Jumping on the REO wagon

Editor's note: This article is reposted with permission by The Real Deal. Click here to view the original article.

By PETER KIEFER

NEW YORK CITY -- Major residential brokerages may still snub their noses at the listings, but a growing number of firms, particularly in the outer boroughs, are fighting for a share of the foreclosed homes market.

Lenders took back thousands of homes in New York state last year and thousands more face foreclosure this year.

Take Staten Island-based Wonica Realtors and Appraisers. Last year, according to founder and President George Wonica, the firm's REO division, which specializes in marketing and selling foreclosed residential properties in Staten Island and Brooklyn, accounted for almost 80 percent of his firm's revenue.

"It carried the office," Wonica told The Real Deal. "I've never seen anything like it."

The marketplace for these bank-owned properties (also known as real estate owned or REO properties) that did not successfully sell at a foreclosure auction -- is thriving in places hit hard by the housing downturn. In New York City that usually means in the outer boroughs, although Manhattan is not impervious.

Unlike foreclosures, which are auctioned off and must be paid for in full at the time of the auction, REOs are sold by brokers with a traditional commission-fee structure. Last year there were 918,376 REO filings nationwide, with 6,341 REO filings in New York state, according to data company RealtyTrac.

A report released by New York University's Furman Center stated that the number of REOs in New York City grew from 290 in December 2006 to 1,750 in September 2009.

That is a pittance compared to California and Florida, which had 199,000 and 82,000 REO filings last year, respectively. But the worst may still be in store for the Empire State.

Rick Sharga, senior vice president at RealtyTrac, said the numbers of REO filings in New York City and state are expected to spike significantly this year. "If you are a Realtor and not playing that part of the business, you are missing a lot of opportunities," said Sharga.

However, selling an REO home in New York isn't easy.

It takes an average of 450 days from the initial notice of a pending foreclosure to an auction. That is about 300 days longer than the equivalent process would take in any other state. This gives people more time to get out of trouble and reduces the pool of properties.

That may explain why none of the larger residential brokerage houses, like Corcoran, Halstead or Elliman, have REO divisions, effectively ceding the market to companies like Fillmore Real Estate, Wonica, Triton REO Management and Safari Real Estate, among others. ...CONTINUED

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