CA Mod Bee Merc News

Modesto Bee

Condo conversions were all the rage a couple of years ago, as seven Modesto apartment complexes decided to sell about 500 rentals as owner-occupied units.

The first couple of projects sold like hotcakes, filling a niche for lower- priced housing. Then the real estate market cooled, and sales slowed dramatically.

Now after two years of trying, one of those multifamily projects is giving up on traditional sales methods. Instead, the Villas at Creekside is going to auction off its final 29 units Nov. 18, with bids starting at $100,000 to $130,000.

That's less than half what those town houses sold for in 2005.

Creekside's co-owner Pat Cannon said they must do whatever it takes to sell.

"It costs us a lot of money to carry these units every month, and we can't keep digging ourselves in deeper," Cannon said. "We know it's time to move on, and we'll take the price we can get."

So any bid over the minimum will be accepted, and no extra sales or auction commissions will be tacked on, but those who buy will have to pay $220 per month in homeowners association dues.

The two-story town houses range from 1,098 to 1,375 square feet, each with two or three bedrooms. They originally were built in two phases, in 1984 and 1989, then rented as the Valencia Apartments.

Cannon and his partners purchased the 114 town houses in January 2005. They remodeled every unit, installing new appliances, carpet, cabinets, flooring, window coverings and paint. New roofs were installed and the exterior was spruced up.

"We probably put $30,000 a unit into them," Cannon said.

The 85 units that have sold went for $204,950 to $268,950.

At first, only those who planned to live there were allowed to buy. Now investors are being invited to bid, and the auction is being promoted in the Bay Area and in publications such as the Chinese Daily News and Sing Tao Daily.

Cannon said they must attract as many bidders as possible because if the town houses only sell for the minimum bids, then he and his partners will lose half their investment.

So will Doug Hopkins and his family, who bought a Creekside town house last year.

"We paid pretty much double (the minimum bid)," Hopkins said. "The owners already here are going to really lose out."

But new buyers could get bargain-priced deals.

That's what Rita Mae Ballard of Riverbank and her son, Troy Ary Jr., of Modesto are looking for.

"It would be a good opportunity to get into some affordable housing," said Ballard, who has been renting. "I haven't even been looking to buy because the prices have been too high. I needed prices to come down like this."

Ary said he wasn't thinking about buying himself until he toured Creekside with his mother.

"The amenities are beautiful here," Ary said.

Most of the Modesto apartment complexes that converted from rental to homeowner status did comprehensive remodeling to upgrade their amenities.

That was the case at Normandy Park Townhomes, 1212 W. Roseburg Ave.,which has 15 of its 54 units left to sell. They are priced at $239,000 to $249,000, with incentives worth $25,000 to $50,000 being offered.

Dennis Nairn, the PMZ Real Estate agent who sells the Normandy town houses, said he doesn't think his project and Creekside compete directly.

"That auction obviously is going to take 29 people out of the marketplace," Nairn said, "but I don't know if it's going to have an effect on us."

For more information about the Creekside auction, visit the town houses on Lincoln Avenue, just north of Penny Lane. The auction office, at 525-A Lincoln Ave., is open 10 a.m. to 5 p.m. daily.

The auction will be at 1 p.m. Nov. 18 at the Red Lion Inn, 1612 Sisk Road, Modesto.


Mercury News


# WHAT: Pinole houses auction

# WHEN: 1 p.m. Nov. 3

# WHERE: Hilton Garden Inn, 1800 Powell St., Emeryville

# INFORMATION: 510-724-3840

# WHAT: Benicia condos auction

# WHEN: 1 p.m. Nov. 10

# WHERE: Hilton Concord Hotel, 1970 Diamond Blvd., Concord

# INFORMATION: 707-748-1125

By Tom Lochner

STAFF WRITER

Pinole has a $700,000 house for sale. Bids start at just over half-price.

"The quaint community of Pinole just 20 miles northeast of San Francisco is about to play host to a once-in-a-lifetime opportunity for homebuyers!" reads a recent news release from Beverly Hills-based auctioneer Kennedy Wilson. On Nov. 3, the company will auction off the last seven unsold new houses at Serita, a 21-house, soon-to-be-gated subdivision just south of San Pablo Avenue at Pinole Shores Drive.

The 21/2-acre property was owned by developer Art Pakpour and his company, Palm Plaza Development, when the Pinole City Council rezoned it in May 2004 to allow 21 houses, 17 of them with a second unit. DeNova Homes of Pleasant Hill acquired the parcel from Pakpour a short time later.

The seven houses for auction, which include three models with different floor plans, range from just over 1,700 to 2,300 square feet and have modest-sized yards. Minimum bids range from $385,000 to $435,000 for houses that once had asking prices of $627,900 to $728,900.

The last closings at Serita occurred in July, said DeNova Executive Vice President
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Lori Sanson. A real estate tracking firm recorded prices of $618,000, $619,000 and $720,500 for what appear to be the three houses sold most recently at Serita.

"This (bursting of the) housing bubble has not been a secret in coming," said Charlie Long, Pinole's interim city manager. "It just took a while to get here."

Auctioning houses is not unusual as a way of cutting losses in a market slowdown, said Long, who is also an instructor with the Urban Land Institute. In the case of Serita, it is "hard to know whether this is a beginning of (a) rush to exits or simply some folks leaving the show early to avoid congestion," he said. "Time will tell."

Sanson said the auction is "an opportunity to eliminate the fear factor ... and to let the people tell us where (the market) is."

"At this point, what we're seeing is, the market is really confused," she said. "Interest rates are still competitive. But the media have raised fears, so people are playing a waiting game."

Selling houses at a discount can affect neighboring property values -- a frequent complaint of owners who bought similar homes at the market rate. The discounts can affect values not only in the same subdivision but beyond.

"This will do hell with our comparables," said real estate broker Sharon Brown, who is also a member of the San Pablo City Council. To determine the market value of a property, appraisers and brokers use "comparables," or recent sale prices of comparable properties, among other tools.

"We don't appreciate what's going on, but we understand it," she said. "The developers have to do something to get rid of this inventory."

Brown said some developers are further pressed to sell quickly because they may have loans due.

Serita resident Ted Diaz said he bought his house four or five months ago. He is not happy about the prospect of lower price tags on the seven remaining houses, but he looked at it philosophically.

"This is life; I take it as it comes, day to day, and I look forward to positive things down the line," he said.

But he and possibly other Serita residents might ask DeNova to give them rebates, he said.

"I think that would be a fair thing to do," Diaz said. "I hope we can work out something like that."

It does not appear likely.

Sanson, responding to the idea of rebates, said that most Serita homeowners know that the existence of unsold inventory is the biggest threat to their home values.

"We really feel the best way to preserve the values in the community is to sell the inventory quickly and at the highest competitive value that we can," she said.

The Nov. 3 auction is one of three by Kennedy Wilson in the Bay Area over a three-week period. On Sunday, the auctioneer sold 19 townhomes in the Devon Square development in San Pablo at prices ranging from $300,000 to $375,000, said the company's auction division president, Rhett Winchell.

Previous asking prices for the homes, which have 1,500 to 1,685 square feet of floor space, ranged from $420,900 to $504,900, Winchell said.

The homes that sold Sunday were among the last 21 still unsold at the 74-unit Devon Square.

On Nov. 10, Kennedy Wilson will conduct an auction for 45 condos in Benicia's Highlands development, previously priced up to $365,000. Minimum bids will start at $145,000.