The Real Estate Industry in Florida has changed drastically over the past 10 years from its heyday years till the meltdown starting in mid to late 2006. The 2006 crisis opened the door further to traditional Real Estate’s major competitor; Real Estate Auction companies. REAC’s have seized the opportunity to sell large numbers of residential homes very quickly and in many cases quite as profitable as Real Estate Brokers/Agents. With so many foreclosures, lenders have revised their debt collection strategy and processes. Lenders no longer are willing to allow homeowners to walk away from their mortgage obligation via foreclosure. Lenders now have sophisticated debt collection teams put in place to manage deficiency debt from foreclosures including all additional costs associated with the legal process of foreclosures. So homeowners are finding out later their payroll check is being garnished or the lender is suing to claim other assets the homeowner might have. With debt collection processes in place for foreclosed homes the lender then contracts out hundreds of homes to auction companies where auction companies sell the home in as little as 2-4 weeks time. Auction companies now require bidders a minimum offer the lender will accept (same process in a short sale). Auction companies show the savings of not having to carry the debt and or carrying costs for 6-9 months which is the average time homes are being sold when priced at market value by traditional Real Estate Sales.

Real Estate agents have been wondering where the listings have gone and why they are not able to sell as many homes. Well Auction companies are becoming stronger and offer quick cash flow streams to lenders who are monetarily bleeding. It is true that there are not as many new homes being built and sold and this may possibly remain this way thru at least 2010.

The homes that are being bought and sold are the foreclosed homes. However, a majority of these homes are being purchased via auction by REACs. Auction companies have several perceived advantages; they create urgency and have the ability to create an image that you are going to save money. However, underneath the sophisticated sales process of auctioning homes is the same process found in short sales. An offer from an auction may be turned down by the lender which the lender usually provides a counteroffer back (same as a short sale).

Surprisingly about 85% of homes that have foreclosure suits brought in the courts end up being auctioned at the courthouse and generally purchased by the lender. In September 2008, Brevard County Florida had 850 foreclosure suits and 85% of homes foreclosed in Brevard end up being auctioned (Florida Today 10/2008). Many of the lenders are then turning these homes over to Auction companies.

Real Estate Agents have such a tremendous advantage over the Auction companies. Real Estate agents can list the home with the foreclosed owner (seller) and institute a Short Sale Reverse Auction™. Instead of having people bid on the home such as in an auction setting the seller and selling agent are bidding to the public with price changes until a contract is secured. Financial Recovery Group creates Pricing Strategies that sell foreclosure homes in less than 6 weeks. Then the negotiation starts just as it does with auction style sales. Real Estate Agents/Brokers can now offer a very valuable service that REAC’s can’t offer. Real Estate Agents/Brokers can not only sell the homeowners house, but can also in many cases save the homeowner ten to thousands of dollars if the home is foreclosed and sold via the auction process. For example, if the home was sold via auction for $100,000 less than what is owed on the home, the lender will try to recoup this amount as part of the deficiency judgment from the homeowner. However, in most cases when the home is sold via short sale the entire deficiency may be waived and usually no more than 10% may be required to complete the deal.

Lenders are looking for quick sales in the 4-6 week period much like the auction company. Lenders have very difficult processing systems and need sophisticated mitigators who know how to get the deals done in a timely manner. Lenders want Earnest Money Deposits and will focus on contracts with earnest money deposits (Auction Companies require a $5,000 deposit just to bid on homes).

Reverse Auction via Short Sale is the new opportunity to take back real estate sales being lost to REAC’s. Foreclosure suits are spending 9-14 months in court prior to being completed. Listing a Reverse Auction is easy when explaining the process to homeowners who are in pre-foreclosure.