New Program Improves Short-Sales Results
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IRVINE, CA—Independent research and consulting firm Beacon Economics has released a report concluding that Auction.com’s Market Validation Program delivered significant increases in short-sale prices and reduced short-sale discounts for both single-family homes and condominiums. The report, titled “An Analysis of Short-Sale Prices: Traditional Short Sales vs. an Auction Platform,” analyzes short-sales data from nine markets on transactions completed between March 2013 and January 2014.
Among its findings, the report concluded that single-family homes sold on Auction.com sold for 10.7% more than their original short-sale offers and that condominiums sold on Auction.com sold for 11.4% more than their original short-sale offers.
“One of the unique aspects of this program is that it is a collaborative effort between real estate professionals, mortgage servicers and Auction.com aimed at delivering the best outcome for all parties,” says Charlie Lee, EVP/short sales at Auction.com. “By adding the global exposure and transparency of an online auction to the local market expertise of real estate agents and brokers, we can work together to protect the interests of distressed-property sellers, neighboring property owners and lenders.”
Through the MVP program, lauded as the first of its kind in the industry, once an offer is received by the mortgage services or lender, the listing agent and borrower are asked to put a property on Auction.com for an online auction to see if a higher bid can be attained or to validate that the offer is the best available price. This is intended to helps fulfill the servicer’s responsibility to reduce loss severity and deliver the best possible return to the mortgage holder, as well as to improve the likelihood of a short-sale offer being approved. The company also offers direct-to-auction product for borrowers and servicers who prefer to do short sales directly via an online auction rather than waiting to receive an initial offer.
“In an industry that has imperfect information, the auctioning process helps prevent inefficient offers from being accepted by a seller because it raises awareness of a property’s assets to more potential buyers,” says Christopher Thornberg, one of the study’s authors and founding partner of Beacon Economics. “Not only does Auction.com yield higher prices for short sales listed through the MVP program than originally offered to the seller, but we found the final prices were significantly greater than the short-sale prices we projected based on similar property characteristics.”
On a national basis, more than 6,000 short sales have been conducted via the MVP program, which has generated higher offers on 54% of the properties marketed, Auction.com reports. Some regions had even stronger performance; for example, more than 67% of homes marketed in California generated a higher bid, with sales prices averaging $50,000 more than the original offer. The Beacon report had similar findings when analyzing data from the nine markets included in the study: Chicago, Las Vegas, Los Angeles, Miami, Phoenix, Riverside/San Bernardino, Sacramento, San Diego and Tampa.
According to Jessica Collins, a real estate agent with Canyon Marketing in St. George, UT, who participated in the program, “I used Auction.com on a short-sale property I had listed. They were able to answer my seller’s questions and concerns, and I felt that this was the best route to get the short-sale done successfully. The online platform gave us great exposure to investors and buyers all over the country, and I think it helped get the home sold faster. I am very pleased with the results and look forward to working with them again in the near future.”
As GlobeSt.com reported in February, Forecast LA, a Los Angeles economic report from Beacon Economics and Thomas and Dorothy Leavey Center for the Study of Los Angeles at Loyola Marymount University, shows a slowly improving Los Angeles economy. In 2014 and 2015, the report predicts steady growth; however, it will be several years before we see major economic growth.
As a GlobeSt.com thought leader, Auction.com provides expert commentary and analysis around economic drivers impacting commercial real estate. For MORE insights and updates on upcoming online property auctions, click here.
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