Auctioning Homes Locally and Across the Globe
Auctioning continues to get more sophisticated on the marketing side of the business.
Auction firms like Williams & Williams still work to target local markets in cities across the country where there are high amounts of foreclosures like Florida and Detroit to conduct front lawn auctions. But they also feel its important to deliver the global marketplace to every property the company is selling.
“That is why we set up the market for the home locally, because that is where the property is, but we have the channels open to the entire globe via online bidding, via simulcasts where they can see the bidding as well as of course, attending the bidding and being present,” said Dean Williams, chairman and CEO of Williams & Williams, based in Tulsa, Okla. “We want to create a paradigm shift in our belief that the real estate marketplace is more flowable. Sometimes the property is local and doesn’t move. The buyer is increasingly interested in moving from not just one state away but potentially from another country.”
Elsa Lewis, senior vice president, national sales director for REO, at Williams & Williams, said although the credit markets are tight, the company is seeing the property auctions and ballroom settings packed with people.
“We recently did a sale in Florida where we had 40 lots and 18 completed homes. We had to open up the room twice, and we sold a majority of the homes subject to the lenders’ approval,” said Ms. Lewis. “The people were lining up to get to these properties. There is a lot of interest out there. The public perception is one of opportunity.”
When it comes to making repairs on REO properties for auction, Ms. Lewis said it is important for the homes to meet city ordinances and inspections in certain locations where certain repairs are mandatory.
“Sometimes if the buyer perceives that you spent too much on the property, there is no opportunity for them to repair it, to put their own blood, sweat and tears in it. If it’s a good price, it’s a good deal. It really is about opportunity today,” she added.
More buyers are purchasing the foreclosed or bank owned properties at auctions because they can find even better discounts on home. “Overall, I think you sell it for the most part, as-is. Paint, new carpet - that is necessary. Make sure there are no structural issues.”
Some asset managers put in new kitchen cabinets and brand new appliances. But in today’s tumultuous market, many have an interesting way of disappearing four or five times before the house settles.
If servicers relist REO in the traditional marketplace, they can average out tremendous losses. To follow the traditional route of hiring a real estate agent, setting a speculative price, Mr. Williams said 1% of the homes are sold at a price they are listed for.
Some servicers put half of their properties in REO retail sales and the other half are tried in auctions. “Five years ago, I would not consider using an auctioning marketing plan. I have seen the light. In certain areas of the country, I would and wouldn’t use auctioning. You have to identify the true end user and who wants the property. Our company uses a four month projection, which cuts down on timeliness and carrying costs,” said Christopher West, president of Green River Capital, Salt Lake City.
Servicers are moving towards liquidating the property as soon as possible, because there is a lot of paper being held in larger portfolios. And restructuring loans is growing, because inventory is too large and too much capital is tied up.
The longer the property stays on the market means there is less financing available to sell the property. There is dramatic uncertainty for the holders of the paper as to what to do in these uncertain times, when it looks like there will be another year of additional trouble. “Passion and creativity is missing in REO disposition,” said Mr. Williams. “We need to see changes that matter, changes that make a difference.”
Many agree that auctioning really does provides an opportunity to deliver full market value, but the challenge is getting buyers to the auction.
Members of REOMAC said that some buyers fly across the country to compete with local bidders on properties. And at a lot of these auctions, there is a home to fit any price range whether it's for first time buyers looking for affordable housing or for investors who want to make a profit.
Robust marketing and advertising plans are put in place for the various styles of auctioning programs, whether its online auctions, live on-location sales, or ballroom auctions.
Often, these auction teams work with lenders in particular communities to provide housing. Banks tend to alternate auctioning with other disposition processes that work for them.
Auctioning is popular for portfolio lenders and can be used as an aid to sell properties for REO brokers and agents. In Rainbow City, Ala., Realtybid.com handles the entire process on-line. Michael Keracher, executive vice president and co-founder of RealtyBid.com, says basically anyone over 18 with a valid credit card can bid. Their properties are under $30,000 and include high-end homes as well. He agrees with Mr. Williams and says auctions are realistic in value with prices driven by individual markets.
In a business where time is the enemy, E-bay has helped get the word out for the acceptance of alternative disposition methods like auctioning, according to Mr. Keracher.
Annette Hamilton from Hudson and Marshall in Dallas says music and entertainment is often provided during the company’s ballroom auctions. Her company can sell a whopping 400 properties in a day within eight hours.