While I was working my way through college one of my jobs just happened to be at a package store where someone imparted these words of wisdom…”All Cognac is Brandy, but not all Brandy is Cognac”. Things, in other words may not always be what they seem.

The Dalton Condominium project in Pasadena unveiled a new marketing campaign today.

When you see several large banners on a new Condo project in Pasadena that advertise “AUCTION”, what comes to mind? We usually associate the word “auction” with desperate, fire sale, below market, especially when its pinned to real estate. Almost certainly when its spelled out in big red banners and the commercial offices on the street level have been vacant and advertised for last for the last 6 months.

However, things are not always as they seem.

As an example, the Ostrich Farm is South Pasadena had an auction in an attempt to move some of their slow selling inventory. It may not have necessarily been because the project was in financial distress, but it may have been an attempt to create some buyer excitement, sell some units and increase the financing availability to more prospective buyers.

One of the problems with community developments is that lenders can be very reluctant to loan money unless a certain number of units have entered escrow. With the new tighter controls on financing, that number can be as high as 50%. For a new development to hit 50%, they need to create some excitement. Push, Pull or Shove. No reasonable deal refused. Neal can’t say no. See the feeding frenzy begin to develop?

Obtaining the magic number of 50%, enables lenders to move away from 20% down payments into FHA with 3.5% down payments. More people can qualify, more people buy. AUCTION ACCOMPLISHED!

It has been rumored the auctioning company will have stooges planted throughout the audience. Not to make you laugh, but to actually bid against you. They have no intention of buying the unit you are bidding for, their only purpose is to make you pay more. If I were a betting man, I would just about guarantee that each unit that will be auctioned will have a minimum acceptable bid. If the bid price is not obtained, the unit will be removed or the stooge that just bet against you, will not be able to complete the purchase.

Beware of the auction mentality. To be successful at an auction you must have a pre-established maximum you are willing to pay and do not exceed it. It will be easy to get caught up in the moment as you try to outdo your competitor only to find out, things are not always as they seem.