life cycle of a distressed property webinar

WHERE REAL ESTATE IS MOVINGWHERE REAL ESTATE IS MOVING™

DISTRESSED PROPERTY

LIFE CYCLEKNOWING WHAT YOUR INVESTMENT OPPORTUNITIES ARE

© 2015 Auction.com, LLC CONFIDENTIAL & PROPRIETARY – DO NOT FORWARD OR PUBLISH

© Auction.com | Confidential & Proprietary

PRESENTERS

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Michael JanstaAuction.com

Sr. Vice President

Rick ShargaAuction.com

Executive Vice President


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


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



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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WHAT IS FORECLOSURE



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


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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PRE - FORECLOSURE PROPERTIES

NOT SOLD THROUGH AUCTION.COM



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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FORECLOSURE PROPERTIES

SOLD THROUGH AUCTION.COM



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.


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.



Live Foreclosure

Sales

Online Auctions

Bank-Owned

Properties

Non-Bank-Owned

Properties


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.


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



Live Foreclosure

Sales

Online Auctions

Bank-Owned

Properties

Non-Bank-Owned

Properties


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


FORECLOSURE REAL ESTATE TRENDS



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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http://www.auction.com/concierge

http://www.auction.com/community

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This document, including all attachments, addenda, and exhibits provided in any form (together the “Confidential Documents”), is being furnished to the recipient (the “Recipient”) solely for the Recipient’s own limited use in considering whether to bid on or buy property via Auction.com (the “Company”). They are for informational purposes only and are not for the purpose of providing legal advice.

The Company has prepared these Confidential Documents, which contain brief, selected information pertaining to the business and affairs of the Company. This information does not purport to be all-inclusive nor does it purport to contain all the information which the Recipient may desire. Neither the Company nor any of its respective partners, officers, employees or agents make any representations or warranties, expressed or implied, as to the accuracy or completeness of these Confidential Documents or of its contents, and no legal liability is assumed or shall be implied with respect thereto.

The Recipient agrees that (a) the Confidential Documents are confidential information, except for such information contained in these Confidential Documents that is a matter of public record, (b) the Recipient, the Recipient’s employees, agents and consultants (collectively, the “Need to Know Parties”) will hold and treat these Confidential Documents in the strictest of confidence, and the Recipient and the Need to Know Parties will not, directly or indirectly, disclose or permit anyone else to disclose their contents to any other person, firm, or entity without the prior written authorization of the Company, and (c) the Recipient and the Need to Know Parties will not use or permit to be used these Confidential Documents or its contents in any fashion or manner detrimental to the interest of the Company or for any purpose other than use in considering whether to conduct business with the Company. The Recipient and the Need to Know Parties agree to keep these Confidential Documents and all confidential information contained herein confidential indefinitely and further agree to use these Confidential Documents solely for the purpose set forth herein.

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