print.
