How a Listing Went From $1 Billion to A Low, Low, Selling Price

This story could be the story of many sellers, albeit on an exaggerated scale.  How did a property on the market for $1 billion dollars ultimately sell for .1% of that, or a 99.99% loss?

It's the story of an investor buyer who wanted the 157 acre parcel in Beverly Hills, and to get it he borrowed $45 million from the seller (Mistake No. 1), the Mark Hughes Estate, and bought it in 2004.  In time, the debt surged to $200 million with interest and fees added. The investor transferred ownership to an LLC controlled by the investor's partner, which was unsuccessful last month in declaring bankruptcy.  The Hughes estate could either buy the property back, but lose the $200 million it was now owed, or let it go to foreclosure auction. But any other buyer purchasing prior to the foreclosure auction would have to pay the $200 million in debt, and there were no takers. So the property went back to the Hughes estate, after 15 years, leaving it to absorb the $200 million debt.  However, the LLC, known as Secured Capital, made a last minute offer of $150 million for the property, but the estate ignored the offer, according to the company's attorney (Mistake No. 2).  So last week, the property sold for $100,000 at auction. 

So 1) don't overprice your property; 2) or do a carryback loan to a buyer who can't perform, 3) and, finally, know when to cut your losses so you don't lose out completely (the estate could have at least recouped $150 million) and then, end up selling at a below market price that you can't even buy a condo for.  And last but not least, check your days on market, and keep checking your market value.


Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Buying a Home at Auction

With more talk about foreclosures, there’s more awareness of buying a property at auction. But it’s important to do your research first if you think you want to buy a property this way. You need to get information about the property, i.e., amenities and square footage, how much is owed against it, and what is the expected opening bid, either required or suggested.

Have your financing already in place, and be prepared for the required deposit for an accepted bid. Your financing must be in place within a specified period of time.

Price at an auction is based on the loan amount owed plus fees and expenses that the foreclosure process has incurred. It may be less than market value, but realize that once the lender owns the property, it may sell with the help of a real estate broker or through auction.

You usually have to have the money in hand and your loan ready to fund. Each auction has different time requirements.

Most of the time, you don’t have the option of getting inspections and may not see what you’ve bought until you’ve bought it. Most homes are sold in “as is” condition without any warranties of any kind. There are no disclosures or guarantees. There are some auctions where you are allowed an advance preview which may afford an inspection.

Consider all your costs, including the auctioneer’s fee and taxes owed against the property. And during this time, all your research could be wasted (is any knowledge really wasted though?) as the borrower may be able to cure the loan at the last minute!

Last but not least, a property sold at auction may not have clear title, depending on how they are sold. There could be various liens and encumbrances which could require a lot of work to clear up.

Be prepared, if necessary, to walk away. If the deal is not right for you, it’s not a deal.

Information courtesy of eHow.com.

Long Beach

Foreclosure Auction