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# Mike Heayn: Falling home values and why real estate auctions are on the rise
- URL: https://www.smdp.com/mike-heayn-send-comments-to-editor-smdp-com-real-estate-101/
- Published: 2007-05-23T15:00:00.000Z
- Updated: 2026-10-25T00:04:52.000Z
- Author: Guest Author
- Tags: Opinion, Santa Monica, #archive-import

THE SAN DIEGO REAL ESTATE MARKET IS FEELING THE pain of receding real estate values. Dropping over the last several months, values show no sign of letting up in the near future. It is true that many houses and condos were overvalued in San Diego to begin with, but just because it happened in San Diego does not mean it cannot happen in Los Angeles.

When values begin to drop, the number of houses for sale — or inventory — begins to increase. A real estate market follows basic supply-and-demand economics — the more supply and less demand, the lower the value of the supply. In San Diego, some condominiums are selling for 20 percent of their appraised value a year ago. When there is a glut or oversupply of housing, some homeowners turn to auction houses to sell their home.

When you think of an auction house, you might think of anything from Christie’s to Sotheby’s to eBay. The concept is the same. An item is placed up for auction and the highest bidder wins. When it comes to real estate auctions there are usually three different types — absolute, minimum bid and reserve auctions. In an absolute auction, the property is sold regardless of the price. A minimum bid auction publishes the minimum price a property can be sold for, while a reserve auction is not disclosed and the seller reserves the right to accept or reject the highest bid. In San Diego a few weeks ago, an absolute auction was held where houses sold for between 10 and 50 percent below market value.

Every real estate auction is different. Some auctions are sealed bid auctions where a sealed bid is entered and the highest bidder wins. Most real estate auctions require a buyer to bring cash or cash equivalent, such as cashier’s checks, to actually purchase the property. An auction will usually offer a buyer fee simple title, meaning the buyer has the right of ownership to the land without any restrictions. Usually, the properties are listed before the auction date, sometimes the day before. However, some auction houses will not list the properties they are selling until the day of the auction.

If you are going to bid on a property, it is best to drive by and make sure you understand where it is located and if you can see any issues with the property. The problem with purchasing a home at auction is that you sometimes do not get a chance to walk through it. Any time several hundred thousand dollars are at stake, it can be nerve-wracking purchasing something almost sight unseen. Nevertheless, great deals can usually be found, and if you purchase a home 50 percent below market that needs little repairs you should be able to sell it for some sort of profit. Just remember that purchasing homes from auctions can be risky.

If buying a home through an auction appeals to you, do some research and try to find someone who has done it before. The advice you gain from an expert auction buyer can save you a lot of pain and suffering, helping ensure that when the auction hammer drops, your diamond in the rough doesn’t turn out to be another lump of coal.

MIKE HEAYN is a Washington Mutual multi-family loan consultant. He (310) 428-1342 or

*Originally published in the Santa Monica Daily Press print edition on May 23, 2007.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/052307.pdf?ref=smdp.com)