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Industry Insight: Streamlining the Foreclosure Process

Rick Sharga cropped

Rick Sharga became CMO of Ten-X in January, 2016, after spending two years with the company (then branded as Auction.com) as an Executive Vice President. Sharga, one of the country’s most frequently-quoted sources on real estate, mortgage, and foreclosure trends, served as EVP for Carrington Holding Company before joining Ten-X (then Auction.com) in 2013. Prior to Carrington, he served as SVP at RealtyTrac for a decade, during which time he won the Stevie Award for National Marketing Executive of the Year. 

Sharga sat down with DS News to discuss recent foreclosure trends and what the future of the foreclosure process looks like.

With the recent news of foreclosures increasing in October, what trends are you currently seeing when it comes to foreclosure metrics?

I think everyone needs to take a deep breath over the foreclosure numbers. There is really no evidence that we are going to see any meaningful increases in foreclosures right now. I think what we had was a one month blip and I suspect that by next month you will see the number settle down significantly.

October historically is a busy month for foreclosure activity. Lenders and servicers try to move things through the pipeline ahead of the traditional holiday foreclosure moratorium that takes place so there is always a bit of a bump. I think two things inflated the number this time. One is that we are coming off a very small base to begin with so any kind of increase make the percentage look bigger. The other is that we are getting to end of a cycle where a lot of really old loans that probably should have been foreclosed upon a few years ago are reaching the end of the foreclosure process, so we are likely to see some spikes month to month on particularly REO activity before this settles down. If you look beyond the backlog of old loans in a handful of states, there is virtually nothing entering the system as delinquent loans.

In moving these foreclosures through the pipeline, why has there been a shift in the length of time these properties are held onto from longer to shorter in the past few years?

I think there are a couple reasons for this shift. Predominately though I think it is a better way to mitigate loss for the servicers and the note holders. What I think we have found over the last couple of years is moving these properties more quickly actually ends up delivering a higher sales price and lower carrying costs for the servicers so they make out better. The investors that they are selling to are looking at a market where there is relatively limited inventory available so they are willing to jump at some of these properties as soon as they are made available. The truth is very few of the properties coming through the pipeline right now are appropriate properties for traditional owner occupants to buy. These are all really investor properties so the sooner you can get them in the hands of the investors the better for the servicer and the neighborhood because they can take what in a lot of cases are vacant properties and get them back into market condition.

Why are servicers choosing to use auctions as the method of choice for selling their foreclosed properties?

Using an auction gives a sense of date certainty. For example, the auction is going to be on Tuesday and that is when the property is going to be sold. The investors know that and they will make their bids accordingly. If you put the property out on the market in the more traditional sense, you are never sure when the property will sell. You also would get more interest from buyers who wouldn’t be getting an ideal property for themselves because they are not investors. I think the ability for an auction company to effectively target investors, to bring some certainty to the time the property will be on the market and get the best execution in price are the reason servicers use auctions. It is important to also emphasize the online aspect to auctions because doing auctions online exponentially expands the potential customer base. It turns it from a local market to a global market by marketing these properties online.

About Author: Kendall Baer

Kendall Baer is a Baylor University graduate with a degree in news editorial journalism and a minor in marketing. She is fluent in both English and Italian, and studied abroad in Florence, Italy. Apart from her work as a journalist, she has also managed professional associations such as Association of Corporate Counsel, Commercial Real Estate Women, American Immigration Lawyers Association, and Project Management Institute for Association Management Consultants in Houston, Texas. Born and raised in Texas, Baer now works as the online editor for DS News.
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