A foreclosure auction for the super-rich

LOS ANGELES — The bargain hunters jockey gingerly for a spot to park their luxury sedans and SUVs along a winding road in the hills of Tarzana, Calif.

It's a woodsy neighborhood of large homes behind wrought-iron gates, and more than two dozen shoppers are here to bid for a piece of it.

Housing auctions are plentiful these days, including builders' closeouts that lure hundreds of bidders to hotel ballrooms and public sales of foreclosures on the courthouse steps.

But this time, the steel-nerved speed-talkers at Kennedy Wilson Auction Group are unloading a palatial 13,500-square-foot bank-owned spec home that had been listed for $9.775 million a year earlier.

"A one-off," says Andrew Levant of the Beverly Hills auction house, meaning just that single property is on the block. The minimum bid at the noon event: $2.1 million for the seven-bedroom, 11-bathroom property.

"The typical auction we do — whether for a lender, developer or investors — is 20 to 60 units in a condo or patio homes project, not necessarily multimillion-dollar homes," says Levant, who estimates the cost to build the three-level Tuscan-style villa topped $7.5 million.

With a four-week marketing campaign and a budget of $25,000, Levant conducted eight open houses, plus some private showings, leading up to the auction on a recent Saturday. He says more than 250 people viewed the property, dubbed the Brewster Estate.

"There apparently are still lots of people interested in purchasing mansion-size homes," says Levant, the firm's senior managing director of business development. "They just don't want to spend $10 million to $20 million for the privilege."

More than an hour before auction time, the 29 registered participants begin signing in. They bring family, friends and real-estate agents. They carry the requisite $25,000 cashier's checks. A uniformed security guard keeps a low profile in the background.

Each bidder gets a large yellow card with a number. Every entrant is outfitted with a blue wristband that looks more like a remnant from a hospital stay than an appropriate accessory for the crowd's winter version of California casual.

The only hint of their shrouded wealth is a fur-collared jacket here and a heavy ring there.

After passing a bubbling fountain in the entry courtyard, through the tall arched double French doors and into the foyer with its hand-painted ceiling, many attendees roam the house.

On the ground level they tour the kitchen with its two Sub-Zero refrigerators, two pantries, single and double sinks and two dishwashers. Downstairs, they view the home theater, wine cellar with tasting room and fitness center.

Upstairs, they examine the master suite with its wet bar and a glass-enclosed steam shower large enough to hold six adults.

Outside, they stroll the nearly 1 ½-acre grounds, taking in the tennis court, a koi pond with a waterfall and expansive views.

Some position themselves in the great room, which has a 36-foot ceiling open to the second floor and is topped by leaded-glass skylights. One extended family settles into the kitchen's circular breakfast area and chats around the large table.

The affair is catered, with strawberries, cookies, appetizers and coffee in cardboard cups. Rented furniture, rugs and knickknacks have been brought in.

The home was about 95 percent completed before it went into foreclosure, according to Steven Miller, a general contractor hired to prepare the property for sale.

On hand for the big event, he estimates a buyer would need to spend about $300,000 to finish the work, including the permitted infinity pool with spa and an unfinished underground room plumbed for a pool bathroom.

Miller enumerates the home's quality details: $250,000 worth of travertine floors, fine workmanship on the plaster arches leading from one room to the next, solid walnut floors, 38 French doors and five fireplaces. There's even an elevator and a 16-car subterranean parking garage.

Ten minutes before noon, the tension mounts. One participant speaks urgently on a cellphone to an absent client, demanding, "Where are you now?" Another discusses power of attorney with on-site personnel. The family in the kitchen grows restless.

Then the voice of auctioneer Dean Cullum breaks through the hubbub announcing the auction will start at 12:05.

He and Rhett Winchell, president of Kennedy Wilson Auction Group, wait by the oversized fireplace in the great room as attendees gather on the first level.

The family of Bidder 783 has staked out the couch and chairs along the back wall. Bidder 199 edges near a column and murmurs to her real-estate agent in French.

Half a dozen others with yellow bid cards arrange themselves on the second-floor overlook as if watching a play unfold.

Once again, Cullum's megaphone-like voice cuts through the room. "We will start in two minutes," he says. "We have one last-minute registration."

Finally, the countdown ends. "Good afternoon, ladies and gentlemen," Cullum says. "Today you have the unprecedented opportunity to set the market. You will tell us and the world what this house is worth."

It's a sign of the times that so few expensive properties have been sold in this area in the last two years that today's purchase price will help establish values for dozens of other high-end residences listed across the San Fernando Valley.

Among the highest recorded sales in Tarzana was a newly built, 9,000-square-foot house that closed in late 2008 at $5.1 million. A new 8,000-square-foot Mediterranean sold for $4.1 million in 2007.

The lack of comparable sales — and a desire to get the house off the books quickly — helped seal the lender's decision to put the Brewster Drive home on the auction block, Levant says.

As Cullum opens the bidding, the room falls silent. Bidders exchange glances for several seconds, waiting for someone else to start. Then the first card is raised. Cullum booms, "2.1," and the bidding takes off.

Early Bidder 199, helps drive the price up at a rapid clip, as do bidders on the second floor. "2.6, 2.7, 2.8., 2.9, 3 even," Cullum intones.

Bidder 340, receiving instructions via a cellphone held to her ear throughout the auction, raises her card: "3.1."

"3.2, 3.3," Cullum continues.

Bidder 783, seated on the couch near his wife, two sons, his brother and his real-estate agent, raises his card again: "3.4." Bidder 199 counters quickly: "3.5."

At $3.8 million from Bidder 783, the action halts. Once again, the room falls quiet as bidders and onlookers exchange glances.

To spur the auction forward, Cullum announces he will accept bids in increments of $50,000. The contest is on again: "3.85, 3.9, 3.95."

Bidder 783 glances at his wife with a furrowed brow. She nods. "4 even."

After several seconds of silence, Cullum says he will accept bids in $25,000 increments. He calls for $4.025 million three times before announcing, "Going ... sold."

Applause. The 783 entourage is whisked away to fill out documents.

The $4 million price is the largest single home sale in Tarzana last year and ranks among the top dozen in 2009 for the San Fernando Valley.

Agent Ritchie Summers of Coldwell Banker, Sherman Oaks, said he wasn't surprised.

"There will be more of these ahead," Summers said. "You get real buyers, motivated buyers, who have cash available to buy without having to go through the loan process."

Among bidders registered and prequalified for the auction, half told Kennedy Wilson they would make an all-cash purchase. The rest planned to finance 50 to 65 percent of the purchase price.

Sanjiv Chopra, a businessman in the apparel industry, and his wife, Renu, who has a software company, have up to 45 days to close escrow. They plan to make the property their home.

The Chatsworth family looked at the house several times before the sale and liked how comfortable they felt in it.

"Although it's big, it's very warm," Sanjiv Chopra says.

"Millions of dollars were spent in a few minutes," says Chopra, a first-timer in the home auction game. "I've never spent that much money this fast."

Down the street, now nearly deserted, a neighbor who had opened his gates to host a yard sale is experiencing a lull, too. Clearly, the action is over on Brewster Drive.