The Role of the Minimum Bid in the Auction Marketing Process

A critical component of LFC’s Internet based, Freedom Realty Exchange auction marketing program for residential property, is the minimum bid. Rather than react after the fact in a downward trending market with evermore incentives and lower and lower pricing, a low minimum bid creates a sense of buyer urgency to become emotionally involved in the property and entices potential buyers to bid the pricing upward to the property’s current market value from an artificially low starting point. In effect, the minimum bid allows the seller to submarine under the market chaos to capture the sale at current market value. (The seller is protected from selling the property too cheaply by an unpublished reserve price.) To illustrate this very important aspect of the Freedom Realty Exchange auction marketing process the following article appeared in the Los Angeles Times on August 12.

“……GMAC took over ownership after the foreclosure. The lender asked Leo Nordine, a veteran foreclosure agent based in Hermosa Beach, to clean up the house and evaluate it for resale.

On March 15, Nordine filled out his first report on the property, a lengthy form requiring him to give GMAC comparable sales in the neighborhood and his recommendation for a suggested price. Under the entry “property values,” he checked the box for “declining.” Next to “number of competing listings in subject’s neighborhood,” he wrote: “Tons.” He recommended a low price to get out in front of the market. His suggestion: $425,000 for the house as it was. He emailed the report to the GMAC offices in Shelton, CT. The lender stuck a price of $445,000 on the house. No one wanted it.

On May 30, Nordine filed an updated report. Nordine advised reducing the price to $409,000. GMAC agreed to drop the price, but only to $419,500. Six weeks earlier, that might have done the trick. Not anymore.

A week later, Nordine filed another evaluation: “No problems, other than the cataclysmic market.” He recommended $399,000. The lender didn’t respond. On June 27, he suggested $390,000. Lower the price, he urged yet again: There are three times as many lender-owned homes on the market now as there were a few months ago.

On July 31: This is the worst market I’ve ever seen.” He proposed $385,000. There was no answer. To sell the house now, Nordine said late last week, would require a price of $379,000. Last Friday, the lender sent Nordine an e-mail authorizing him to drop the price to $395,000.

If this property would have been auction marketed in March utilizing the competitive process of the Freedom Realty Exchange program and a minimum bid of $295,000, it would have been sold and closed by June at its absolute highest value which most likely would have been something north of $410,000 assuming that Nordine’s May valuation was accurate. The Freedom Realty Exchange program doesn’t create a market but rather it focuses the attention of the existing market, whatever it may be, on our client’s property at the expense of its competition. Call (949-706-6121) or email (info@lfc.com) us today to find our more about the Freedom Realty Exchange auction marketing program for residential property. You will be impressed….I promise.

William Lange, President of LFC Group of Companies

The Federal Reserve said today it’s providing liquidity to financial markets to keep them running smoothly. Here’s a clip from a short statement on its web site:

The Federal Reserve will provide reserves as necessary through open market operations to promote trading in the federal funds market at rates close to the Federal Open Market Committee’s target rate of 5-1/4 percent. In current circumstances, depository institutions may experience unusual funding needs because of dislocations in money and credit markets.

The Fed and foreign central banks are responding to a drop in demand for securities backed by mortgages as well as losses by investment funds that hold the securities.

Early today, the Fed accepted a larger-than-expected $19 billion in three-day repurchase agreements, as a way to inject liquidity into the banking system, reports the Wall Street Journal. This comes on top of the Fed adding $24 billion yesterday.

Here’s a clip from the Journal’s web site:

The federal-funds rate – the rate at which banks make overnight loans to each other — had risen to 6% early Friday, sharply above the Fed’s 5.25% target rate, suggesting demand for reserves ahead of the weekend, according to John Silvia, chief economist at Wachovia Corp. After the $19 billion injection, the rate fell back toward the target.

Bloomberg reports that the $19 billion was provided by the Fed accepting mortgage-backed debt as collateral. (Hat tip to Calculated Risk blog.)

The European Central Bank on Thursday loaned an unprecedented 94.8 billion euros ($130.2 billion) in emergency funds to European banks.

And Asian central banks are adding cash to their banking systems, reports Reuters. Here’s more:

A Bank of Japan official said the bank injected funds at its regular money market operation on Friday due to a slight rise in the benchmark overnight call rate. The bank for the world’s second-largest economy offered to supply 1.0 trillion yen ($8.45 billion) in funds — at the higher end of market expectations.

The Reserve Bank of Australia pumped more than twice the usual amount of money into the banking system, injecting A$4.95 billion ($4.19 billion).

The banks acted to ensure there were enough funds for money markets to operate smoothly and to prevent short-term rates from spiking. The moves did not represent a substantive shift in monetary policy, analysts said.

By Mathew Padilla, Orange County Register

American International Group on Thursday told investors the housing market would have to spiral to Depression-era levels before the insurer would be harmed by its exposure to the residential mortgage market.

The world’s largest insurer has exposure to subprime loans — those made to people with tainted credit — as a lender, investor in mortgage-backed securities and supplier of mortgage insurance. But AIG characterized its exposure as minimal and said it would take declines of 30 percent to 40 percent in home values to dent the market for mortgages with stronger ratings, where most of its holdings lie.AIG said delinquencies on first-lien mortgages were on the rise at its mortgage insurance group. But the company also reassured investors that it has ample cash and “doesn’t need to liquidate any of its investment securities in a chaotic market.”

Cliff Gallant, equity analyst with Keefe, Bruyette & Woods Inc., estimates that of AIG’s $1.034 trillion in assets at June 30, it has some $3 billion to $5 billion that could go bad in subprime defaults — a thin slice of the overall pool.

It amounts to about $1 per share in exposure, “a reasonable worst-case scenario,” he said.

Analysts, on average, expect AIG to earn $6.53 per share this year.

As conditions in the credit market have tightened, investors have been sensitive to any sign of a ripple effect, in which the fallout from defaults on subprime loans would spread to other parts of the lending market. Any news of subprime mortgage or credit problems has sent stock prices reeling; on Thursday, the Dow Jones industrials were down by triple digits on concerns about liquidity in the credit markets.

“We believe that it would take declines in housing values to reach Depression proportions — along with default frequencies never experienced — before our AAA and AA investments would be impaired,” said Chief Risk Officer Bob Lewis, in a conference call with analysts on Thursday. “AAA”- and “AA”-rated investments are considered to be those of highest credit quality.

Home prices would have to slide by more than a third, and defaults among borrowers with strong credit would have to balloon above 45 percent, to begin to affect the AAA and AA bundles of securities, the company said.

As an investor, AIG has about $94.6 billion in residential mortgage market holdings, equal to about 11 percent of its total invested assets. Of that, the company has $28.7 billion, or 30 percent, in subprime residential mortgage-backed securities.

AIG has said repeatedly that it is “very comfortable with the size and quality of its investment portfolios.”

AIG’s American General Finance, which originates mortgages, has about $6 billion of its $19.2 billion real estate portfolio invested in the subprime space.

United Guaranty, AIG’s mortgage insurance arm, said first-lien mortgage delinquencies had risen to 3.98 percent in June from 3.71 percent in May.

President and Chief Executive Martin Sullivan told investors that the company remains “well-positioned, even in the event of further deterioration in this market.”

AIG shares fell about 3 percent Thursday amid the broader downturn in the market.

On Wednesday, after the market close, AIG reported a 34 percent jump in second-quarter profit on growth in its general and life insurance businesses. Its mortgage guaranty unit posted an operating loss, but the business accounts for a relatively small part of the company’s overall earnings.

By Lauren Villagran, AP

Look what a $1,000,000 minimum bid could buy

Dateline: (Newport Beach, California) Adelphia Communications’ former corporate headquarters is a first class office space built at the height of their scandal-ridden bankruptcy and ensuing legal difficulties. The stunning 72,056 square foot, three-floor office building with fully-finished basement on Coudersport’s main street serves as a reminder of Adelphia’s impact on the local economy and the state of Pennsylvania. The three year old corporate pad is just off Route 6 connecting Coudersport to Eastern and Western Pennsylvania and can house an estimated 300 employees with total internet connectivity.

LFC Online, the leader in online real estate auctions, in conjunction with the Grubb & Ellis Company, has been selected by Adelphia to sell this former headquarters building in a “must sell” auction marketing campaign. The winning bidder could own this center of operations at a fraction of its estimated $30 million value. In a previous online auction, LFC sold over 70 properties for Adelphia scattered throughout the United States. Some bidders walked away with a one thousand dollar steal!

With LFC Online’s transparent auction process, targeted marketing technology, knowledgeable auction managers and proprietary state-of-the-art auction innovation, LFC has established a footprint in the online auction industry.

“In the coming years the real estate market is expected to see a big increase in auction inventory due to corporate liquidations, bankruptcy sales and foreclosures. LFC is on the forefront of this phenomenon. The LFC online program offers our sellers and buyers a transparent, honest and highly efficient way to sell and purchase real estate anywhere in the world,” comments William Lange, President of the LFC Group of Companies.

Please visit www.lfc.com/695R3 for more information about this auction.

LFC Group of Companies For over 30 years, the LFC Group of Companies have served numerous Fortune 500 companies, real estate developers, investors, financial institutions and government agencies by auction-marketing thousands of commercial, industrial, land and residential properties with an aggregate value well in excess of $2 billion.

The
chart above compares DataQuick’s monthly foreclosure counts back to 1992 vs. the
total number of homes that changed ownership in a month. (This divisor is the
sum of the actual sales reported each month plus the count of homes that bankers
took back through formal foreclosure.) This bit of research shows that
foreclosures are now 10 percent of the market — the first time that mark’s been
passed since 1998. Clearly, without a significant pick up in traditional sales
activity, troubled homeowners will soon become a major marketplace burden.

By Jon Lansner
Orange County Register

Technorati Tags: Orange County, mortgage, foreclosed homes, foreclosure auctions, REO

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Bullhead City, AZ -

Freedom Realty Exchange’s online real estate auction at the golf resort community of Laughlin Ranch in Bullhead City, Arizona is coming to a close. There is still time to register and bid on one of 15 new homes including three model homes being sold at absolute auction.
Laughlin Ranch is along the Colorado River just across from the lights of Laughlin, Nevada. This is the perfect opportunity to purchase a home in a new growing community or that second vacation home close to the river, golfing, and the entertainment of Laughlin.

FRE is a pioneer in real estate auctions and residential online auctions. This is FRE’s 2nd campaign in the Laughlin Ranch community.

Technorati Tags: Laughin Ranch, online auctions, real estate auctions, home auctions, Colorado River, Bullhead City, Laughlin Nevada

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Foreclosures across the country are on the rise. According to RealtyTrac, more than 1.2 million foreclosures were filed nationwide in 2006. U.S. foreclosures in June 2007 jumped 87 percent compared to June 2006 with more than 164,000 foreclosures.

Ohio documented the nation’s third high state total in June 2007 with close to 12,000 foreclosure filings, up 100 percent from June 2006. Dayton ranked 26 out of 100 cities in the first quarter of 2007 with more than 2,300 foreclosures.

Losing a home is devastating, but it’s also a window of opportunity for someone in the market for a house. When you’re considering buying a foreclosure, know your options. These properties can be purchased through pre-foreclosure, at auctions where you bid against other interested buyers; or from a lender, known as real estate owned property.

You may want to hire a real estate agent to help guide you through the process. Make sure you find one with foreclosure experience.

If possible, schedule an appointment to view the property. This will help determine any structural damage, rodents, termites, plumbing and heating issues. Be aware if you purchase the house at an auction, you may not be able to look inside the home or conduct a home inspection before the sale.

Conduct a title search to find out whether the property has a second mortgage or lien against it. If it does, you may be responsible for paying off the initial mortgage and any second mortgage loans and liens on the property before you take ownership.

You may want to get pre-qualified. Securing your financing early in the process will help ensure eligibility to purchase the property and gives you bargaining power when it’s time to make an offer.

Have your agent check nearby or comparable homes to see if the asking price for a foreclosed home is a bargain. Don’t base your decision solely on price. Consider the property’s condition and neighborhood.

In Ohio, all foreclosures are handled through the courts. And, the sale price must be at least two-thirds of the appraised value and the property is sold to the highest bidder.

Buying a foreclosure can be a rewarding investment, but requires a lot of research, preparation, patience and persistence. The Better Business Bureau can give you a list of trustworthy real estate companies or reliability reports on more than 150 real estate companies

By Sheri Sword
Dayton Daily News

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The up side of a down market

Contractors, brokers and lawyers make good money in bad times for real estate.

The Orange County Register

Tough times in the real estate industry mean booming business for Michael S. Buescher, a Trabuco construction contractor who specializes in cleaning and fixing up repossessed homes.

As more property owners fail to refinance or repay their subprime loans, Buescher’s pay days are getting bigger and bigger.

In Orange County, the number of foreclosures through May hit 1,031 – seven-fold the number a year ago. Default notices soared 121 percent, to 4,520 homes, during the first five months of the year.

“We get more every day,” Buescher said. “We’ve been waiting eight years for this to start happening again.”

Buescher, 49, was building a $1.5 million spec home in San Clemente in February when a call came from a Realtor friend offering a job at a foreclosed home in Mission Viejo. As more rehab offers trickled in, Buescher felt almost like he was back in the good old days of the ’90s, the last time Southern California’s real estate market tanked. During that era, he employed five crews to spiff up an average 30 repossessed homes a month.

So far this year, business has taken Buescher to dozens of trash-outs and fix-ups in Orange, Riverside and San Bernardino counties, to gated communities and rat-infested crack dens, all united under the title “real estate owned” or “bank repo.”

“This is more fun than building houses,” he said as he admired his crew’s handiwork at a foreclosed four-bedroom, three-bath split-level home in an unincorporated area near Tustin. “I can make more doing this than on homebuilding. This is quick turnover. You don’t have to wait eight months to get a permit. The cash flow keeps coming.”

Buescher is far from the only person profiting from a real estate market troubled by slack sales, sagging prices and soaring defaults.

Data services like Irvine-based RealtyTrac charge for shoppers to see listings of distressed properties. As the number of listings jumped to 1.1 million in June – up from 700,000 a year ago – the Web site’s traffic for its nationwide listings soared to surpass an average 2.5 million monthly visitors, double its numbers in 2005.

“We believe services like ours streamline the (distressed sale) process and take out the leg work,” said Rick Sharga, RealtyTrac’s vice president of sales.

The Tri-Star Group, a Fullerton development company, hired Joseph Baleto as a “foreclosure adviser” in January. It was a new line of work for Baleto, a Realtor since 2004, a period when the market has known only good times. His assignment: Buy properties at auction to renovate, “bring out the original luster” and resell.

“Inventory is up, which is great on the one hand because there’s a lot of property to pick from,” Baleto said. “On the other hand … you really have to have a product that stands out, and you have to have it priced correctly in order for it to sell.”

Mike Roberts, a real estate agent and radio host, has revived his Laguna Niguel company Trust Solutions Inc., which offers homeowners who are upside-down on their loans a legal method for selling their property without having to go through lender approval. The process, Roberts said, has the advantage of getting the seller out of an unaffordable loan without the penalties of a foreclosure or short sale. For buyers, it can mean acquiring homes at a lower property tax rate.

So far this year, Roberts said Trust Solutions has negotiated one or two deals a month. But he expects business to pick up as more homeowners find themselves underwater.

“I suspect by late summer we’ll be doing one a day,” he said. “That’s what we were doing the last time the market was in trouble in ‘94, ‘95, ‘96 and early ‘97.”

Patti Donovan, president of Stearns Asset Services, a Santa Ana firm that manages and markets real-estate owned properties, said she got back in the business last year after a four-year hiatus when the market was hot and she “pretty much played a lot of golf.” Donovan, who started in the foreclosure business in 1984, said she expects the down market to last three to five years.

“The difference this cycle is it’s not the economy that’s causing this to go upside down,” she said. “It’s more the types of loans – 100 percent financing, adjustable rate mortgages. Before, it was people losing jobs. Now it’s just people borrowing too much.”

Robert Rosenthal is a San Fernando Valley attorney who specializes in evicting tenants from foreclosed homes. He expects a lot of jobs over the next three or four years as more people lose their homes.

“With this market now, my guess is we’re in the first or second inning of a nine-inning baseball game,” he said.

As banks accumulate more property, they hire managers to coordinate contractors, maintenance crews and payment schemes for insurers and tax bills. They also seek out home sellers who specialize in distressed property, like Staci Treloggen, who heads the real-estate owned group at Prudential California Realty in Laguna Niguel.

“Banks outsource to people like me,” Treloggen said. “I need people like Mike (Buescher) to staff up.”

Treloggen assigned Buescher and his five-man crew to an abandoned home at 17571 Rainier Drive in an unincorporated triangle between Orange, Tustin and Santa Ana. Public records show Wachovia Bank foreclosed on the property in May. The asking price is $762,500.

When Buescher and his crew arrived, the swimming pool was a mosquito breeding ground; bird cages and bales of hay littered the yard; the garage closeted a mountain of papers, clothing, toys and other trash.

After two days’ work, the four-bedroom, three-bath 1959 split-level home looked neatly trimmed and vacuumed.

Buescher typically proposes a cleanup plan in several stages. He charges $500 for a barebones job to rekey locks, install smoke detectors and secure a house from intruders. He can tell if a house has been broken into if there’s a rush of air when he opens the front door, because it means there’s an opening somewhere else.

After securing a property, his job escalates to the “trash out” – filling dumpsters with yard waste, clothing, toys, appliances and furniture abandoned by tenants. Items worth more than $300 – cars, boats, fur coats – must be stored for 19 days for the owners to claim. Few people come back, Buescher said.

“It’s amazing what people leave behind,” he said. “I see wedding albums. That usually means a divorce.”

For some reason, he said, tenants almost always walk off with shower heads. Many rip out counters, air compressors and other fixtures that belong to the bank. Sometimes neighbors join the looting.

“If the air compressor is gone, the first place I look is over the fence,” he said.

It’s not Buescher’s business to understand why people lost their home. To encourage renters to leave, he’ll offer a few hundred dollars. If he finds a squatter, he’ll ask the cops to arrest them for trespassing.

If the bank agrees to pay for it, Buescher will repaint the walls and replace the carpets. He recommends neutral, vanilla colors to avoid turning off potential buyers.

As the repairs get more complex, Buescher’s fees escalate. Granite counters, a reshingled roof, new wiring – they all make his cash register ring.

“My job is to convince the client to spend more money to sell the house,” he said. “But at this point, the banks aren’t willing, because the market hasn’t hit bottom.”
By JOHN GITTELSOHN

Technorati Tags: foreclosures, real estate, property, foreclosed homes, california, bank-owned

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Online bidding has begun for our online real estate auctions in Frederick, Colorado in the community of Carriage Hills!
The bid deadline is quickly approaching!
You can view current bids for all our home auctions on website.

www.FRE.com

Freedom Realty Exchange is a pioneer in residential real estate auctions.

Technorati Tags: online real estate, home auctions, real estate auctions, carriage hills

Link from Matthew Padilla, OC Register mortgage insider. Most default and foreclosures in one month for the year in Orange County. This trend can be seen across the nation as more and more foreclosed homes are available to buy in foreclosure auctions.

Technorati Tags: foreclosed homes, foreclosure auctions, mortgage, Orange County