Real Estate Marketing & Beyond
Historically, the REO auction market has been associated with investment buyers and more recently with intuitional buyers. Today, the auction market has opened up to consumer buyers and real estate agents. Steve Udelson, President of Online Real Estate at Altisource, shares this insight:
"REO Auctions are largely a result of the housing crisis, when REO inventory dramatically increased. The timing of the crisis corresponded with the rise in digital services and provided a significant opportunity for sellers looking to efficiently liquidate REO properties. Online REO auction platforms opened access directly from the source and made it easier for investors and consumers to transact. To note, a common misconception regarding the REO transaction process is that prospective buyers have to choose between using agents or auction platforms; however, many online auction platforms are realtor-friendly and complement the online auction offering."
Altisource Portfolio Solutions S.A., a leading provider of real estate, mortgage, and technology services, polled 100 mortgage-servicing professionals in attendance at the recent Five Star Conference and Expo in Dallas, the nation’s largest gathering of mortgage servicing professionals. The poll finds that participants are optimistic that continued low interest rates will encourage home buying (44 percent) and new financing options from lenders will broaden the buyer pool (39 percent).
New poll data finds that the REO market has evolved to attract increasing consumer homebuyers. Key factors include:
This evolution is really interesting in the context of affordability issues across the country and a maturing REO market coming together to boost home ownership.
The all-cash model that many associate with the REO market and auctions is a misconception that should be corrected. Today, auction platforms accept traditional and rehab financing as a purchase contingency.
The survey indicates that respondents believe offering more financing options to homebuyers for auction properties (38 percent) will be a factor in attracting a more consumer-based audience. Followed by over a third of respondents (34 percent) who say education about the auction market and the use of real estate agents to promote auction properties (34 percent) will be needed to attract consumer interest in purchasing REO homes. Furthermore, 28 percent of respondents view having access to more robust market data and insights as the most important aspect to make the greatest impact in the REO market.
“The bank-owned real estate sector was largely untapped by individual home buyers until recently,” said John A. Vella, chief revenue officer of Altisource. “Today, individual buyers can benefit from smart financing options like rehab financing, otherwise known as a FHA 203(k) loan, which bundles the home purchase price and renovation costs into a single mortgage. This is a huge step in the right direction because it can help buyers purchase affordable properties from the REO market, especially at a time when inventory is low and housing prices are continuing to climb.”
Today auction platforms accept traditional and rehab financing as a purchase contingency. According to Udelson: "After the housing crisis there was a period of unprecedented high volume in the REO space – and institutional buyers embraced the market opportunity. What we’re now seeing is a normalizing of inventory levels and REO properties will continue to be a solid opportunity in the future." He followed up by adding: "The FHA 203(k) financing feature allows buyers to make bids contingent on rehab financing. This allows buyers to finance both the purchase and renovation of a property with a single mortgage, increasing the opportunity for traditional buyers to enter and participate in the market of distressed properties. It’s important to note, terms and conditions of a property are usually set beforehand and buyers should get pre-approved for a loan before making an offer or bid on a property. To help with planning, some auction sites like Hubzu have preview pages that display pre-auction listings, which allows buyers time to research properties of interest and prepare bidding and inspection strategies before they come to market. This is a huge step in the right direction because it can help buyers purchase affordable properties from the REO market, especially at a time when inventory is low and housing prices are continuing to climb.”
What's clear is that the residential real estate market continues to evolve. More financing flexibility for individual buyers at foreclosure auctions is a move towards rebalancing the sellers' market to better favor buyers at a time this is needed. Still, this is an option that many buyers are not yet aware of and traditionally most end buyers are leery about taking up purchasing options outside of the traditional model. Real estate agents will do well to help educate buyers of this and other optional purchase methods.
Additional information is available at altisource.com.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.
