life cycle of a distressed property webinar
TRANSCRIPT
WHERE REAL ESTATE IS MOVINGWHERE REAL ESTATE IS MOVING™
DISTRESSED PROPERTY
LIFE CYCLEKNOWING WHAT YOUR INVESTMENT OPPORTUNITIES ARE
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PRESENTERS
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Michael JanstaAuction.com
Sr. Vice President
Rick ShargaAuction.com
Executive Vice President
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WHAT WE’LL BE DISCUSSING TODAY
• Who is Auction.com
» What is Our Role in Selling Foreclosures and REO Properties
• What is Foreclosure
» Distressed Property Life Cycle
» How Does a Property Get into Foreclosure
• Buying Opportunities
» Pre-Foreclosure, Foreclosure, Post-Foreclosure (REO)
• Foreclosure Real Estate Trends
» Trends & 2016 Outlook
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AUCTION.COM - PROFILE
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Auction.com is the nation’s leading live and online real
estate marketplace
Powerful combination of real estate auction experience and
marketplace technology
Privately held company with over 1000 employees throughout the U.S.
Over $34 billion of real estate sold since 2007
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ROLE AS AUCTIONEER
• Auction.com brings buyers and sellers together on its online auction platform
to make buying and selling real estate efficient, transparent, and easy.
• Auction.com is auctioneer of real estate assets (both live and online) whose
clients include major banks, financial institutions, private investment funds and
governmental agencies throughout the country.
• Auction.com is licensed as a Real Estate Broker in all 50 states and the
District of Columbia.
• Auction.com does not represent buyers and is not a Realtor or a member of
the Multiple Listing Service in any state.
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WHERE REAL ESTATE IS MOVINGWHERE REAL ESTATE IS MOVING™
WHAT IS FORECLOSURE
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DISTRESSED PROPERTY LIFECYCLE
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Pre Foreclosure
- Notice of Default
- Short Sale
Foreclosure
- Foreclosure date posted
- Live Auction held
- If property doesn’t sell to third party, it is
returned to the bank
Post Foreclosure
- Pre-Conveyance
- Bank-Owned (REO) Property Auction
- Non Bank-Owned (REO) Property Auction
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Quick Definition:
• Foreclosure is a process that allows a lender (e.g. a bank or financial institution) to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property.
• The foreclosure process begins when a borrower/owner defaults on loan payments and the lender files a public default notice, typically called a Notice of Default (NOD), or a Lis Pendens.
Steps taken to save the property from foreclosure:
• After an NOD or Lis Pendens is filed, the property is now in Pre-Foreclosure status
• At this point the homeowner has the opportunity to avoid foreclosure by selling the home (traditional or short sale), cash for keys, loan modification, a deed in lieu of foreclosure, or filing bankruptcy to buy more time
WHAT IS FORECLOSURE?
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Process Varies State to State
• In some states, the lender has to file a lawsuit to foreclose (judicial foreclosure state), while in others, the lender can foreclose without going to court (non-judicial foreclosure state)
Does the homeowner receive notification?
• Typically a Notice of Default (NOD), serves as notification to the borrower that the property is facing foreclosure.
• The homeowner receives a Notice of Sale, which is posted on the property, recorded at the County Recorder’s Office in the county where the property is located and published in local newspapers.
WHAT HAPPENS WHEN YOU GO INTO FORECLOSURE?
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WHERE REAL ESTATE IS MOVINGWHERE REAL ESTATE IS MOVING™
PRE - FORECLOSURE PROPERTIES
NOT SOLD THROUGH AUCTION.COM
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BUYING PROPERTIES IN PRE-FORECLOSURE
• Traditional Sale – if a homeowner has equity, they can sell their home to avoid the foreclosure process. In addition, they may be willing to sell at a discount.
• Short Sale – if a homeowner owes more on their mortgage than the home is worth and they want to sell it to avoid foreclosure, they would need to do a short sale. This means they would sell for a price that is “short” of what they owe on the property. In this case, the mortgage holder would have to agree to the short sale.
• Auction.com does not currently have much of a presence in the Pre-Foreclosure market
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WHERE REAL ESTATE IS MOVINGWHERE REAL ESTATE IS MOVING™
FORECLOSURE PROPERTIES
SOLD THROUGH AUCTION.COM
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TYPES OF RESIDENTIAL PROPERTIES
Auction.com conducts two types of auctions
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The properties for sale at these single-day
public events are called foreclosure homes, as
they are currently in the foreclosure process.
These events are typically live, in-person
events.
Live Foreclosure Sales
Live Foreclosure
Sales
Online Auctions
Bank-Owned
Properties
Non-Bank-Owned
Properties
Our weekly online auctions feature both
Bank-Owned (REO) properties and
Non-Bank-Owned properties. These auctions
are multi-day and you can buy from the comfort
of your own home.
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WHAT IS FORECLOSURE?
A Foreclosure Sale is the final step in the foreclosure process.
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The properties for sale at these public events are called foreclosures, as they are still going through the foreclosure process and have not yet been foreclosed upon.
If a property has gone through the foreclosure auction but was not sold to a third party, it is then sold back to the bank and becomes a bank-owned (also known as Real Estate Owned or REO) property.
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Live Foreclosure Sales
Live Foreclosure
Sales
Online Auctions
Bank-Owned
Properties
Non-Bank-Owned
Properties
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BUYING FORECLOSURE PROPERTIES – HIGH RISK & HIGH REWARD
Benefits:
• Properties can sell below market value
» Can get a great deal; sometimes up to 30% below market value!
• Possible investment opportunities
» Start building your real estate portfolio
» Potential properties to “flip”
Risks:
• Potential Hidden Liens
» Make sure you do your homework
• Possible Eviction Process
• Buying without benefit of interior inspection
If you do your due diligence and research, you can find a great property at the right price with the potential to make top dollar on your return on investment!
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BUYING FORECLOSURE PROPERTIES – NON-JUDICIAL VS. JUDICIAL PROCESS
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• Non-Judicial sales are conducted by a third party sales agent. Typically this is appointed by the seller/lender.
• Auction.com acts as a third party agent or auctioneer.
• Auctions may be held in various specified locations such as the courthouse, a ballroom, etc.
Non-Judicial Sales
• Judicial Foreclosure Sales are conducted by the courts or court appointed official.
• Typically these sales are held at the courthouse- either at the steps or in a designated room
Judicial Sales
VS.
Auction.com has Non-judicial and Judicial properties featured on the website along with photos, sale details, foreclosure property reports and other helpful buyer information.
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WHAT IS AN REO PROPERTY?
An REO property (Real Estate Owned) is a property that sold to the lender at a foreclosure sale.
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• An REO property can either be owned by a bank (bank-owned) or a non-bank institution (non-bank-owned).
• Auction.com has both bank-owned and non-bank-owned properties for sale in our weekly online auctions. Properties are sold “as-is, where-is” with no warranties of any sort
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Live Foreclosure Sales
Live Foreclosure
Sales
Online Auctions
Bank-Owned
Properties
Non-Bank-Owned
Properties
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BUYING REO PROPERTIES – KNOW WHAT YOU ARE GETTING
Benefits:
• Potential investment opportunities
» Properties sell below market value, sometimes up to 30%!
» Many properties are vacant and allow for interior inspection
» Potential to buy “income producing” properties, which are properties sold with tenants and leases already in place
Risks:
• Potential Hidden Liens – though the foreclosure wipes out many liens
» Make sure you do your homework
• Possible Eviction Process if the property is occupied
• Some properties do not allow interior access for inspection – due diligence is the key to risk mitigation
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TYPES OF REO PROPERTIES ON AUCTION.COM
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OccupiedVacant
• Institutional sellers motivated to move properties
• Properties sold exclusively on Auction.com
1 2 Newly Foreclosed3
• No longer occupied
• Open house dates on
Auction.com
• Financeable, in many
cases
• Broker co-op may be
available
• Pre-Auction Bids
available on selected
properties
• In differing stages of
eviction
• May require eviction
by buyer
• No interior
inspection
• Not financeable, in
most cases
• Broker co-op may
be available
• Pre-Auction Bids
available on
selected properties
• Posted just days after
foreclosure
• Likely occupied
• May require eviction
• Interior Inspection Reports
and Interior Access available
on select properties
• Not financeable, in most
cases
• Broker co-op may be
available
• On many properties, no
buyers premium is charged
• Pre-Auction Bids available on
selected properties
WHERE REAL ESTATE IS MOVINGWHERE REAL ESTATE IS MOVING™
FORECLOSURE REAL ESTATE TRENDS
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REO ACTIVITY INCREASING…
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…BUT FORECLOSURE STARTS TO DECLINE
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WHAT’S IN STORE FOR THE REMAINDER OF 2015 AND 2016
• 2015 sales volume will improve from 2014
» Existing home sales between 5.2-5.3 million units
» New home sales will approach 500,000
» Existing home prices likely to appreciate between 5-6%
• Foreclosure inventory will continue to decline
» Judicial foreclosure states should work through backlog by end of 2016
• Lack of credit will continue to hamper recovery
» Domestic and foreign investors continue to play a vital role
• 2016 should deliver the next step in the recovery
» More existing home inventory, slight uptick in new home stock, slowing home price
appreciation, entry of more Millennials into the market
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QUESTIONS?
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THANK YOU!
?
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AT YOUR SERVICE
Auction.com provides a wealth of information and services to support your real estate goals.
Whether you are a first time buyer or a seasoned investor, we provide the tools to help you maximize your investment opportunities.
Concierge:
If you are ready to invest or just want more insight into the auction process; Auction.com Concierge is here to provide the answers with educational seminars, webinars and personal assistance.
www.auction.com/concierge
Community:
Join our community, where buyers can get help, give feedback and interact with Auction.com pros and other members.
www.auction.com/community
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