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Foreign Investors Take Advantage of Online REO Auctions

The current foreclosure crisis combined with a weaker dollar compared to some of the major world currencies appears to be the drive behind an unprecedented number of online property auctions by foreign investors.

FastHomeAuction.com, a real estate auction website for REO agents, asset managers and sellers that allows buyers to search, bid and acquire REO properties at no cost, reported "a record number of foreign investors" visited its website in December. Among reasons for the surge, it highlights "search of real estate bargains, especially in the Sun Belt area of the United States" and the weakness of the dollar against foreign currencies as "a key contributor to the trend."

FastHomeAuction.com recently launched an online property auction website. According to the auctioneer it works "to the advantage of lenders anxious to sell their REO inventories of defaulted properties." Company CEO Jim Case sees the new trend as "a huge opportunity" for REO asset managers.

"We're seeing investors from all over, especially France, Germany and Belgium, as well as from the United Kingdom, Canada and Australia," he said. "They are eager to buy U.S. properties now, while their own currencies are strong against our dollar."

For example, the British pound is currently trading at about two-to-one against the dollar, he said, which highly motivates private investors and investment groups.

"There will be more millionaires coming out of this downswing than ever before," Mr. Case said. "Foreign investors often use a group strategy when they acquire properties, pooling buying power and distributing risk." They buy multiple properties in targeted areas, hire local property managers to oversee them and keep them rented. According to Mr. Case, Canadian investors are very active right now, "especially in the Sun Belt areas like Florida," while businesspeople from the U.K. who "are very familiar with Florida as a vacation spot" try not to miss out on possible online bargains, "they are quick to seize the opportunity to purchase."

The trend is expected to equally benefit lenders, loan servicers and loss mitigation professionals who need to dispose of REO. Auctions also are becoming increasingly popular among investors and future homeowners.

"Asset managers are getting slammed right now by the sheer volume of properties they must sell," Mr. Case said.

To attract REO listings, according to FastHomeAuction.com, the best strategy is to avoid marketing mistakes and negative experiences buyers and sellers have seen in the past in online auctions, including paying premiums to buy properties online, requesting investors to pay for research data and information about areas and property values, or finding local property managers. "So we're adding content to make those available at minimal or no cost," he explained.

FastHomeAuction.com recognizes that it is not so easy to sell REO for asset managers interested in selling property in Sun Belt areas like Florida, which more and more people are trading for "financially more hospitable climes." REO sales in these areas are competing for buyers so a drop in demand is keeping prices low.

Another downside to the situation is a tendency to increase insurance rates due to the hurricanes of recent years and higher property taxes. So there are "additional properties cluttering up the inventory" for REO sellers in these areas.

Meanwhile buyers are moving "half way" to places like Georgia, the Carolinas and Tennessee, Mr. Case observed, because these neighboring states have much more attractive scenarios for these sellers, who "still don't have to put up with harsh winters."

He believes foreign investors may be the key REO market driver. "We send out over a million opt-in e-mails to investors every week and I can tell you that the demand for property listings is getting stronger. The dollar's weakness right now may work out to be a blessing."

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