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Sold! REO Sellers Shift Practices to Attract More Buyers

real-estate-online-BHAltisource’s SVP of Real Estate Services, Min Alexander, recently spoke with DS News about the auction market’s performance in 2016 and what can be anticipated in the new year for changes in buyers, sellers, and REO auctions.

What trends are you currently seeing among sellers of REO properties?

For the states that we are in, typically for REO properties, most sellers are held to a particular strategy so they won't invest in any repairs unless there are code issues but that means that for an owner-occupant buyer they will have difficulties with some of the financing requirements for a conventional loan. By the time a property has made it through the foreclosure process, the property may have been abandoned for several months. There will be quite a bit of deferred maintenance on the property that is necessary for most of the conventional loans.

We are actually finding that most sellers are now adopting a more strategic marketability and habitability repair process and they want to take on the general discretionary repairs that would be required by a conventional loan. Most tend to be the baseline requirements that follow the FHA guidelines for what is required.

We encourage our clients to also adopt that plan because that expands the buyer pool of owner-occupants. The goal for us is also to create new homeownership opportunities for those owner-occupants and cash investors who are predominately in the market for distressed REO properties. We are finding though that we are catering to more and more owner-occupants now.

How do you determine the purchaser's classification?

We identify the purchaser as either cash or traditional financing through the closing process and so we use the cash as a proxy. This is mainly because for most owner-occupants the property will be their primary residence, and they will be able to qualify for the conventional loan applications and work through that process. Typically, most of our investors are very cash aligned because they won't qualify for the primary residence owner-occupants.

How would you assess the auction markets performance in 2016 and what can we expect in the new year?

Auctions are an interesting thing because they can be used for super high end properties or the distressed properties where there are no reserves or minimums. With distressed properties, it is more about trying to get rid of the very low value properties quickly. As the industry has picked up, though, more buyers are getting comfortable with online transactions particularly as online platforms have developed in the past five years.

Some of the primary benefits that auctions provide are, one, they are a sweet spot for most residential properties because you can get to the market price faster whether the seller accepts the highest bid or not because it is based on a reserve. There are no requirements to accept any bid and only bids that met the sellers reserve are put under contract, just like a typical sale. There are controls around the contract and auction process that most people when they first hear the word auction don’t think about. Instead, they think the auction process is looser. But with auctions, there are even more controls than a typical transaction.

Additionally, another benefit to auctions is the information you get. You can actually see who is tracking the property and who is bidding, and that really tells you the price discovery for the transaction much faster. This information empowers most sellers and the data and analytics that come out are key to assisting sellers of any type of property. I think we are going to see a lot more of that because most buyers are more comfortable with online transactions.

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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