Beating traditional pre-foreclosure sale offers by 15 points, 60% of the Time
With the current wave of seriously delinquent loans likely to result in disposition, Auction.com’s pre-foreclosure Market Validation Program (MVP) provides a graceful exit for borrowers, better execution for sellers, and stabilization for neighborhoods and communities.
As the pre-foreclosure auction leader since 2013, Auction.com’s marketplace has closed more than 4,000 pre-foreclosure sales, providing transparency, access, and improved performance to the distressed sales process.
Pre-foreclosure sales represented one-third of all distressed sales in 2019, up from less than 15 percent in 2008. That progress is admirable, but we at Auction.com believe a much higher share of foreclosures could and should be avoided with a pre-foreclosure sale.
“The promise of pre-foreclosure MVP is most fully realized in a competitive and transparent online auction marketplace,” said Ali Haralson, Auction.com Chief Business Development Officer. “When used in tandem with traditional pre-foreclosure methods, online auctions ensure equal opportunity for a broad spectrum of prospective pre-foreclosure buyers. This, in turn, ensures the highest and best offer for these homes — which is good for the distressed homeowner, surrounding neighborhood, and the mortgage servicer.”
What is the Market Validation Program?
Auction.com’s pre-foreclosure MVP leverages the power of the Auction.com platform and its more than 6 million registered users to validate — and usually beat — offers received in the traditional pre-foreclosure sale market. Data shows that on average, a property in the MVP sells during the first auction.
Here’s how it works: A pre-foreclosure offer from a potential buyer is put on the auction platform and marketed aggressively for 14 days. The original offer then competes with the Auction.com buyer database, which has millions of registered users.
Data shows that 60 percent of the time, the original pre-foreclosure sale offer from a buyer is not the highest and best offer. On average an offer made on the Auction.com platform for a pre-foreclosure is 15 percent higher than the highest offer received through the MLS. In dollars that is an average of more than $28,000 higher.
By streamlining the pre-foreclosure sales process, Auction.com validates a competitive offer for the property, and the process ensures all interested buyers are given the equal opportunity to make an offer through a transparent process.
“Not only does our platform beat traditional pre-foreclosure offers 60 percent of the time, but a higher offer also comes from the original bidder about 20 percent of the time,” said Jesse Roth, Auction.com SVP of Strategic Partnerships & Business Development. “And 80 percent of the time, the bid is from a new buyer. Our platform’s transparency and efficiency enable increased competition.”
Based on feedback from clients, Auction.com is expanding the program to not only validate the market for already-listed pre-foreclosure sales but also to pro-actively help distressed borrowers who haven’t listed yet to secure the highest and best offer.
A Graceful Exit
There’s much more to the Auction.com pre-foreclosure MVP than better seller execution. The program is a pre-foreclosure solution that renders eviction unnecessary and provides a graceful exit for the homeowner, which helps stabilize neighborhoods, especially during a fiscal crisis.
“We are going to have a lot of borrowers over the next two years who are going to go through default,” said Haralson. “Borrowers can be active participants in that process and work with their servicers to sell the property prior to a foreclosure sale, allowing them a graceful exit, which is letting the homeowner avoid the ramifications of foreclosure. The Auction.com program allows for the most graceful exit for a homeowner while maximizing proceeds for all stakeholders. In some instances, the Auction.com program has turned a pre–foreclosure sale into a full payoff.”
According to Roth, “This program is a much more compassionate way to sell a home for people who find themselves in a distressed situation. The homeowner can walk away in much better place both financially and mentally.”
For more information about the pre-foreclosure MVP, contact your Business Development Partner.
MVP-Related Content
- Does MVP Outperform Traditional Short Sales? (article)
- How Online Auctions Deliver on the Promise of Pre-foreclosure Sales (article)
- What Is Market Validation and How Will It Help Prevent Future Foreclosures? (video)
- Why Does MVP Outperform Traditional Short Sale? (video)
Visit Auction.com/MVP for more information.