Total of Notes for Auction Reaches $100M

NEWPORT BEACH, CA-Online mortgage note auctioning web site BigBidder.com has reached a total of more than $100 million in loans for sale, comprising individual notes in more than 40 states. Senior vice president Paul Lyons tells GlobeSt.com that the online auction, which is a member of the Newport Beach-based LFC Group of Cos., has reached the $100 million total in part because “The environment and the timing are right.” Lyons adds that, although the loans now being sold are all individual residential notes, BigBidder.com has the capability of auctioning pools as well and is also looking into auctions of some commercial assets.

Another reason that the web site is adding to its total of notes for sale is that online auctions today have gained wide acceptance, according to Lyons. The technology used in online auctions existed in the last downturn, but the Internet has not yet gained acceptance as a platform for auctions, he explains.

“Our platform wasn’t built specifically for this cycle, but it is taking advantage of it,” Lyons tells GlobeSt.com. The notes on BigBidder.com are being sold at a broad range of discounts. “We’ve seen everything from 90 cents on the dollar to 10 cents on the dollar,” Lyons says, but there is no hard and fast rule about how much of a discount any given note might sell for. “We’ve sold performing notes at 47 cents on the dollar and nonperforming at 70 cents on the dollar,” he explains.

Lyons says that his company’s system differs from other auction platforms in that, “It enables the seller to set a price that is comfortable, and then the bidder can either bid accordingly or not bid.” The company describes its system as an “eBay-like bidding process gives buyers a clear picture into the transaction…ensuring a transparent auction process that is open to all qualified investors.”

Lyons says sellers like the approach because it eliminates the back-and-forth negotiation on price and terms. “When I talk to sellers, I tell them that we are not trying to replace their exit strategies or re-invent the wheel,” Lyons says. He tells them the new online platform is not going to supplant their existing systems, but it offers an alternative method to help them implement their strategies.

From the buyers’ perspective, Lyons says, the online auction isdesigned to create “an equal playing field for everyone from the institutional players to the individuals who want to buy something in their own back yards.” The idea is to break away from the traditional institutional focus of loan auctions and open the bidding to individuals and investment groups of every size, he says. “We’re not acting as a loan sale adviser, we’re an auction marketing company, so we are not trying to preclude anyone.”

Lyons says that the BigBidder.com technology can be used to sell any asset, so it does not depend upon the downturn to remain a viable business. “We could sell any asset on the site, but we have decided to stay with real estate-backed assets as our proprietary niche,” Lyons points out.

Lyons notes that BigBidder’s parent, LFC, has been in the auction marketing business for 30 years, and in 2004 went online exclusively with commercial property. Sine then, the LFC Group of Cos., which includes LFC.com, FRE.com and BigBidder.com, has sold more than $850 million worth of notes, commercial real estate and residential real estate.