Builder DRHorton introduces "unauction"

In an attempt to move inventory quickly, builder DR Horton introduced its "un-auction" over the weekend at various new home developments in Southern California. So what's an un-auction? It's a way for the builder to (a) cut prices to what would otherwise likely be a reserve price; (b) save on costs paid to an auction company; and (c) control the process.

Apparently it worked well at the builder's Port Marluna at Seabridge condo project in the Southern California city of Oxnard. From the Ventura County Star:

Camping out to buy a home is unheard of in today's declining housing market. But price reductions of up to $320,000 drew eager buyers.

Ten of the 11 condos for sale sold Saturday for a combined estimate of $4.8 million, according to a price sheet. The remaining 1,720-square-foot home — a two-bedroom, two-bathroom unit — is priced at $549,990.

The price-slashing turned out to be a success for home builder D.R. Horton. The Fort Worth-based builder has been struggling, with reported losses of $128.8 million for its fiscal first quarter that ended Dec. 31. The push was a way to spur business for the company, which generated $1.71 billion in revenue last quarter, down from $2.8 billion from the same period the previous year.

Dubbed an "unauction sale," the company described it as "low auction level pricing" without the hassle. Homes went up for sale on a first-come, first-served basis, according to Chris Chambers, California regional president for D.R. Horton.

The company's goal was to reduce inventory at 23 of its communities throughout Southern California, including 11 homes at Port Marluna, Chambers said.

Buyers didn't come in droves, but at least eight were waiting Friday night, armed with $5,000 cashier's checks, food and warm clothes. One prospective buyer even had a portable propane heater...

Maria Rios, a Realtor with Century 21 New Vision, called these types of sales "bait" because they generate hype and attract people who think that they cannot afford a home.

She said it was an "excellent idea for developers," who are competing with foreclosure prices. However, Rios said she recognizes that the discounted luxury condos undercut values of other homes on the market. The traditional home seller is being left in the dust because they cannot compete with the developer, she said.