Lenders don't want to talk about their bank-owned or REO products because in most cases an REO means that they invested in a bad borrower. In all cases the likely result is that they take a loss on that investment, regardless of the circumstances that led to foreclosure. The bad news is that foreclosures are expected to be on the rise as interest rates creep up and refinance options shrink.
Enter Bank Auction Realty (BAR), a real estate auction company. Bank Auction Realty launched its REO sales division to provide services for the disposition of foreclosed property. The program is described by BAR as "Turnkey," including all management, marketing and brokerage, from security and preservation through to sale, and only on a 75-day time line from assignment to closing." Turning a non-liquid asset into cash is a very time-sensitive thing, and is a natural fit for lenders to come to us. We sell REO properties on a 45-day cycle."
Once BAR gets properties assigned for disposal, they are sent to the auction scheduling team. Typically, BAR will holds live auctions either thru ballroom style setting or on-site. When the scheduling department gets the list of REOs, that same list goes to the property preservation and maintenance department If the property is unoccupied, we will send someone out to put on one of our lock boxes. If the property is occupied we go back to the lender to see if they want us to offer cash for keys, which is compensation for the occupant to leave, clean it and be out on a certain date. We will also advise the lender of any serious maintenance issues that may exist.
Our scheduling and Maintenance is on going, the closing department at BAR also receives the REO list to go back to the lender to see if they have a title company that they prefer so BAR can assign one if the lender doesn't have an existing relationship. BAR calls the title company upfront to get a preliminary title commitment so any problems can be resolved before the sale. In the end, all sales are subject to the approval of the seller. If the seller does not approve, BAR pays for the title.
The marketing department is also alerted about REO properties to be sold, to begin telling people about the eventual auction. BAR prepares signs, placards, postcards, etc. After the property is re-keyed, the field services department scouts the property and places the signs and other forms of advertisement. In addition, the field services manager interviews homeowners in the neighborhood to alert them about what BAR is doing and enlist them to monitor the property.
At the same time, the customer service department fields calls from realtors and potential buyers to see who is interested. One open house is held before the sale and one on the day of the sale. As foreclosure inventories continued to increase monthly, the lender needed a new way to manage its existing REOs, reduce costs and avoid any future expenses.
In the end, BAR will help this lender realize significant savings such as reduced average marketing time to 44 days, and reduced closing time to 23 days. The lender's average holding time has been reduced from nine months to 120 days, resulting in a significant savings in REO maintenance and marketing for sale. This service will include complete asset management services from initial listing and Cash-for-Keys negotiations and evictions, through property preservation and management from the sale to closing. On average BAR will sells 50 properties a month and expects that number to increase. We have a seller acceptance rate of 94%. Unlike the traditional REO approach, which is more of a list-and-wait strategy, we bring a sense of urgency. Our clients tell us that what we do is unique because we usually sell over the average investor's threshold.
|
