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70 Hudson & Marshall, RealtyBid, and XOME. e bulk sale seems to have gone somewhat quietly into the night without making many headlines—much in contrast to the way it debuted, with heavy anticipation and some resistance from some community groups. When asked about the shift in strategy and whether auctions deliver diminished listing cycles and increased net proceeds on sales, a spokesperson for Freddie Mac said matter-of- factly, "Sales channels and sales options change from time to time based on our inventory and what is the best way to minimize losses and maximize returns for Freddie Mac." A Fannie Mae spokesperson was more direct in explaining that the current REO inventory at Fannie Mae is not ideal for bulk sales. "Declining REO volumes and lack of geographical concentration have diminished the need for bulk REO sales as a disposition channel," Fannie Mae's spokesperson said. About 95 percent of Freddie Mac's REOs are "sold through traditional channels with agents and brokers," Freddie Mac's spokesperson said. However, he explained that when a property has been on the market for a while, Freddie Mac will begin to "look for other disposition methods." One of those "other disposition methods" is the online real estate auction. Like Freddie Mac, "Fannie Mae uses REO Auctions to market and sell some of our more challenging properties that appeal predominately to investor purchasers," stated the spokesperson for Fannie Mae. EXCHANGING TRACKS A recovering housing market with declining REO inventory, rising prices, and rising demand makes individual REO sales a more attractive disposition strategy. With fewer REO properties, there is not as much opportunity currently to pool properties based on geography. At the same time, online auctions simplify and often expedite the sales process with the potential to deliver better returns. "In the past, many servicers offered REO assets within a pool structure based upon geographic location, condition, asset-type, etc. With a decline in supply and an increase in demand, the auction process has been proven to yield higher returns versus a traditional bulk/ pool offering," said Shawn Miller, director of business development at Hudson & Marshall. "Offering assets on an individual basis versus a pool structure is proven to yield higher returns within an auction environment," Miller said. REO SALES FUELED BY AUCTIONS Just as the market has changed over the past several years, the face of real estate auctions has also changed drastically, namely in that many auctions are not always taking place face-to-face. Five or six years ago, it was common for auction companies to gather a couple hundred people in an auditorium over a weekend and sell a couple hundred REO properties—largely to investors—in live auction, according to Rick Sharga, chief marketing officer at Ten-X, formerly Auction.com. Auction.com debuted its online real estate auction in 2008, and today many properties are sold through an e-Bay style auction with the entire transaction taking place online, according to Sharga. "REO Auctions, especially online auctions, provide Fannie Mae with a platform to showcase our properties in front of a larger audience. e more competitive the auction, the better the outcome for Fannie Mae and the taxpayer," Fannie Mae's spokesperson told us. In part, this is due to the fact that online auctions draw multiple offers and reach buyers across the globe. Sharga said Ten-X has had buyers from more than 100 countries bid on properties on its platform. About 50 percent of properties sold through Ten-X sell to buyers outside the state where the property is located. Ten-X had bidders from more than 100 properties bidding on its platform in the past year, according to Sharga. "At least in theory, when doing an auction, you're always going to get the best market price," Sharga explained. "With multiple people bidding on the same property, you're going to get the best available price, the price the market would really bare." Another benefit is that there is "date certainty" for the sale, both Sharga and Miller explained. ere is no question about when the property will go to sale. "If the auction is set for Tuesday, that's when it will go for sale," Sharga said. "Negotiation takes place live, in real time, online," and 98 percent of the time the winning bid closes the deal. KEEPING THE DOOR OPEN TO INVESTORS "REO Auctions, especially online auctions, provide Fannie Mae with a platform to showcase our properties in front of a larger audience. The more competitive the auction, the better the outcome for Fannie Mae and the taxpayer." – Fannie Mae

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