Issue link: http://dsnews.uberflip.com/i/1149365
14 A DATA-DRIVEN APPROACH TO NEIGHBORHOOD STABILIZATION By Daren Blomquist Overused phrases such as "data-driven analysis" and "data-based decisions" are empty buzzwords unless individuals and institutions give data permission to change opinions. ere's an opportunity to give data that opinion-shaping power when it comes to answering a specific question regarding neighborhood stabilization. If the primary goal is to stabilize the surrounding neighborhood, is it better for a distressed foreclosure property to revert to the foreclosing lender or to be sold to a real estate investor at a foreclosure auction? Conventional wisdom in the mortgage servicing industry has traditionally defaulted to the former: a neighborhood is better stabilized when a distressed property reverts to the foreclosing lender. e reasoning behind this assumption? A lender is more likely to get the property back into the hands of an owner- occupant, and owner-occupants have a more vested interest in neighborhood quality and stability than do real estate investors. However, a thorough analysis of data shows that properties sold to real estate investors at foreclosure auction more quickly convert to owner-occupancy than those that revert to lenders at the auction. "We do see some owner-occupants buying directly at the foreclosure auction—the absolute quickest path to owner-occupancy for these distressed assets—but most owner-occupant buyers are not in a position to buy all-cash without a full property inspection," said Jason Allnutt, CEO at Auction.com. "In the majority of cases, local real estate investors usually represent the best bridge from distress to owner- occupancy." ROI-ACCELERATED REHAB e bridge from distressed property to owner-occupied property often requires eviction and extensive rehab, processes that require, time, money, and expertise that may not be the core function of mortgage servicers. e data shows that local real estate investors can perform the same eviction and rehab functions much faster, returning those distressed properties to the retail market more efficiently. An analysis of data from both Auction. com and public record data from Collateral Analytics demonstrates this trend based on a review of more than 19,000 properties brought to foreclosure auction in the three months ending in February 2018. A year later, properties that sold to third-party investors had resold in an average of 193 days, while properties that reverted to the foreclosing lender at the auction had resold in an average of 221 days. at means it took lenders about a month longer to resell than it did real estate investors. Furthermore, investors who don't resell within a year are still returning the home to retail more quickly, but as a rental rather than a resale. In many cases, that rental may be to the former homeowner, which also helps to stabilize the neighborhood. "You are better off selling it quickly to a cash