Speed is one of the keys to achieving the best result in an asset disposition, according to one asset management firm.
“In this market, each day that the property is not on the market is a lost day,” said Brent Taggart, vice president at Green River Capital, in an interview with this publication.
“The faster you can get the home on the market, the better off the client is,” he said.
Some players are using competition between vendors like Taggart’s company to compare what are considered “key performance indicators” such as the aforementioned in “champion challenges,” he said.
He said common key performance indicators factoring into results include selling time for properties, net proceeds of sales, whether properties sold for the amount the vendor said it could sell them for and—if there was a variance in that figure—how much of one was there?
If one does not value the property correctly at the beginning of the process, one is “always going to be lagging behind in everything else,” Taggart said.
“You should be able to liquidate that property in the best manner in a very good timeline and for the best executable price.”
While there are certain common parts of the asset disposition process market participants tend to like to size up, Taggart said the exact type and number of KPIs market participants’ use in challenges differ.
In addition, while challenges are common as a way for market participants to decide which vendors to cut when the number or distressed assets in the pipeline slows, or add when it is growing, they are not a given.
“We have clients where we have never seen a champion challenge and clients where we’ve been through a second or third,” he said.
When asked whether the champion challenges the company has been in reflect on any trend in the market as far as whether the flow of distressed assets is on a net basis decreasing or increasing, Taggart said there does not seem to be an overall trend in either direction. “It just depends on the client,” he said, noting that some have been adding while others have been subtracting.
In addition to the aforementioned factors that play into how well an asset disposition goes, borrower cooperation is another aspect of the process players in the distressed space see as central to achieving the best result possible, he said.
This may either be in terms of negotiations with borrowers for their cooperation in helping to maintain the house and show it to prospective buyers or to move out and give the keys for the subject property to those working on the sale of the property to handle these tasks.
The latter is “one of the things that our clients continually ask us for,” Taggart said, noting that common questions include how negotiations for this should be presented, averages for how much money is offered and accepted, how long it took to get in touch with the borrower and to get related agreements executed.
Answers can vary, he said. “It’s always changing and it’s hard to quantify that because it’s different in every area.”
He said his company usually recommends a baseline amount based on the value of the property or unpaid principal balance of the loan. This “gives the tenant of the property some sort of idea of what you’re willing to offer.
“You have to provide some sort of a baseline.”
