Since 2016, foreclosure sales have generated $1.2 billion in surplus funds for distressed homeowners—that and related intel is included in a 2021 Seller Strategy Report from online auction marketplace Auction.com. According to Auction, using an analysis of more than 70,000 properties brought to foreclosure auction in Q1-4 2020, the report identifies distressed disposition strategies that yield better outcomes for mortgage servicers, distressed homeowners, and underserved neighborhoods.
“We want mortgage servicers to be equipped with the tools they need to most effectively and compassionately work with distressed homeowners, particularly those who have been impacted by the pandemic,” said Jason Allnutt, Auction.com CEO. “This will help to achieve better disposition outcomes—not just for the servicer but also for the distressed homeowner and the surrounding neighborhood.”
Auction's surplus funds analysis found that third-party foreclosure auction sales not only yield the highest price execution relative to foreclosure credit bid—17 percentage points higher than price execution for traditional REO sales—but also are increasingly generating surplus funds above total debt owed to the foreclosing lender.
After paying off junior lien holders, any excess surplus funds go back to the distressed homeowner.
More than 40% of all foreclosure sales in 2019 and 2020 generated surplus funds, according to data from Auction's platform. That is more than twice the percentage of sales with surplus funds between 2012 and 2015. More than $1.2 billion in surplus funds have been generated by third-party foreclosure sales on the Auction.com platform in the last five years.
“Even among properties with no perceived equity—those with a specified credit bid at foreclosure—16% ended up becoming full payoffs, demonstrating the power of a transparent auction marketplace to uncover hidden equity for distressed homeowners,” said Ali Haralson, Auction.com President.Online auction offers for short sales and other pre-foreclosure sales outperform MLS offers more than half the time, by an average of more than $30,000, or 18 percent.
The report revealed that online auctions reduce REO holding times by 52% or 139 days. It showed 71% of third-party foreclosure sales that are resold are owner-occupied within two years compared to only 49% of traditional REO sales.
The full report is available on Auction.com.