Auctions Touted as Way to Reduce Neighborhood Blight
New York-Default servicers have an opportunity to change the current real estate marketplace that is seeing a rise in REO and blighted homes as a result of foreclosures.
If borrowers are facing default, and if they are willing to participate, the servicer should help them get the properties sold pre-foreclosure, according to Dean Williams, chairman and chief executive of the auction firm Williams & Williams, Tulsa, Okla. He said the company will have a big presence at the MBA servicing conference with its senior vice president of national sales and REO, Elsa Lewis, speaking on one of the panels.
“This would benefit the investor, who they ultimately serve,” Mr. Williams told MSN. “In the end, everybody is going to benefit if these homes are treated immediately via auction. It would change the market to less blight to practically no blight.”
Lenders and servicers have normally thought of auctioning as an alternative tool, one that is used here and there on a selected basis, to liquidate real estate-owned assets. Traditionally, their approach to auction companies is as vendors. “Servicers have thought of auctions in this way: 'I’ll use it when I give up on everything else.’ Maybe that was reflective of how they function. A liquidation strategy, the way it fits. When auction is being used as a liquidation strategy vs. a retail strategy, then it gets liquidation results. We’re focused on using our auctions to be retail, hence, the number of bidders we have per auction.”
It is in REO management where there is systemic flow of vacant real estate, whether anybody likes it or not, added Mr. Williams. “Some don’t like to talk about REO, they like to talk about keeping people in their homes and all those good things. But then here it is, and the property must be managed. REO is systematic to people in servicing. Default servicing is really one of the few places where there can be a change for the better in how to avoid blight. You do everything in your power to let properties not stand indefinitely vacant.”
Through ASAP, the assisted sales auction program, at Williams & Williams, there is a role for servicers to play in leading the change to move homes prior to foreclosure.
“Default servicing can eliminate foreclosure. Servicers keep people in their houses if they can and want to stay and make some payments. Some cannot or will not stay. In those instances, everyone says foreclosure is a waste but no one is doing anything about it,” he said. “And I think the only purpose left after foreclosure is to get the real estate sold. Why don’t we do that before? ASAP is of course designed to do that. If you will assist the borrower with recognizing if and when it is appropriate to sell the home, they agree, why don’t we help them do it in a way that’s time-certain and good for the investor?”
Getting to borrowers and working with them prior to foreclosure is key to going forward. “I do believe out of this disaster can come tremendous good positive changes that are long lasting.”
Foreclosure as a practice could be practically eliminated, not just through loan modification strategies, which is what everyone is doing, he said, but it would also help people get their real estate sold. “Borrowers want this. They want to be responsible.” The housing market is at a turning point. What the market needs to see is more and more properties that are selling, rather than sitting and waiting. If things don’t change soon, if properties are not sold at auction pre- and post-foreclosure, the industry is going to end up with even more blight.