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Copyright 1995 - 2005
Minimum Selling Price: from $125,000
"42 Luxury Condominium Homes"
says the brochure by Kennedy Wilson, Inc.
the complex is located in "fog city" surrounded by lots of low priced townhouses and condos. The term luxury has been stretched quite a bit. Cultured marble isn't *my* idea of luxury, but then again, some people might consider an indoor toilet luxury. According to the brochure, all 42 condos feature 2 bedrooms and 2 baths.
The small print disclaimer states "Bath count is rounded to the whole number."
What??? I know that many real estate people are too dumb to measure square footage, but this is the first time I see a real estate broker who can't count 1/2 baths. Did they round up or down?
The kitchens are very small, but the design is open and modern. The units have white carpets and appliances, are decorated in light colors and feature mirror walls, so they appear more spacious.
I am NOT recommending these condos.
Will there be deals?
Who knows, it will depend on the number of bidders.
What about construction defects?
I recommend spending a couple of days researching the property as well as comps, reading the fine print in their contract, the terms and conditions, prelim and other documents prior to auction day.
Once you are a "successful winning bidder" you pretty much have to buy or lose your 3% deposit.
Don't forget that you'll also PAY the 2% "Buyer's Premium," added to your winning bid.
Financing will be provided by First Security Loan Corporation with as little as 3% down. I talked to Tanis Ryan about their quotes.
She would not disclose their profit margin. She didn't want to talk to me at all and claimed to be busy. However, besides the other loan agent, nobody else was in the sales office. Very odd.
It looked like they were both waiting for applicants to walk in, as it was a busy Sunday afternoon with tons of people checking the place out. My best guess is that they'll charge according to what they can get away with. Be sure to have the Quote Request Form completed.
From their brochure:
"If the buyer does not qualify, his or her Good Faith/Earnest Money deposit will be returned, less document and processing fees." Wow, who are they licensed with? I'll be happy to help ONE APPLICANT with the pre-qualification with First Security Loan Corporation at NO CHARGE!
Again, I don't recommend these units, but it certainly would be a great learning experience for a first-time buyer. And I'd just really like to know how this outfit operates.
It bothers me when a loan broker can't tell me how much they intend to make on a clean $150K purchase with 10% down. I'd like to see their disclosures and loan programs. Please E-mail if you have any of their disclosures and/or documentation.
I'll be at the "How-To-Buy Workshop" this Thursday at 6 PM.
Auctions are becoming more popular in California, and I have yet to hear of any buyer getting a good deal. But so many buyers *think* they'll get a bargain, I just have to check this out. It was fun attending last year's REDC Auction, so I won't miss this one.
What if there are less than 42 buyers? I guess, at $130,000,
the seller would get into the bidding. And I'm sure they've done
their market research and determined that there are enough suckers
on the Peninsula to give the seller a higher profit than selling
the traditional way. I wouldn't be surprised to see sales prices
in the $200K range.
Update April 26, 1996: The Auction Workshop
According to Kennedy Wilson, 122 people attended the workshop. They must have counted every person there, and of course there were many couples and families. Most of the Caucasians there were Kennedy Wilson employees. (I don't know what that means, but I couldn't help noticing.)
I happened to see their (current?) lead sheet showing 2,841 leads with the main sources being drive-by (signs) 1,633 and the SF Chronicle 487.
I looked at the documents provided for review in a binder: Bylaws 29 pages, Budget 14 pages, CC&R's over 100 pages, sales contract 12 pages!
Item 31 of the contract calls for initials from the buyer acknowledging having received, read, understood and approved every one of 16 documents, well over 200 pages total.
Kennedy Wilson is the owner/broker and apparently purchased and completed the unfinished project.
Item 9 of the Contract, Buyer's Costs:
Among other "normal" loan costs, I found a few unusual items such as buyer's pro rata share of
all property taxes for the applicable tax year (not prorated at closing date, the tax year started July 1, 1995. The buyer seems to pay for nearly a full year of taxes assessed PRIOR to owning)
assessments against the condominium (I don't know what they are, didn't have a chance to read the prelim. And the prelim is exactly what it's called, a preliminary title report, so who knows what the total will be)
the Master Association Insurance Policy (I have no idea how much that is)
I got to ask 2 questions during the Q & A session:
Why do some documents refer to 84 units, while only
42 are being auctioned?
Surprise! Another 42 units will be built. (Enjoy the construction
noise and dirt!)
What about construction defects?
Item 24 of their contract specifically states:
The entire 1/3 page disclaimer is printed in caps, so most people probably won't read it.
I think we need some legislation prohibiting the use of all caps in disclosures and contracts. Item 25 is nearly an entire page about the home warranty, also all caps. I just can't make myself read it.
While I had a lot more questions, especially regarding their financing, they stopped taking questions.
Buying these units is extremely speculative.
I can't stand their contract, obviously written completely in favor of the seller.
Considering the risks of construction defects (so many new developments go through litigation) *I* wouldn't touch these condos even at the minimum selling price unless I had money to burn.
Even if they offered a construction warranty, I still feel that it takes way too much time to read and understand 100s of pages and to invest many hours of research PRIOR to having an accepted offer.
April 28, 1996: The Auction
They were just getting started when I got there. The crowd was a lot smaller than at the 1995 REDC Santa Clara Auction, maybe a couple of hundred people. I'm no good at estimating crowds and forgot to do my chair count. Must have been all the excitement, with their video crew taping, the auctioneer yelling and the floor men screaming.... The first few units sold in the $180K range.
I stood in the back, recording with my hand held audio tape recorder.
It didn't take long until I noticed the "man in black" approaching. He asked if I had permission to tape and I replied that I didn't. Did he mind? He DID mind. I asked if the public wasn't allowed in, as there were signs all over South City pointing towards the hotel. He replied that only registered bidders were allowed and also informed me that they had the bidders' permission to be video taped. So I asked him to please state on tape his name, position, that he wanted me to leave and why. He stared at me and my recorder, didn't say anything and eventually walked away.
I find it fascinating how difficult it is to get ANYONE to make their statements in writing or on tape.
It doesn't take any longer to talk into a tape recorder, it was already recording, all he had to do was talk! Go figure....
In the meantime the condos were selling for a little less and the bidding took a little longer.
I decided to take a few pictures. It didn't take more than 2 minutes until the hotel guy asked me to step outside and told me to leave.
The auction was only open to registered bidders, the hotel guy informed me. How do I register? A $25,000 cashier's check was required. Hmmm, I didn't have one. So I tried to get his official statement on tape, but he also declined to be interviewed. He threatened me with security to get me to leave.
I didn't appreciate that at all and told him that I wouldn't leave until he got the police. Then I walked right past him, back into the auction room, and of course they didn't call the police. Heck, they'd have to give a statement for the police report and identify themselves, so I didn't expect them to call 911.
Meanwhile, the condos were selling in the $160K range.
Quite a few people had left and I was beginning to wonder if they'd run out of bidders. The video crew was still taping the happy buyers as they were escorted to the room where the contracts were signed. I recognized some of the people from the practice bidding on Thursday. The last condos sold in the $150Ks, all units were sold in less than an hour.
Funny thing happened though. A couple of days later I drive down Skyline Blvd., and there are new signs:
New Luxury Condo's
Now I'm confused. What happened?
A few days later I finally found time to get over there. The sales person handed me a list with 8 units for sale.
Didn't they all get auctioned last Sunday? No, he replied,
the Seller held 8 units back.
Does the DRE ever look at these auctions?
June 17, 1996: I had a look at the brochures and at the auction schedule again . And I did a count. They DID hold back 8 units! I didn't know they could do that. Apparently they realized that they wouldn't get as much as they really wanted for those condos, and the day of the auction they only auctioned 34 condos. Very clever, they auctioned in a different order than on the sales brochure, I sure hadn't noticed.
I didn't know you could advertise to auction for a low minimum sales price, and the day of the auction you pull the properties not expected to bring a good price.
That's one more reason NOT to waste your time on auctions.
Did you see those zillions of signs advertising
"125+ Homes must be sold!"
Wondering what it was all about I called for the brochure. One of my clients told me he thought he found "his place" in Palo Alto on the listing, but then discovered that he wouldn't own the land and the monthly lease payment was $850.
I decided to have a look at 3720 Elston in San Bruno with a minimum bid of $169,000. Wow, what a dump!!! This wasn't a fixer-upper, but a tear-downer. I haven't seen so much dry rot in a long time.
The house needed just about everything: new kitchen, baths, carpets, some walls and ceilings were black with mold, holes in the walls ... you get the idea.
The brochure states this disaster of a house was "previously listed to $249,000." However, I didn't find it in the MLS. Who would list this property at $249,000? Or are they talking about a listing back in 1989 when the property was still in good condition?
The terms of the auction sales contract call for all inspections to be done prior to the bidding (i.e. an "as is" sale) and I would NEVER buy a house without inspections.
Looking at 3720 Elston I'd say the minimum bid is overpriced. A lady who was also inspecting the property had checked out some of the other properties to be auctioned and thought 3720 Elston was one of the better ones.
My recommendation: Don't waste your time!
August 6, 1995:
3720 Elston sold for $202,500 + the 3% premium to be paid by the buyer.
What were these people thinking?
The place was packed and I was observing from the hallway. It looked like there were hundreds of bidders ready to compete against each other to get their "dream home." I noticed a few observers, but most had the orange bidding card.
Many realized that there were no "deals" and left after the first few properties were sold. But enough bidders remained for an exciting auction. I found it fascinating how REDC kept the bidders excited. Very high pace.
I can't help smiling, just remembering the event. It was quite hilarious at times and I wished I had at least an audio tape so I could upload a few sound bites here. Maybe next time. REDC puts on a great show! I realize it's not funny to the people who buy.
To become a registered bidder, one had to complete a form similar to a loan application, but they even asked for the drivers license number.
First Republic Mortgage, GML Mortgage and REDC were authorized to run the credit and verify income and assets. The bidders also acknowledged on the form to have received, read and accepted the Terms and Conditions of the sale.
I don't think it would be possible to create a contract more in favor of the Seller.
Did these buyers have any idea what they were signing?
Some properties "came back" and were auctioned a second time, maybe some bidders had a reality check. One woman cried while she and her companion were escorted to the sales office, I think they were tears of joy. I'm afraid that many of the "winning" bidders will be very unhappy shortly.
If anyone thinks they got a below market deal, please let me know.
I talked to several brokers and observers who all agreed that there were no deals. I quote from the REDC brochure:
That's a true statement. 23 properties sold in less than 1.5 hours. Above market. Not all will close, and of course REDC collected applications for backup offers. Maybe that's how one could get a deal, but somehow I doubt it.
Why would you expect to get a good deal at a public auction -
competing against hundreds of other bidders?
It takes many phone calls, property inspections and offers.
It's important to be able to close quickly and provide evidence of loan approval to the Seller.
Submit the right offer at the right time.
Understand your contract.
Know the Seller's motivation, research when and for how much the Seller purchased and how much is owed now.
Find out how long the property has been on the market.
Talking to the neighbors can provide very helpful information.
Listen to anyone who has anything to say about the Seller or the property. It's amazing what Agents and Sellers will sometimes reveal when you just take the time to listen.
It takes a lot of time and effort, and a little luck.
It's a four letter word: WORK