When Dan Costello left his Potomac home to run an errand one recent Saturday morning, he didn't know that it would lead to the purchase of a new house.
But last weekend, Dan and his wife, Becky, found themselves crowded into an empty house in Centreville with dozens of other people, heatedly bidding for a three-bedroom house in the Potomac Crossing community in Leesburg.
In the end, the Costellos prevailed with a winning bid of $162,000 and joined 17 other people who purchased homes and land during five days of auctions held this month by the Grimm Co., a small McLean home builder.
The auctions turned out far better than the company's owners, Ann Grimm and her husband Gary Grimm, had dreamed: Hundreds of people turned out to watch and to bid, and 17 houses and one parcel of land were sold.
"I think it gives the real estate market an indication that there are buyers out there," said Ann Grimm, who heads the company's residential division.
The winning bidders were thrilled. Many were families who said they couldn't have otherwise afforded the houses they bought.
Chanda and Duli Agarwal successfully bid $234,000 for a Grimm Co. house in Potomac's Quince Orchard Estates, where houses once sold for as high as $365,000.
The Agarwals, like other successful bidders, also must pay a 5 percent "buyer's commission" to the auction house as well as all closing costs. They said they now live in a town house nearby with their two children, but had been unable to afford a larger house in the area at the prevailing prices.
Bharat Thakral bid $179,000 for a four-bedroom house in Potomac Crossing, where neighbors said houses once sold as high at $270,000. "That's the reason I came here, to make a good deal," Thakral said, "and that's what I got, a good deal."
But homeowners in the Grimm Co. subdivisions where the auctions took place were shocked and angered when they saw what they thought had been healthy property values tumble to levels tens of thousands of dollars less than they had paid.
"It hurts... ," said Jim Avramis, who owns a Grimm Co. house in the financially troubled Potomac Crossing subdivision. Avramis paid "in the 230s" for his house two years ago.
Residents of Potomac Crossing, Leesburg's first planned community, are already angry with the Grimm Co. for what they call the firm's failure to complete promised amenities, such as a swimming pool.
Most of Potomac Crossing, which ran into financial trouble earlier this year, was taken over in May by its lender, United Federal Savings Bank. However, United Federal has since been taken over by the Resolution Trust Corp. (RTC), the federal agency that is disposing of failed thrifts. The RTC has not decided whether to finish the one-third completed development. The properties that were auctioned by Grimm were not involved in the takeover.
"It's not going very well, at least according to the initial plan," Avramis said.
It's too soon to tell whether auctions will catch on with other builders. Some builders have expressed dismay at the idea of selling houses by putting them on the trading block and have said they don't want to upset neighboring homeowners, who paid full prices.
At least five real estate auction companies have popped up in the Washington area in the last year, but few properties had actually sold at auction until the Grimm Co. venture.
The Costellos said they bought their house as an investment: They will rent it for several years and wait out the current market downturn.
"Hopefully, the market will turn around in three to five years and we can sell it for a little bit of a gain," Dan Costello said.