I hear it on a daily basis: 'I'd love to do REO's, but how do you get into it?'
REO (Real Estate Owned) properties are those that the lenders take back and resell in order to recoup losses in mortgage not paid by the mortgage holder (the owner). In many cases, the property has stood empty or at the least, the mortgage not paid, for a couple of years or more. Often the property has been left to fall into disrepair or the mortgage holder has removed anything of value that could be stripped from the house.
The process starts with a BPO (Broker Price Opinion) so that the property might be priced according to the market value, by comparing it to size, condition, age and area to recent sales.
The REO agent is given 24 hours to photograph the property, prepare the comparable property data and submit a full report. As REO agents are graded on the quality of reports and the time in which they complete them, if the agent is late submitting the report, there is a high risk of losing that account or Asset Management Company.
14 - TCnbc Magazine
By Susan Burton Columbo, Remax Masterpiece, Port St Lucie
they need tens of thousands of dollars in capital to back them because it might be many months before the expenses are recovered.
In addition to which, an Asset Management Company requires ongoing reporting, while the property is listed, so more photographs need to be taken on a weekly/monthly basis and marketing reports must be submitted for the life of the listing.
Each REO listing can attract several offers and the acceptance of an offer by the seller (the lender) can depend on many criteria. Yes, highest price is one of them however they also look for 'clean' offers - those that don't require costs to be paid by the seller, and where all documents have been submitted, with all signatures, in one package.
If a property languishes on the market, a lender might consider reducing the price, however most properties have been 'right priced' at the time of listing, taking into account the property defects.
In a multiple offer situation, the lender might call for 'Highest and Best' - what is the highest price that the buyer is prepared to pay.
This process requires countless hours of time by the REO agent/s of back and forth requests for documents, cross checking
BPO reports pay between $40 and $70 each, so unless there is high volume, the effort and cost does not justify the time. The hope, of course is that the agent will be awarded the listing.
The record for our office is 22 BPO's in one day ~ it took three people to complete those tasks!
Once a listing has been awarded and accepted, the fun really starts! The agent is given 24 hours to 'trash out' (remove all debris left by the mortgage holder), clean, secure the property by rekeying and having the yard mowed and tidied in order to prepare it for market. In the event that repairs must be affected in order to maintain safety regulations, a general contractor is brought in to submit a bid. These properties are sold 'As Is', which means that the seller (the lender) will NOT pay for any repairs, beyond obvious safety issues (risk of electrocution, etc). Water and power must be turned on and arrears paid.
All these expenses are paid up front by the agent and expensed at the discretion of the lender - this means that sometimes, not all monies expended, are recovered.
Utility arrears might run into many hundreds of dollars for each property and arrears must be paid prior to service being connected! The bottom line is that if a licensee aspires to become an REO agent,