Some signs of struggle in Utah's housing market were on full display Thursday at one of the first large-scale bank foreclosure auctions held in the state this year, and the first ever by Ogden-based Centennial Bank.
Fifty-two properties were put up for bid at the Wells Fargo Building located on Main Street in downtown Salt Lake, many of them casualties of the bursting housing bubble. A standing room crowd filled the 23rd floor event room made up of everyone from first-time bargain hunters to savvy investors looking for money-making opportunities.
Among the inventory were homes and lots ranging in estimated value from $175,000 to $2.6 million dollars, according to information provided by Eric Nelson of Las Vegas-based Eric Nelson Auctioneering, which managed the auction. The properties were mostly in Salt Lake, Davis and Utah counties.
"The majority of these sales are either owner-builder or a developer that has not finished the home or has finished it and could not sell it or refinance the home," Nelson said.
Heather and Dean Sapp won the auction for a home in Riverton that she said was their first choice.
"We've been looking around, and we really need a house," Dean Sapp said. "We were looking for a good value and something we could really afford."
Their winning bid was just over $300,000 for a home that was nearly 5,000 square feet and had an estimated value of more than $600,000. She said the price for the house was low enough that they could still afford to make any required changes on the property, and it will be large enough to accommodate their four children.
Nelson said that nationwide, there are probably well over 100 auctions each weekend, with sales ranging "anywhere from one house to 300 homes."
Areas such as Nevada, California, Arizona and Florida have been the hardest hit, with those states ranked one through four respectively with the highest foreclosure rates. The foreclosure rise has struck people from across the social strata, including famed pitchman and television host Ed McMahon, who recently disclosed that his multimillion dollar mansion is in foreclosure.
In Utah, one in every 675 households received a foreclosure filing during the month of May, based on the latest figures from research firm RealtyTrac, based in Irvine, Calif. That rate means the Beehive State ranked 16th nationwide. The national foreclosure rate was one in every 483 households.
The Utah foreclosure rate increased 68.05 percent from May 2007. In April, RealtyTrac said that for the first quarter of 2008, the state foreclosure rate increased 77.59 percent over the same period last year, while the rate jumped 69.36 percent in Salt Lake City year over year.
At the auction Thursday, Nelson said that all the properties involved in the auction had been foreclosed upon, and the highest bidders would have clear title. Qualified buyers would be required to make a 3 percent down payment with FHA financing available at 5.875 percent on a 30-year, fixed rate mortgage. Lender financing was available for up to 90 percent of purchase price, subject to qualification.
Under the rules of the auction process, sellers have seven business days to confirm the high bids, Nelson said. He said bidders were required to bring $10,000 in cash or cashier's check for each property they intended to purchase.
Nelson predicted that because of the economy, his company would probably be doing auction sales in Salt Lake every 60 to 90 days for the next three to five years.
"The high-end market is just crashing in the Utah area right now, with homes over a million dollars, and there will be a surplus of them, probably a 5-year supply by October or November," he said.
Veteran builder Cory Olsen won the auction for a Bluffdale house valued at $726,000 for just $275,000 and felt like he got an excellent buy.
"I didn't intend on bidding on that one, but the number stayed really low," he said. He said his ultimate plan is to turn the property around and sell it for a profit."When you buy it at this price, you can do a lease option and still have a positive cash flow on the monthly income," Olsen said "It almost feels criminal to take advantage of buying things at pennies on the dollar. This stuff is selling for 40 to 60 cents on a dollar."