Like most real estate transactions, foreclosure auctions have traditionally been less than ideal for social distancing.
Statutes written more than a century ago in many states govern the arcane foreclosure auction process, which requires bidders to be present at the specified time and date of the auction with cashier’s checks in hand to tender payment if they end up as the winning bidder.
In some larger counties, particularly in states such as Texas and Georgia where foreclosure auctions are conducted just once a month, it’s not uncommon to have hundreds of prospective buyers gathered in a tight crowd outside the county courthouse as properties are sold or revert back to the foreclosing lender.
Furthermore, a high percentage of properties scheduled for foreclosure auction – also known as trustee’s sale or sheriff’s sale, depending on the state – are canceled or postponed at the last minute. That means many people show up at the auction who don’t really need to be there because the property or properties they came to bid on are no longer available.
Remote Bid Launched
“Why do those kind of auctions have to be in-person where you stand out in the snow … and then you find out (the sale was postponed or cancelled)?” said a Portland, Oregon-based real estate investor who purchases bank-owned (REO) properties in his local market as well as in in the Las Vegas and Albuquerque metro areas via online REO auctions on Auction.com. “I have in the past bought sheriff sale stuff, but unless you are close by it’s too tedious.
“Why can’t your industry go to the states and say let’s modernize this? Let’s put these foreclosures up for sale online. If we have to put up the cash, we will,” the Portland investor continued. “We present proof of funds ahead of time as high as we’re going to bid and then we bid online. I think that sellers … would just be tickled to have remote bidding.”
Feedback like this from many investors – as well as from sellers that want a competitive marketplace in which to sell – led Auction.com over the past year to develop a technology-empowered process that, for the first time, will allow foreclosure auction bidders to submit and win foreclosure auction bids remotely. This foreclosure auction remote bid program was officially launched in four counties in early March and will soon be expanded to 370 counties nationwide.
Real-Time Remote Bidding
Since June 2019, the share of users on the Auction.com Foreclosure Interact mobile app who have expressed interest in remote bidding has increased sevenfold. This doesn’t include Ohio, where a 2016 change in state law now allows foreclosure auctions conducted by a private selling officer to be conducted online.
That remote bidder share should grow, as the program is now launched and will rapidly expand to be available in more counties — particularly given the current season of social distancing.
Prospective bidders only need their Auction.com account, name and address to apply for remote bidding. Once a bidder is set up for remote bidding, he or she can deposit funds in an escrow account and can bid up to the amount deposited on multiple properties in any counties available for remote bid.
The Auction.com Foreclosure Interact mobile app allows bidders to remotely track the bidding in real-time and even change their bid during the auction. When the bidder lands a winning bid, the funds used for that bid will not be available for other auctions.
Innovation Serendipity
The serendipitous nature of innovation means that technology designed to solve one set of problems can end up helping with other, unforeseen challenges.
That is certainly the case with the remote bid technology, which was originally designed to help overcome the constraints of time and place that have limited access and competition at the foreclosure auction. But the technology will also empower social distancing in an arena that has traditionally involved person-to-person interaction – as do most real estate transactions.
“With what we’re seeing now with the coronavirus, which will go away at some point, it makes sense to stay at home,” said the Portland, Oregon-based real estate investor.
In the short term, many foreclosure auctions are rightly being postponed given the speed and severity of the coronavirus. But over the next few months, as those postponements are gradually lifted, there will likely still be a heightened desire to maintain social distance at foreclosure auctions. The new remote bid technology will allow for this while also fostering broader access for buyers and a more competitive marketplace for sellers.
