Online Auctions Going Strong
Jim Case, a highly experienced real estate investor, thought there needed to be a better way to put buyers and sellers together, so he created FastHomeAuction.com to market REO properties.
The innovative approach has resulted in generating thousands of hits from foreign buyers.
During the real estate boom, Mr. Case recalls the incredible time he experienced buying and selling properties, sometimes well over 100 a year. It was not uncommon for him to buy a property in the morning and make money the same evening on the sale.
Later, he decided to expose more homes to the market through the creation of FastHomeAuction.com in 2005.
"The market was so good we didn't have to go with the first person that came along and wanted to pay our price," he remembers.
With the online auction platform, the Tampa, Fla.-based company built a database of investors throughout the country. A lot of California investors were investing in Florida for a while. Now they are taking their money and moving it to North Carolina and South Carolina.
"There always seems to be some area of the country that will do well," he said. "What's happened recently is that overseas investors seem to be coming in and becoming members on the site, due to the weak dollar and what we can get. Brits are signing up heavily in Florida and the Panhandle area. In Georgia and the Carolinas, along the Gulf. It's very appealing to them."
As a result of the subprime meltdown, the company is reaching out to help out asset managers. Mr. Case says the whole auction process takes about 14 days but the company can sell properties for asset managers in as little as seven days.
"We want to create the buzz, bring people in, and march them through the process."
A lot of websites go more the eBay route with premiums, he says. The whole idea is to charge a fee upfront and a backend transaction fee, which can result in a whopping $12,000-$13,000 in fees. FastHomeAuction.com charges a $100 flat fee. "That's it. There's no posting fee," said Mr. Case. "That's huge for asset managers."
The company sends e-mails to more than one million buyers and agents - anybody who wants to put a property on the site.
Some homes have been viewed 50 to 4,000 times. There tends to be a lot of cross-promotion with different real estate sites, too. The e-mails are a consistent reminder for those looking for properties in specific counties and states.
Asset managers are not trying to get top dollar at an auction in today's market, Mr. Case stresses.
Right now there is a huge amount of REO. The auction format can be great for a short sale. The real estate agent or broker becomes certified with the company and has the property listed. The starting price can be anything.
"The lower it is the more activity you get. Start somewhere with a real number that's low enough where you bring in interested parties."
The reality is setting in. Before, asset managers were reaching to get top dollar, he adds. "Now they are coming down, starting lower."
Quite often, the actual sale is done after the auction is over. Fifteen bids or offers come in and not one is acceptable. All of the people who were looking at a particular property call up the agent or broker. It is a good marketing tool to bring people to the site and bring people to the property.
"Twenty percent get sold on the site. Beyond that, 30%-40% are sold after the fact," he said.
People sitting at home in New York and New Jersey have purchased properties in Florida. Yes, folks from all over are bidding on homes across the country, not just local markets.
With ballroom auctions, the buyers tend to come from the local area, he said. With online, the buyers are in California and Britain.
For example, browsing through photos of homes in Florida. They have also noticed a substantial amount of traffic from potential buyers from outside the U.S., notably in Western Europe and the U.K., where the currency is strong enough against the dollar to make U.S. properties seem like a bargain.
As a particular trend, Mr. Chase is seeing buyers who are looking at the Sun Belt region of the country and offshore investing. Couples are looking for second homes in places like Florida and Colorado.
They buy and rent them out. Buyers come once a year and go home, he said.
Mr. Chase says lenders have tried putting properties online. "It never worked well. Now, here is a place to consolidate. These guys are so overwhelmed. Taking more phone calls does not help.
You go to a lender's site, and you can't get through to anybody. Here, you go to the site, see all the pictures, bid on the house. There is always the phone number of an agent. When you want to look at a property to see what it's worth, to get a feel for it, you can set up a time to view it. Having a bid doesn't mean you buy, it's just an offer."
Asset managers can make a little bit of money on a case-by-case basis, he added.
"Not off of one house. It's a numbers game. How much can you save? Holding on to REO properties doesn't do anybody any good. It's like selling a used car. There is so much property available. You have to make it look better than the home next door and sell it a bit cheaper that the one next door."
Buyers of the online auction properties tend to have more than one home - that investor/user.
The asset manager can see a quick turnaround and sell it to a first-time homebuyer or someone who is retired by fixing up the home and making improvements, like putting in granite countertops.
Without having to pay a premium, the bank lender or person who wants to sell the property will end up with more money in their pocket, said Mr. Case.
"The real estate agent gets a commission and the bank is happy to have a little more money."
(c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/