Auction Firm Sees Growth in Distressed Realty Sales

An auctioneer here realized about four years ago that the mortgage banking industry has the most to lose in what he calls the "real estate value proposition" if defaults and foreclosures get out of hand.

So Dean Williams began recruiting mortgage bankers as clients for his auction firm that he started in 1986 with his father who already was a successful auctioneer of ranches and pure-breed cattle.

To get a grip on the real estate finance industry, the president and chief executive of Williams & Williams joined the Mortgage Bankers Association. He got his certification as a mortgage banker and completed the future leaders program, which he called "extremely rewarding."

Last month, his nationwide auction company sold 1,100 homes for institutional clients, mortgage banks and investment firms. The foreclosed properties, or real estate-owned, are marketed and sold in 35 days. Closings generally take another 26 days.

Mr. Williams wants the mortgage banking industry to view auctions as a way to reduce the hassle, costs and holding time of selling residential properties and REO. And more importantly, he wants the industry to view auctions as a way to create liquidity in real estate markets - even in markets that become stagnant with few sales transactions and large inventories.

Mr. Williams entered the auction business right out of Georgetown University Law School 20 years ago. He got married the same year in Jamaica and now considers the island his favorite vacation spot. "We love Jamaica. We love the food, the atmosphere, the independence of the whole island," he said in the interview.

The auctioneer likes scuba diving and skydiving, not golf. He took up boxing as a fitness regime 12 years ago and became friends with Cecil Pettigrew, a retired professional boxer.

"Cecil is a fascinating guy," who has became a tremendous leader for inner-city children in Tulsa. "I saw the difference he was making just on his own." So Mr. Williams helped his friend create the Cecil Pettigrew Boxing Foundation to cover the costs of his gym and his work with kids.

With 20 years of real estate experience under his belt, Mr. Williams believes the current slowdown in the housing market should be manageable so long as the economy remains healthy with good job and wage growth.

"I would not expect defaults and foreclosures to be unacceptable from a mortgage banking prospective," he said.

However, he is concerned about the amount of leverage homeowners are carrying and the amount of homeowners equity that is attributed to house price appreciation.

"I question the soundness of property appreciation and I think a lot of it is property illiquidity - not because of fundamentals," he said.

While auctions create a "spot market" for real estate, the traditional real estate real brokerage process encourages owners to set a sales price and hold out for the right buyer.

"Every seller wants to get more" and it is little bit like a Ponzi scheme.

With rising house prices, the mortgage industry responded with innovative products - interest only and payment-option ARMs - that allows buyers to qualify for larger mortgages with short-term affordable monthly payments.

"I am not convinced that it is anything but an inflationary and potentially speculative add-in to real estate price fundamentals," Mr. Williams said. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com