How auctions are affecting the liquidation of REO assets

There are many ways that REO agents can market their bank-owned properties. These include print advertisements and live auctions, online listing services, social media websites, and auction websites. It is beneficial to REO agents and banks to have many options to advertise when they are looking to liquidate their assets as quickly as possible. Despite the wide selection of options, there are still many properties that are still in a lenders possession. There are currently over one million properties in the United States that are in some stage of foreclosure, whether it is default, auction or bank owned. According to a foreclosure status distribution chart for the United States, provided by, about 45.3 % of active foreclosure homes get put up for auction, while 21.5% are bank owned, and 33.3% are pre-foreclosure. Of the three of these, auctions occur the most frequently. There are many benefits to the seller and to the buyer for real estate auctions. For sellers, this includes reducing long-term carrying costs including taxes and maintenance. There is competition among buyers and it ensures that an aggressive marketing program that increases interest and visibility. For buyers, they are reassured that sellers are committed to sell. Buyers can determine the purchase prices and they know that they are competing fairly and on the same terms as all other buyers. In an auction, sellers take advantage of the competitive nature of interested buyers to get them a good price for their asset. The sale is guaranteed to the highest bidder with no inspections or repair negotiation process which makes the transactions easier for the sellers. In most cases the buyer is able to purchase the asset below market price. Auctions are gaining popularity as a quick and efficient way of liquidating property therefore helping banks and lenders unload properties faster.

When I was active in real estate investing back in 2010-2012, I realized that the as a buyer it was a better deal for me to buy a foreclosure property at a traditional sale or a short sale property rather than buying a property in an auction. With an auction, you never know what are getting.

In 2012, I began noticing that some big time investors and fund managers started getting into the auction market and drove up the prices. I was in an auction in Sacramento where investors were paying market prices for these properties in auction. I think these big time investors have changed the buyers side market in these auctions. My observations were just in the Northern Cal area (bay area and suburbs). I haven’t been to a real estate auction for over 12 months now.