Pricing Poll: 1801 Elm

Posted by Dave Fratello on Monday, November 30th, 2009 at 4:22am.

It's likely that the little stretch of Elm between 17th and 19th streets hasn't been so busy for years.

Saturday's open house at 1801 Elm was a throwback to the frenzied days of the real estate bubble. That era when a first public open was often an event, with constant caravans of people coursing through, excited chatter on-site about the price the sellers might get, a neighborhood crawling with people carrying the flyer from the open... Saturday's open had all that.

There was something different, too, about the crowd. Because 1801 Elm will be auctioned off, and got listed with an utterly fake, ultra-low MLS start price of $399k, the added mystery – what's it worth? can you really get a house in MB for that? – drew interest from all over. (There's no true "starting price" for the auction; we'll ask you below to guess what you think it will auction for.)

Mixed in with the usual neighbors, local agents and looky-loos, you had investors hoping to grab an undervalued property rubbing elbows with young couples wondering if they might luck into a cheap house in MB. The cars coming and going ranged from the 15-year old Nissans to the rented Mercedes to the paid-off BMW convertibles. And plenty of minivans.

All the excitement, though, gave way quickly to 2 realizations:
1) that's one grim, destroyed house that's for sale; and

2) no one's getting any bargain here, not with so much buzz around the property.

Grim, yes – it's hard to overstate. The home was built in 1950 and has been through the wringer ever since, lived in until the house itself began to give out. (The owner actually passed away inside, as the on-site listing agent was more than willing to disclose to open-house visitors.)

Ceilings are peeling, pockmarked and outright collapsed. Walls are cracked. Trees and vines grew through windows. Termites appear to have had their way. Carpets were remarkably soiled, deep black in places, but the most shocking dirt may have been the rusty, caked-on filth covering the walls and floor of the shower tub and the sinks in the bathrooms and kitchen. Doesn't water clean things?

If you marched into the open thinking: "With a little vision and patience, anyplace can be transformed," then your faith was challenged. It's a teardown.

Similarly, if you marched into the open thinking that you could blaze past any human story behind this property, the crushing squalor of the home may have stripped you of that notion as well.

Besides the crowd indicating broad interest, there was another blow to open-house visitors hoping they might grab this property for a bargain: The fine print.

The basic details of the probate auction were already well known – next Sunday, Dec. 6, an auction will be held at the property, with no opening bid, no pre-registration, and few of the big-time cash demands that make foreclosure auctions difficult for regular folks to participate in. You must bring a $5,000 cashier's check to be eligible to bid (it will only be collected from the winner) and be ready to write a personal check for 10% of the winning bid on site if you win.

On balance, not so tough. (For more on the auction itself, see the website of the company repping the property. Within that page is this list of FAQs about their auctions.)

But the fine print says this to the winner: Even if you win, you might not win.

How's that? The auction "winner" can be outbid in 4-6 weeks in court. So if you luck out and pay "too little" – less than true market value – when winning the auction, some shark can come to court and outbid you there. Overbids start at the auction price plus 5%.

We're still thinking that the buzz and numbers of bidders and the frenzy of the moment will lead to an above-market price being paid at the auction, but it's sobering for any "winner" to know that's not the last act.

So now, just a week before the auction, we'll call the question for MBC readers:

How much will 1801 Elm auction for?

Here we're limiting the question to next week's auction event – not the final price in court late this year or early next.

We don't have to look far for comps. As MBC noted previously in "A Different Kind of Auction," the home right next door, 1733 Elm sold (short) for $801k in May. That was a "fixer" because it had been gutted, mid-remodel, but it has now been fixed and is hosting humans nicely.

This probably means that 1801 Elm is worth a bit less as dirt – well, land, to be specific. What's that, maybe $700k-$750k, conservatively?

Your guess as to what the "winner" will bid at the auction next week needs to factor in:
  • land values during a downtrend, 
  • the motivations of auction bidders (flippers, sharks or end-users) and 
  • the uncertainty of the auction moment when it arrives. 
And since you know that bidders will have another crack at the property after the auction, do you think there will be excessive offers on-site, or not until the court date weeks later?

We're putting up several choices for where you think the auction will end up next week. Please vote in our new poll and explain and support your vote in the comments. The poll will run through Saturday night, the eve of the auction, at 8pm.
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