LPS Enters Auction World
Jacksonville, FL-Chad Neel, president of LPS Asset Management and Field Services here, has always been a believer in the auction model for the disposition of real estate. While a lot of people think it should only be used for the old, tired or ugly-looking properties, Mr. Neel says it's a good model in every economy for all types of properties.
"It's a necessary tool in your toolkit," he told MSN. "We've always believed in the methodology. We've known for well over a year we were going to move in this direction."
So, it makes sense that Lender Processing Services has acquired Rising Tide Auctions to provide property auction solutions to help servicers minimize REO timelines and reduce costs.
LPS looked for an auction firm that would blend well with the company. Evan Gladstone, the former executive managing director of Rising Tide Auctions, is now managing director of LPS Auction Solutions.
"Evan has deep experience and so does the team of people they brought with them. We worked with RTA prior to the acquisition and found them to execute very well. We loved their service delivery and their ability to drive good auction results," said Mr. Neel.
As a result of the acquisition, real estate buyers and investors will have the ability to purchase individual or multiple bank-owned properties directly from LPS.
According to Mr. Gladstone, RTA seized the opportunity to become part of the most "prominent default servicer in the country."
"We felt our service platform meshed very well with LPS," said Mr. Gladstone. "We're ready and able to scale up the auction business with LPS over the next few months to provide this additional expertise for the total service package."
Mortgage servicers have long relied on a wide range of default-related solutions from LPS, including national field services, full-service asset management, title and closing services, as well as bankruptcy and foreclosure management. With the addition of property auction services through LPS, servicers now have more REO management options from a single provider.
Servicers working the new auction company will benefit from its ability to manage all aspects of the auction process from beginning to end, including data collection, property due diligence, open house showings and the auction event.
LPS said its technology and reporting capabilities play a critical role in driving efficiency throughout the auction process and in keeping participants well informed. Web-based technology is used to communicate property details to potential buyers, enable the initiation of pre-emptive sales and allow simultaneous online bidding. Reporting functionality keeps servicers informed by providing access to sales metrics, auction day selling data and post-auction escrow information.
"One of the things LPS acquired through this acquisition was a very robust technology platform," adds Mr. Neel. "We have the technology application, the Web presence, the backend database that's highly scalable to manage."
The approach is to tailor the auction model to meet the needs of each client. There will be large ballroom auctions, smaller evening events, to online spot bidding, and active online auctions, based on the asset pool. The key is to get the right buyers to the event.
"With access to a powerful array of promotional channels and our unique understanding of local market conditions, we can quickly adjust our marketing strategy for each individual auction," said Mr. Neel.
"This helps ensure that we're attracting the maximum number of potential buyers and investors to each auction event."
Having a variety of property values is important, points out Mr. Gladstone. If all the auction consists of is extremely aged and highly distressed inventory, it doesn't work as well as having a combination of the "good, bad and ugly." The good houses will always hold their value, he said.
"We encourage our sellers and clients to look at contributing a variety of good houses because we know that will generate interest from homebuyers, first-time homebuyers and so forth. Average REOs certainly can be moved, and then the 'uglies' go to investors. The whole event becomes that much more successful because of the variety of properties that are in it," said the managing director.
The $8,000 tax credit has been a draw, Mr. Gladstone adds. "My personal experience in the auction industry is three-decades long. From past cycles and now looking at today's market, I think the perception in the marketplace is that in many markets around the country, values are at bottom or nearing bottom. That tends to get more buyers in play and certainly first time buyers in play with the tax credit."
LPS is marketing towards this key group of buyers. "There are always investors that will come and take the hard-to-sell assets. They are purely price driven whereas your first-time buyer wants to find a house to live in. They may have been looking for a while or they may be new to the market. If we can deliver those properties to those buyers, I think we will have a winning equation and a lot of business here."
The market is at historic low rates, he added. In terms of buyers qualifying, the standards are higher than they have been in this whole decade, which is a limiting factor. "We will certainly carry forward with LPS to have sufficient lenders at the auction with a variety of attractive programs from FHA and conventional. We want to give the auction customer, the buyers that come in, enough information to get themselves properly qualified to obtain financing. Buyers just need to go through a little bit more qualifying to be able to obtain it."
Sellers are encouraged to attend the event. "There is nothing more compelling to the seller than to see robust bidding on assets, to see bidding wars between three and four bidders drive the price up, and to really get a flavor for who is in the auction room."